By: Thanj Kugananthan, Founde
“The days of highly inflated salaries and subsidies to cover living costs … are now a thing of the past,”– every Compensation expert in the UAE.
We hear these type of comments regularly, but what really has changed?
As a Compensation & Benefits consultant over the last 5 years, I have definitely noticed the trend in salaries and bonuses not being as high as they used to be. It’s difficult to pinpoint exactly what changed and when, but the best place to start would be two areas: The start of the economic climate uncertainty due to fluctuating oil prices, as well as the changes in company hiring demographics due to changes in the external market. One such example is the UAE’s Technology Vision.
Why do hiring demographics impact my salary?
According to the 2018-2019 Salary Survey/Review from Nadia Global, the average age of the UAE workforce is now under 30 – this is a significant age reduction even in the last 5 years.
The added impact of digital transformation in the UAE – from Artificial Intelligence, Big Data analytics, Blockchain and more have also had an impact on the type of skills the UAE employers now view as coveted – and typically employees with these skills are likely to be younger.
Age is not relevant from a workforce contribution perspective but a younger work force is typically less interested in money and more interested in opportunity making it harder for long-term expatriates to command the same salaries they used to; they are competing with a less costly workforce.
What is the outlook for salary increases for employees?
Since the start of the economic uncertainty, 2019 has actually seen the highest real salary increase forecast (salary increase minus inflation) according to the Korn Ferry Hay Group survey at the start of this year.
Is this likely going to be a significant increase? Not significant, no, but it is a sign that Companies are now being less risk averse when forecasting salary increases and as a result things are starting to move in a more positive direction for employers and employees.
What is the outlook for bonuses?
One of the key focus areas from Companies surveyed was to improve the link between pay and performance. What do we mean by that? Companies want to ensure employees are rewarded when they contribute directly to their success – this is the best way Companies can ensure their high performers are rewarded well and in correlation with their bottom line.
Why are Companies being cautious over their employee costs?
Fluctuating/falling oil process can affect a Company’s revenue hence uncertainty, this makes Companies unsure about spending money as well as focus on their costs. They would rather make risk averse decisions or none at all. Companies focusing on reducing expensive costs may look at scrutinising costly expatriate costs as their first point of call. Almost 50% of companies stated that fluctuating economic conditions were a key salary & benefits challenge to them, HR Observer survey in 2018. This also had a knock-on effect on their risk averse bonus forecasts where the majority of employers stated they did not know what this would be or stating this would be the same as the year before.
What can we look forward to as an employee in Dubai?
There is actually a lot to look forward to as an employee in the UAE due to recent government initiatives and external changes:
-Employees working in scarce and coveted roles can still command a premium salary if their skills and experience is within a growing and relevant sector in the region
-Pay gaps between different nationalities are diminishing, again impacted by the UAE’s technology vision and harsh penalties for Companies shown to be discriminating when making hiring decisions
-Initiatives driven by the government such as the happiness initiative, has enabled more companies to focus on Wellness and Work Life Balance initiatives
-The private sector now in 2019 and 2020 has equal official holidays as the public sector – a total of 14 official public holidays. The decision aims at enhancing the balance between the two sectors
-The UAE government are currently looking to enhance and improve the end-of-service gratuity benefits awarded to employees to help expats manage savings and create retirement funds
-A new school fee hike framework has been approved which ensures school fee increases are kept within a cap which is related to the school’s performance rating helping parent employees manage their school fee costs
-Housing prices and rental prices have reduced significantly since last year and are continuing to fall in 2019 ensuring employees can save money while living in the same location