Business | General
UAE salaries still inadequate
Salaries in the UAE are rising but still fall short of inflationary pressures, putting increased strain on families and forcing some to return to their country of origin.
- By Robert Ditcham, Staff Reporter
- Published: 00:00 September 28, 2006
Dubai: Salaries in the UAE are rising but still fall short of inflationary pressures, putting increased strain on families and forcing some to return to their country of origin.
A new report on the UAE pay market has put the average increase in guaranteed cash levels (basic salary plus cash allowances) at 5.3 per cent from April 2005 to April 2006.
This compares favour-ably to the UAE's official inflation rate of between 4 and 6 per cent. But in a report earlier this year the International Monetary Fund (IMF) said inflation in the UAE crossed 8 per cent. The chief of the UAE mission at the IMF described the trend as "one of the major challenges facing the UAE economy".
Although the overall increase in basic salaries alone reached seven per cent — the highest increase in the Gulf — the pot is far from being spread evenly.
Figures released by Dubai-based consultancy firm Hay Group show that managers and executives have seen their basic pay packets expand by a healthy 8-11 per cent on average, compared to just 4 per cent for middle income earners.
Some companies say they have experienced reverse migration as workers find themselves unwilling or unable to finance mounting rents and petrol prices.
Shahnawaz Khan, HR manager at Al Tayer Group, a Dubai-based conglomerate with interests ranging from automobiles to fashion and jewellery, said the company has lost employees to this factor and stressed it is common among people who are new to the region and cannot adapt to traffic and rent issues.
“Businesses are finding that they have to do something drastic in terms of pay if they want to attract and retain talent,'' he said. “But they cannot be expected to simply chase inflation as it would lead to even greater inflationary pressures.''
Vijay Gandhi, who operates Hay Group's reward information services unit in the Middle East and North Africa, said companies are offering more competitive salary packages for new hires, especially in managerial and executive positions, causing difficulty in maintaining internal equity within an organisation.
“This is because of the very high demand for people and reduced supply from traditional markets for hiring expatriates. It has faced employers with a dilemma — do we pay the high numbers sought or settle for a less capable individual?'' he said.
According to the Hay study, the trend is forcing companies to introduce incentive bonus arrangements, ensuring they obtain value for higher remuneration arrangements.
“In the coming years, organisations will continue to move towards a closer relationship between contribution and reward, leading to a higher proportion of performance-based variable payment, both short and long term.''
Dr Mark Eaton, managing director for Hay Group, Middle East, added: “This is the most volatile period in the pay market in the Middle East in over ten years.''
The research (based on information from more than 160 companies in the UAE) also found that multinational companies are paying 24 per cent more than local companies. However, Gandhi stressed that pay differentials are narrowing.
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