Private sector pay rises dealt a blow by downturn

Dubai: Pay rises in the UAE's private sector have slowed down significantly since the start of the economic downturn, according to a new report.

The Towers Watson survey revealed that while salary increases in the years leading up to 2008 reached an average of 8.7 per cent per year, last year they dropped to 4.6 per cent. Among 180 companies in the UAE, 25 per cent did not grant any pay rises at all in 2009.

"In 2005 and up to the middle of 2008, you obviously had a very rapidly expanding economy as that was linked to a great extent to the economic conditions and real estate boom and as result of that there was real bidding up for salaries and there was a lot of competition between companies," Cliff Single, Commercial Manager at BAC Executive Recruitment, told Gulf News.

When people were changing jobs they were often looking for a substantial increment of around 20 per cent or even 50 per cent to move, he explained. "Obviously what has happened in the last year or two is a completely different market scenario."

Single said that companies who are looking to recruit have become more cautious about the salary grading with a focus on finding the right people and a greater willingness to negotiate salaries.

"Before the focus was on speed and finding candidates quickly," he said. "Today it's much more about finding the right person and not paying above market rate."

Roman Weidlich of Towers Watson says the outlook for 2011 seems more optimistic. "In 2010, HR professionals were contemplating a more favourable environment for increases. Also fewer companies were planning to have a salary freeze," he said.

Vineet K. Singh, Business Head of NaukriGulf.com told Gulf News that the job market still seems to be defensive as far as salaries are concerned. "Salary increases will continue to be dampened till there is full visibility on growth. Unless growth is clearly back, we won't see the days of 2007 as far as salary increases are concerned," he said.

Singh expects the UAE market to bounce back in the next 12 months and continue its high-growth trajectory. "If that does not happen then we may see some fundamental changes in the way companies and businesses work and attract talent," he said.

"With the stabilization of the external labour market, companies need to adopt a more balanced approach to pay management," Weidlich said. "Management priority during the boom years was on market competitive pay, meaning sustaining pay levels to be able to hire and retain the right talent. The focus now needs to be on internal pay equity which means ensuring that roles of similar value within the organisation are paid similarly and likewise that people in those roles with similar performance are paid comparatively," she said, adding that organisations need to adopt a systematic procedure of job evaluation.

Job evaluation would create a hierarchy where each job is assigned a grade that indicates its relative importance and value to the organisation.

According to a 2010 global research by Towers Watson, on more than 1,000 multi-national companies, nearly 70 per cent of global companies surveyed have an organisation-wide job levelling programme.

In comparison, a 2011 Towers Watson poll of 60 companies in the UAE, 41 per cent of respondents recognise that they do not operate a formal methodology that could solidly justify the grades assigned to individual roles.