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UAE companies buck global trend with employee wage increases, says Mercer

Companies in the UAE are giving their employees average wage increases of 5.2% this year, bucking the global trend for limited pay rises. The figures were revealed by Mercer’s 2013 Total Remuneration Survey (TRS), with a spokesperson for the organisation saying that the increases gave workers in the UAE greater purchasing power than their GCC neighbours when taking into account the country’s low inflation rates.

“While salary increases in the UAE are similar to other countries in the region, purchasing power has been rising more quickly due to more controlled inflation in the country relative to the rest of the GCC,” said Nuno Gomes, Mercer’s Information Solutions leader for the Middle East.

The Mercer survey found that although pay rises in the UAE were in-line with Qatar and Saudi Arabia at 5%, 5.6% respectively, inflation in these countries – excluding housing costs – is higher than the 1.6% estimate in the UAE. Qatar’s inflation for 2013 is estimated to be 3%, with Saudi Arabia running at 3.7%.

More than 230 companies across various industries were polled for the Mercer survey, which revealed that the above global average pay rises in the UAE form part of a long running trend in the country that has been consistent for a number of years. It found that the highest salary increases were to be found in the energy and life sciences sectors, although all industries had broadly comparable increase figures.

Other significant findings were that 68% of the organisations polled intended to increase their personnel levels over the year, compared to 60% in 2012. Voluntary turnover was found to be higher in 2013 and was recorded as being 12% of full time employees, which could be an indicator of a more dynamic labour market.

“Overall, multinational organisations with operations in the UAE still perceive the country as a key growth region. This is exemplified by the fact that organisations intend to hire more staff over the coming year as well as the fact that voluntary turnover is higher than it used to be last year,” said Gomes.

Despite the rise in rental and property costs for the UAE residents, it appears that organisations are only offering small increases on their employee housing allowance. Mercer’s poll this year recorded an increase of 8% on housing allowance, slightly higher than the 6.7% increase recorded in its 2012 survey.

“One of the main reasons we have not seen the increase the market expects is because most organisations feel that housing costs have not reached to pre-crisis levels and allowances have not been reduced in the aftermath. As a result, the current amounts should be sufficient to accommodate employees’ housing needs,” said Gomes.

Mercer’s 2013 report predicts that salary increases for UAE employees in 2014 will remain close to this year’s figure at around 5%. It suggests an increase in long-term incentives in the region, with pay-outs that occur over a longer period of time and which emphasise sustained performance and employee retention.

One particularly surprising observation was that bonus pay-outs have declined in comparison to 2012, on average by almost 20% in 2013. “Keep in mind that pay-outs in 2013 are based on performance in 2012. With the increased activity we’re seeing in 2013 and the continuous growth of the UAE economy, we should expect bonuses to pick up in 2014.” Gomes concluded.

The annual Mercer survey covers the complete range of sectors from consumer goods, energy and technology to durable and manufacturing. It highlights compensation trends from top executives to the administrative level. It is conducted in more than one hundred countries globally and covers over 500 benchmark positions.