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By allowing businesses to save on costs, the UAE government has managed to ease short-term concerns. But businesses will need all they cash they can save or loan to get through the difficult months. Image Credit: Gulf News Archive

Dubai: Preserve cash at all costs – that’s the only priority for UAE businesses as they wait for commercial activity to resume. Even sending their staff on paid annual leaves is a way of cost saving for them.

“More businesses are “forcing” their staff to use up all their accumulated leave rather than allow any encashment,” said an HR consultant advising two of the leading corporate houses in Dubai. “So far, few businesses have taken the real hard decisions of massive layoffs or asking them to go in for extended pay cuts.

“But that will come... soon.”

On Monday, the corporate sector was shaken up by a memo reportedly signed by Emaar’s Mohammed Alabbar that talked about voluntary pay cuts for everyone from the chairman – Alabbar – right down to the support staff. The cuts were 100 per cent for Alabbar and up to 30 per cent for Grade 3 staffers. The cuts came into effect from April 1.

Emaar has so far not officially confirmed whether the circulated memo states the actual case, and if yes, how long the cuts will be in effect. “It’s likely that the cuts will only be for a set period of two to three months,” said a consultant.

‘Gulf News’ tried reaching out to Emaar sources for confirmation. A couple of them said that salary cuts were on the agenda, but declined to get into specifics of whether it was for the short-term or until such time the market corrects itself.

The Dubai developer, incidentally, had cancelled its dividend payouts to save cash.

Airlines too

The UAE’s mega carriers, Emirates and Etihad, as well as flydubai too have gone in for adjustments on their salary payouts as the scale of the COVID-19 and its ability to bring global travel to a standstill came into focus.

Emirates had announced a “temporary reduction of basic salary for the majority of Emirates Group employees for three months, ranging from 25 per cent to 50. Junior level employees will be exempt from basic salary reduction. The Presidents of Emirates and dnata – Sir Tim Clark and Gary Chapman – will take a 100 per cent basic salary cut for three months.”

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Emirates and Etihad have gone in for strategic pay cuts in the short term and tide over the COVID-19 induced crisis. Image used for illustrative purposes. Image Credit: Gulf News Archive

So far, so good

Until now, UAE’s leading businesses have refrained from outright layoffs. In fact, some of them even suggested there will not be any COVID-19 enforced layoffs this year. Abu Dhabi Commercial Bank was the prominent name to come out and say this would be their position.

But consultants say that banks in the UAE have already gone through extensive restructuring in the last two years, after the economy started going through the slowdown. “The two key industries that are ahead of the curve on restructuring are oil and gas and banking,” said the consultant. “Abu Dhabi banks have gone through mergers, and that meant reductions in headcounts.”

Repurposing

Retail and real estate sector workforces could see a pruning. A lot depends on whether the retail sector tenants will be able to win over rent reductions and other cost benefits. If they don’t secure any, they will have to start looking at making cuts elsewhere.

Not many can engage in the sort of repurposing that the Majid Al Futtaim Group managed in recent weeks. The mall-to-entertainment group re-purposed more than 1,000 of its employees at its leisure, entertainment and cinema divisions to join the Carrefour business on a “temporary basis”.

“While our redeployment efforts come during unprecedented times, a recent World Economic Forum report suggested that by 2022, 54 per cent of the total workforce in an organisation will require significant reskilling and upskilling,” said Alain Bejjani, CEO at Majid Al Futtaim – Holding, said in a statement at the time.

“The current situation has accelerated the need for employees to stay competitive and will require companies to relook at how they utilise their talent.”

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Create a 'liquid' workforce, where staff skills can be repurposed to suit the need of the hour. File picture of a Majid Al Futtaim staff member checking out the Carrefour inventory. Image Credit: Gulf News Archive

Such switchovers from within group companies or even to outside businesses could become a more permanent affair. Vijay Gandhi, Regional Director at Korn Ferry Digital, the headhunting firm, says it represents the transition towards a “liquid workforce”.

“HR laws in the GCC have undergone change in the last three years to allow for part-time employees, internships and with the spring of independent free-lance community offering specialized professional services,” Gandhi said. “These were rare to find few years ago.

“In future, we will see more organisations tailoring its resource requirements to the needs of the labour market. Organisations will move towards liquid workforce to capture the best talent regardless of source or nature of contract, which may not be employed full-time.”

A test case

Dubai’s free zones will be testing out the efficacy of employment not overly bound to just the one employer. Companies will be allowed to release those employees they deem surplus to another entity within the free zone, where they stand a better chance of having their skills utilized.

Such “temporary contracts” will allow the free movement of labour between companies operating in the free zones for the rest of this year. It will also benefit workers who have been granted unpaid leave by facilitating their re-employment in jobs in Dubai.

How well these switchovers work at the free zones could well be a model for businesses outside to follow. The authorities are doing their best to reduce the chances of wholesale layoffs as had happened in 2008-09.

Reduce the pain is what they are intent on. Hopefully, businesses can keep it that way.

In the last three to four years, a majority of organisations in banking and oil and gas sector have gone through re-structuring because of mergers and acquisitions, or synergies across common assets to get the best out of cost optimization programmes

- Vijay Gandhi of Korn Ferry Digital