Dubai: UAE employees can expect salaries to increase by 6.2 per cent in 2011. However, local recruitment agencies were not so optimistic that everyone will welcome the new year with pay rises.
Driven by a hiring demand, sectors most likely to see salary increases included financial services, hospitality and tourism, luxury retail, consumer goods, and infrastructure construction.
The average salary hike is forecast to increase from 5.2 per cent in 2010 to 6.2 per cent next year, according to a survey of 140 UAE firms spanning 100,000 employees by global HR firm Mercer.
The survey covered a range of sectors including energy and high-tech and consumer goods.
It studied compensation trends from top executives to employees at the administrative levels.
The prospect of a salary increase across the UAE is "looking firm" and no company reported that they were considering a freeze, the survey showed. The average salary increase in Abu Dhabi is set to be 1.3 per cent higher than Dubai, the survey indicated.
However, the predicted pay rises do not match employee expectations. Employees across the UAE said that they were expecting a salary raise of 11.6 per cent at the end of this year, according to the 2010 Salary Survey conducted by job website Bayt.com.
Boom levels
Although the predicted salary increases for 2011 are not as high as the boom levels of 2006, they are higher than the inflation levels, according to Bassam Gazal, head of Mercer surveys in the Gulf.
This means that the individual's purchasing power is increasing, he said.
"This is something we haven't witnessed for quite some time in the region," he said.
The forecast inflation rate for the UAE is 2.5 per cent according to the IMF Regional Outlook for the Middle East. But if rocketing food prices at the end of this year continue into 2011, the salary rises may not lead to more disposable income or savings. Recruitment agencies in the UAE say employees should not hold their breath for pay rises next year.
"No sector strikes me as definitely aligned for big increases," Cliff Single, commercial manager at BAC Middle East.
Companies cannot dole out extra pay with the cost of living and doing business still "in flux" and with residential and commercial rents still unstable, he said.
Companies are not going to be looking at giving out large increments unless they really have to. They're keeping an eye on the bottom line," Single said.
Still, companies want to retain good performers so they will practice "salary differentiation," he added. "They'll do what is necessary to retain the top 20 per cent of their best people so any increments will not be across the board," he said.
Employees with a good track record in the region — who succeeded during the tough times — will have a higher market value and can expect salary hikes, Single said. Changes in the labour law mean that there is more labour mobility.
"Companies will quickly be aware if they are paying below the market rates because people will be able to move," he said.
Salaries have been frozen or reduced during the past three years of the financial crisis and people are pessimistic about whether or not the new year will bring them good news in terms of a salary increase. "The majority of people aren't expecting it but there's an increasing sentiment that they should have earned one," Andrew McNeilis, Managing Director for the Middle East and Africa of Talent2 International, an HR consultancy and executive head-hunting firm said.
Employees should not expect a pay rise in the first half of 2011, he said. "Anyone with a pay rise will see it as a pleasant surprise rather than an expectation."
Means to attract
Potential salary raises will be for existing top executives or skilled leadership that companies are trying to attract, he said.
"The market is turning. If companies are looking to hang on to their talent, the subject of pay has come back. The reward can no longer be ‘hey, you've got a job'," McNeilis said.
For non-executives, there will be "cautious optimism" on pay if they showed outstanding performance, he said. Whether or not they get a rise will depend on the market sentiments of the employer and whether a private company can afford it. Any increases should be in line with inflation rates, he added. "It's not enough to lead to greater savings. It's more a recognition as opposed to a huge award."
As rents fall in the northern emirates, even a small increment will result in more disposable income, Cliff said. However, as Abu Dhabi faces a housing shortage and more people commute to the emirate from Dubai, the prices of fuel and food could offset that increase.
Sectors that are least likely to offer salary rises are residential real estate and construction and ancillary services, Single said. Small and medium business will be driving hiring activity next year as national economic policy continues to encourage SME growth, he said.
As Qatar invests in long-term infrastructure projects in anticipation of the World Cup in 2022, Dubai will see talent moving there. "A lot of talent is mobile and this is a regional market. Salaries are affected by what is going on in different parts of the Gulf," Single said. Employees can expect bonuses to bounce back next year especially as performance measurement systems improved since 2009, McNeilis said. Managers are now more transparent with their employees on how the company is doing, so it will not come as a surprise for them after a tough year.
"Keeping jobs and surviving is the priority for decent businesses," he said.
"The region has two gear settings: full throttle and reverse. People will take the handbrake off eventually. What makes a company great is people. Rewarding them will help business," McNeilis said.
"Eventually they'll take the handbrake off after sustained recovery and recognise and reward people better."
UAE data
- Housing allowance is the dominant cash allowance in the UAE. There is a 43 per cent difference in housing allowances between Abu Dhabi and Dubai.
- Two-thirds of the 140 firms in a Mercer survey will hire more people in 2011.
- Local companies pay 27 per cent higher base salaries across all employee levels compared to multinationals.
- The average guaranteed cash difference between local and multinational companies is as high as 33 per cent.
(Source: Mercer survey)
Have you been informed of a salary increase by your company? Did it meet your expectations? How is it impacting the way you manage your finances?
