Coronavirus: Will lower salaries be the norm in the UAE?

Dubai: As several companies implement temporary salary cuts in the wake of the COVID-19 pandemic and a growing pool of laid off workers is available for hiring, UAE residents are concerned about whether reduced salaries will become the norm in the foreseeable future.

Over the last couple of months, several employees have had to cope with a 20-50 per cent cut in their salaries after a decision issued by the Ministry of Human Resources and Emiratisation (MOHRE) allowed employers affected by the COVID-19 crisis to take certain measures against expat employees. These progressively included asking them to work from home, consume annual/paid leave balances, implement unpaid leaves and amend employment contracts for a temporary or even permanent reduction in salary, in agreement with the employee.

The temporary salary cuts have been widely accepted by employees, who have had little choice in the matter and are perhaps thankful they still have a job in the current circumstances. New openings are hard to come by, even as lay-offs have resulted in a surfeit of talent in the local job market. There’s also the fact that travel back home is not a feasible option for many still.

So does this new dynamic lend itself to cheaper hires? Does it mean expats will have to lower their salary expectations while applying for jobs?

Take it or leave it

Hassan Aljuaidi, HR professional and mentor at UAE-based mentorship platform Jupiter Business Mentors, told Gulf News, “Some organisations had to lay off a portion of their head count which led to higher supply in the employment market than the demand. As a result, many candidates accepted a cut to join the workforce again to stay in the UAE."

He said, "As a specialised recruitment company, we noticed individuals with certain positions drawing a salary of Dh20,000 in their past ventures now resorting to a salary of Dh12,000-13,000 going through this together with their employers.”

Paying the bills

Carmen Meyburgh, staffing services manager at HR firm Nathan and Nathan Human Resources, said as some organisations implement salary cuts for core employees and make non-core roles redundant, it has created a surge of well-experienced and qualified individuals on the hunt for new opportunities.

“The result of this has impacted the types of jobs employees are looking for as they are having to take a step back in their career path and development in order to support their family and pay the bills as it is better to have a lower paying job than none at all,” she reasoned.

“Companies looking to hire employees now are finding that candidates salary expectations have lowered. Candidates also find themselves in situations where they are spending less money on leisure activities, allowing them to budget their lives at lower salaries,” she added.

Who’s on the hunt?

According to Gulf Talent, a Middle East recruitment firm, “Vacancies advertised on GulfTalent during April received on average 40 per cent fewer applicants each, compared to vacancies in February. While candidates typically seek new employers as a way of increasing their earnings, in the current crisis many have been holding on to their jobs and only seeking new opportunities if they became unemployed, were put on unpaid leave or found their jobs in danger.

“This is reflected in candidates’ salary expectations, which have decreased significantly. To switch to a new employer within the UAE, job applicants on GulfTalent demanded a median salary increase of just two per cent in April, down sharply from 14 per cent in February. One in four UAE-based applicants in April were willing to accept a new job that paid less than their previous position,” the recruitment firm said.

No alternative

Aws Ismail, general manager of international recruiter Marc Ellis UAE, said, “We have noticed a huge number of applicants from a range of industries like hospitality, aviation and retail, who have been affected either by major pay cuts which has hit their ability to sustain their life in the country, or have been made completely redundant from their roles.”

He said, “Many businesses and employers we have spoken to are not proud or happy regarding these drastic measures but they have no alternative until the situation returns back to normal.”

He said a senior VP in business development, who before the pandemic would have expected 50 per cent more than what was recently offered to return to work, had no choice but to accept it due to competition from candidates with similar backgrounds willing to accept the salary on offer.

Jobs most impacted

According to Gulf Talent, the UAE’s hiring decline at 50 per cent has been comparable with European markets. The worst affected professions in the UAE have been marketing and teaching, witnessing drops of over 60 per cent in interview invitations in April relative to February. This was followed by sales, customer service and HR, whose demand fell by over 50 per cent during the same period. Admin, operations and general management were next, with drops of around 40 per cent each. IT, Finance and Engineering roles saw the smallest drops in demand, at less than 30 per cent.

How long will this last?

Ismail said, “We think it is necessary to understand that this isn’t businesses taking advantage of the situation rather than a precautionary measure to keep their operational costs down until they resume in normal economic activities and status."

He said, "This is backed by the fact some industries are still hiring, maintaining and paying more to keep their talent. We specialise in the digital and technology industries, who have been rather busy during these current times with companies looking to transform their businesses and be ready for anything like this again, and we noticed that salary packages have remained consistent and, in some cases, increased in order to attract the skilled local talent that is available since there are travel restrictions.”

Demand-supply dynamic

According to the experts, salaries are determined by the demand and supply of available skills.

“From what we see in the market, we believe the reduction in salaries will only last for a short term. Once life is back to normal and businesses find the return of their customers, there will be a natural increase in the demand for the employees and the salaries should return back to the same as they were before the pandemic,” said Ismail.

Meyburgh said, “Based on market statistics, pay cuts may be here to stay longer than earlier anticipated by most firms and will hopefully end by end August or September in the majority of companies. At the same time, we have seen industries who have been severely hit by the crisis, announcing pay cuts for up to six months. Job seekers should be aware that difficult market conditions may persist till the end of the year and a full recovery may only start in 2021.”

According to her, temporary pay cuts and shorter work weeks are going to remain the norm until organisations can establish themselves in the “new normal” economies and employees need to be supporting and accepting of this.

What job seekers should know

Meyburgh offers the following tips for job candidates:

• See this as a new challenge, through challenges we grow and develop to our full potential

• Be open to change, whether it be changing careers, moving into a new industry or being open to do more at your current organisation

• Do not measure your worth based on the salary you are offered

• Go into this new market knowing that most organisations are offering 15- to 20 per cent lower salary packages than what they would have offered pre-Covid-19

• Job seekers should be motivated to adopt an attitude of continuous learning and development, and companies should evaluate their staffing requirements to include temporary staff and contractors into their plans to be better prepared for any future crisis they may face.