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UAE salary growth slows, pressure on wallets increases

The UAE is undoubtedly a preferred employment destination, as it is known for its higher salaries and great living conditions with many opportunities to move up the ladder in a highly competitive environment. However, recent studies are showing strains on promotions and salary growth.

Emirates NBD Purchasing Managers’ Index (PMI) said in a recent report that September had seen employment growth slowing, compared to August, with staff earnings dipping as well.

Oxford Economics, an independent global advisory firm, providing reports, forecasts and analytical tools on 200 countries, said in a recent report that the last 3 months in 2017 would witness salary growth in the UAE declining by 0.7 per cent y.o.y, and only reaching 2.9 per cent.

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That is the total compounded pay increases through promotions or job changes.

This trend was corroborated by Korn Ferry Hay Group Middle East, a global management consulting firm, which said that a quarter of UAE companies had awarded salary increases to only half their employees, with the consultancy expecting little change in 2018.

Macroeconomic conditions led by oil prices hovering in the mid $50s are having a cringing effect on regional government spending, and are diminishing the private sector income as a result, leaving a tightening window for wage growth.

“Bonus payments have been in decline since 2015, and we suspect the trend to continue into 2018,” said Vijay Gandhi, Regional Director at Korn Ferry Hay.

Talent availability

Middle East job site, which is boasting more than 30 million registered CVs, revealed that, by the end of Q3, more than 42,000 new jobs had been announced on the job site between July and September of 2017.

“The number of new jobs announced on during the third quarter of 2017 represents a 29 per cent increase in online job postings in comparison to quarter one of 2017, and a 13.72 per cent increase in comparison to quarter two of 2017. Overall, the number of jobs announced online has increased by 21.25 per cent,” the site said in a statement.

Oxford Economics discovered that salary increases had slowed down and that it was now easier to hire and retain professionals compared to 2016, due to having a larger pool of qualified candidates to choose from.

“However, focusing on fixed-pay has turned into a long-term problem, as the region faces an economic slowdown.”

When the region faces a slowdown, businesses are forced to work on tighter budgets. That leads to a decline in the amount of pay increases awarded to employees. Korn Ferry Hay said that historically, the business community in the region had tracked inflation as the key factor for increasing salaries.

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Inflation worsening

Economic research company FocusEconomics’ Consensus Forecast expects UAE inflation to average 2.6 per cent in 2017 and to rise to 3.3 per cent in 2018, growing from 1.6-1.7 per cent in 2016.

The same report from Oxford Economics says that staff incomes will be further strained as the Excise tax, already in place, and value added tax (VAT) coming up in January 2018 reduce consumers’ purchasing power.

Adding to liquidity pressures is the fact that the Dirham is pegged to the Dollar, which has weakened, and market speculators are still debating whether the greenback would gain ground on major global currencies.

UAE is still an attractive work destination

The recently released HSBC’s 2017 Expat Explorer Survey shows that the UAE is now in the top 10 of preferred destinations to live and work.

It showed that the country’s expats were earning an average $127,197 more than the global average of $100,000, and that 72 per cent of them owned property, 10 per cent more than global figures.

“Chief concerns for UAE expat respondents included job security at 42 per cent, compared to a global average of 21 per cent, and tax increases – cited by 44 per cent, compared to a global average of 23 per cent,” teh HSBC report said.

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