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COVID-19's inflicting a lot of pain on the Gulf's workforce. Salary cuts are just one facet of it. Image Credit: Pixabay

Dubai: The hard times are here – a majority of businesses in the Gulf are planning to adjust “one or more” elements in their employee compensation packages, which will include suspended or delayed salary increases.

Most businesses have already opted for reduction in base salary and allowances, initially for three to four months after COVID-19 struck these economies, and with possible extensions.

According to a study by Mercer, 28 per cent of organisations surveyed in the UAE have “already, or are planning to, reduce base salaries of one or more of their career levels.” This is more or less the case in other Gulf states.

Interestingly, the biggest pain is being felt at the CEO and senior management levels – “A key trend across the entire GCC is the prevalence of reductions on base salaries or cash allowances is significantly higher’ for these executives than at the support level.

And nearly 40 per cent of organizations have or will implement a hiring freeze, enforce permanent terminations or place employees on furlough.

According to Nuno Gomes, Head of Career at Mercer MENAT,“Organisations are trying to preserve the financial safety of their lower level support functions by focusing salary reductions at the higher career streams. Furthermore, salary reductions have been mostly within the 15-25 per cent range and applied for a short period of time.”

Some resilience too

Organisations in healthcare/life sciences and financial services have proved “more resilient” to the impact of COVID-19, with 87- and 58 per cent respectively reporting no changes to their compensation and benefits.

But those in the engineering, construction and real estate sector (90 pe rcent) and those with diversified operations (86 per cent) have reported taking actions across one or more of their employee benefits.

The number of job losses are piling up in real estate, with developers moving to trim their sales and marketing teams given the fact that most people are less likely to invest in property right now. Some of these businesses are also falling back on prompt salary payments, market sources say.