Dubai: In the search for – and retention of – global talent, Dubai and the UAE are building on their strengths. And the absence of a tax on personal income is the biggest strength that the emirate can call on.
The Dubai Media Office late on Monday (August 2) tweeted a chart citing the consultancy PwC (PriceWaterhouseCoopers), which found a top-rung corporate executive would retain more by way of salary and other benefits if working in Dubai than other leading cities. Hong Kong and Singapore feature in second and third spot, while Florida, California and New York figure in the next three spots.
PwC based its assumptions on what the take-home would be in each city after deducting the tax and social security obligations. “Executive base salary in Dubai/UAE is competitive at global levels,” said Vijay Gandhi, Regional Director for Rewards and Benefits at Korn Ferry, the specialist consultancy. “More organisations in the country are developing more consistent, centralised reward systems and planned career assignments.
“This allows employees to gain the global experience needed to make their organisation a stronger player on the world stage, without losing valuable talent to their competitors.”
Even before the pandemic broke, there were concerns in some quarters that a slowing economy would mean that businesses here would be more intent on saving costs rather than spending on recruiting the best talent out in the market. The banking sector – from the mergers that were happening - and the oil and gas industry – oil price dip being the main reason - were going through consolidation,
Then COVID-19 struck and those concerns magnified into full-blown fears that it would be years before the UAE economy would regain its footing. But the worst-case scenarios have not come to pass – UAE’s economy is picking up lost momentum faster than was thought possible. The IMF is projecting 3 per cent plus growth, and oil’s push back to $70 a barrel levels is also helping.
Digital and renewables
According to a firm specialising in senior management positions, both banking and energy industry are back to recruiting – selectively. “Instead of traditional banking, the new jobs are being created for digital entities,” said a senior official there. “(Mohammed) Alabbar led bank Zand and the planned digital bank by ADQ – these are major attractions for banking professionals.
“Digital banks will lead to major upward revisions in banking industry compensation packages in the UAE. So, the question of banking jobs becoming scarce is not a fact – it’s only shifting in new directions.” (Even traditional banks are ditching the old ways of thinking – Sharjah’s Invest Bank on Monday confirmed two CEOs with sharply defined roles to see the bank’s recovery from more than Dh1.5 billion in accumulated losses).
Ditto with the energy industry. Since the second-half of 2020, Dubai and Abu Dhabi announced major renewable/clean energy projects, with multi-billion dirham ‘blue’- or ‘green’ hydrogen projects seen as the next big thing in the energy industry.
Meanwhile, all aspects of the digital economy continue to outperform, and this is where salaries and compensation packages are seeing the most significant changes. Expect more of the same in the coming months.
No tax on income
Right through these last 18 months, the UAE authorities have emphasised that no taxes on personal income are being considered, and that status quo will prevail on VAT, even when speculation mounted that there could be a hike after Saudi Arabia raised its to 15 per cent from 5.
It is in this context that the PwC report should be seen, and why Dubai’s status as the top spot when it comes to take-home salary should be viewed. Sure, there will be intense competition from the other Gulf economies to get top-notch talent. But those are challenges that Dubai and the UAE will be facing for the first time. Those challenges have been overcome in the past – and new ones too will go the same way.
On executive compensations, Gandhi sees potential changes in ‘long-term incentives’, something that is quite prevalent among US and West European companies. Again, tech and digital companies will be the ones forcing change to happen on this score too.
If all of that means more take-home for those living and working here, then it all adds up to the greater good.
The UAE’s non-oil economy had its best showing in two years during July, with demand rebounding sharply from the pandemic impact. For businesses, the bets piece of news is that orders are coming in again, which led employment to rise at fastest rate since January 2019, according to the latest data from IHS Markit, the London-based research firm.
Businesses will be hoping that the easing of COVID-19 restrictions and the Expo 2020 would further improve economic conditions. But they remain cautious in mindset - overall business expectations declined from the previous survey period, the report notes.
Most of the new orders seem to be coming from within the UAE or the Gulf. “Ongoing measures in other parts of the world led to a third successive fall in export sales during July, with firms increasingly turning to domestic clients to help recover new business,” IHS Markit notes.
Worrisome supply chain
"With COVID-19 cases re-accelerating in Asia, firms also pointed to a worsening of supply chain problems," said David Owen, Economist at the firm. "In fact, delivery times lengthened to the greatest extent since the onset of the pandemic in April 2020.”
This is something that all businesses reliant on Asia for their supply of raw materials and other commodities would be worried about. New delta-variant infections are on rise there, and if supplies take longer to reach, businesses – and consumers – here can expect prices to climb even further. The landed costs of steel and almost all other major building material supplies have seen gains since October last.
As it is, UAE firms are already reporting the "second-worst lengthening of input lead times in the survey history, behind only that seen in April 2020", which was when the UAE felt the full impact of the COVID-19 created disruption.
Customers have to pay up
The higher input costs were again partly passed on to customers as output charges rose for the second month running. But so far, the price increases have only been marginal. But can businesses afford to keep it that way?
The PwC (PricewaterhouseCoopers) data shared by Dubai Media office showed that Dubai topped major global jurisdictions in take home earnings of individuals. Dubai’s position ahead of world’s leading financial and business hubs such as Hong Kong, Singapore and New York points to the pre-eminence of the emirate in offering top tax free compensation to resident employees.
The PWC study compared the salaries taken home by highly-paid resident employees in different cities across the world, and Dubai came out on top with employees here taking home 100 per cent of their income. Compensation is a major factor in employee attraction, retention, and turnover. With higher compensation packages attracting top global talent, it is only a logical extension that these high earners save, retain and manage their wealth within the jurisdiction where they work and live.
Tax-free salaries combined with efficient wealth management infrastructure in Dubai is indeed helping the emirate to retain and manage such savings. The UAE’s financial wealth reached $600 billion in 2020, despite the global pandemic impacting the local economy, according Boston Consulting Group’s latest wealth report.
One of the significant aspects of the study was that the UAE is fast emerging as a leading cross-border wealth management center with as much as half a trillion dollars of overseas wealth managed in the country in 2020. In 2020, the country became the sixth largest overseas wealth management centre. While Switzerland with $2.4 trillion in overseas wealth managed there is the top global jurisdiction that attracted largest chunk of foreign wealth followed by Hong Kong, Singapore, USA and Isle of Man in the first five positions.
In the global competition for talent, Dubai is fast emerging a clear winner with its tax-free salaries and world-class living. The city’s well-developed financial infrastructure is fully geared to help professionals manage their big earnings, leading to further wealth creation for both these professionals and the emirate.