Question: I have been working in Dubai for the past three years on a salary that includes a basic wage plus accommodation and car allowance. However, my employer has frozen my allowances and salary and has recently floated the idea of introducing a performance-related pay scheme. What impact could this have on my personal finances?
Answer: The situation you are in where your basic salary and allowances have been frozen sounds familiar — many people in the UAE are now facing changes, and even cuts, to their salary packages. The main reason for this is that due to last year's global recession there has been an increase in the talent pool in certain industries, meaning that employers are in a position whereby they can drop salaries for new recruits. At the same time the UAE housing market has seen rents fall by up to 50 per cent, leading organisations to freeze their current employees' housing and living allowances.
As a result human resource experts are warning that salaries in the UAE will see the lowest rises in the Gulf region in the coming year. A report published by Hays Group earlier this month called "Ten Years of Pay in the GCC" predicts that real salaries in the UAE will rise by just 0.84 per cent in 2011. The continued rise in consumer prices which even during last year's recession increased by 1.6 per cent, as well as salary freezes, are deemed responsible.
In such a climate it is unsurprising that your employer is floating the idea of performance-related pay, which may be part of wider plan to do away with their current commitment to paying staff allowances for housing and living costs — it seems the days of attractive expatriate packages are on the way out.
Yet, this is not to say that you will be worse off under a performance-related pay system. As the name suggests it will depend on how good you are at your job. In general these schemes use money incentives to motivate and reward staff, you may be given targets to reach or a list of duties to perform to receive bonus.
These schemes can also provide a level of standardisation in employee evaluations and may actually give you the chance to show your employer that you are twice as good at your job as your colleagues: earning you greater pay and greater recognition. However, a fundamental criticism of performance-related pay is that the performance of a complex job as a whole is reduced to a simple measurement of performance.
For instance a telephone call centre helpline may judge the quality of an employee based upon the average length of a call with a customer, without any focus on the quality of help given or whether the issue was resolved or not.
You will need to decide whether you can boost your salary by moving to a performance-related pay scheme or whether you are better off remaining on a basic salary with allowances, even if these are likely to remain frozen in the coming years when the cost of living is rising.
When making this decision you should also think about your long-term financial goals, for example, at what age do you hope to retire, do you have enough money to pay for your kids education and what happens if you get sick? Will a performance-related pay system still ensure you a basic salary if you are off work ill? An independent financial adviser will be able to assist you in working out these details and making sure provisions are in place to protect your income, and ensuring you have enough savings and investments for your future financial needs.
The writer is a chartered insurance broker and sales training manager at Nexus Insurance Brokers. Opinion expressed here is the writer's own and do not necessarily reflect that of Gulf News. If you have any questions, please email to advice@gulfnews.com
