More UAE employees receive salary hikes in 2018
More employees across all UAE economic sectors received salary increases in 2018 compared to the previous year, with 72% of companies across the country awarding their workers raises.
The number of companies paying out bonuses also increased to 65% across all organisations surveyed compared to just 50% in 2017, said new data from the Korn Ferry 2018 Salary and Benefits Study.
However, the study also revealed a significant challenge facing UAE workers. According to the study, while more employees received increases, the actual average rate of salary hikes declined year-over-year. Salary increases also failed to keep up with a rising inflation rate, said Harish Bhatia, regional director, Korn Ferry Mena.
The annual study from Korn Ferry captured data from more than 600 UAE organisations across 20 economic sectors and included more than 425,000 employees.
The data revealed average salaries increased at a rate of 1.8% in 2018, which is lower than the average increase of 2.1% in 2017. With forecasted inflation jumping from 1.9% to 4.2% in 2018, the actual spending power of the average UAE worker dropped 2.4%.
“We’ve seen a trend showing salary compression over the last few years which continued in 2018. That’s not surprising, given that the average UAE salaries for mid-level professionals and executives continue to outpace most Western economies. It’s healthy that companies are protecting fixed costs and giving salary increases in a more disciplined and selective fashion,” said Bhatia.
He also pointed to several market forces that help minimise the actual financial impact on UAE workers. Government initiatives to support new economic growth sectors, visa rule changes, freeze in school feels and declining rental costs all help to offset the inflationary gap and enable workers to realise the intended benefit of salary increases. This is also helping employers in managing expectations and indirectly managing costs in an environment of tightening business margins.
The trends in variable compensation highlight another potential challenge facing UAE companies, but working through this carefully can also prove to be an opportunity to balance expectations of employers and investors vs. employees, according to Bhatia.
The Korn Ferry study highlights a trend in conservative bonus pay-outs compared to many top-ranking mature economies. A relatively flat market is an opportunity for organisations to tweak their pay philosophies and utilize higher budgets towards variable pay in the future. Also, with changing visa regulations and a shifting mindset towards long term expatriate retention, organisations should start to leverage budgets towards building long term incentive schemes that help drive long term performance, retention and commitment of senior professionals and skilled talent.
“The challenge organisations have is finding a balance between managing the pressure of rising fixed costs and allocating funds to a bonus pool that is used to drive performance. One measure of finding this balance is to stop offering a bonus to low-performers.” Bhatia said.
The Korn Ferry study highlights other significant trends in the market that impact the UAE talent market, including:
- Total employee turnover fell from 11% to 8% year-over-year, with voluntary turnover at just 5%. Yet with new employees, most sectors are still recruiting at higher than median levels, with clinical, digitalisation and data analytics jobs being recruited with significant premiums;
- Even in a stable overall job market, the impact of the talent crunch and resulting salary surge for specialised talent in select jobs is having an impact. Companies report having the greatest difficulty recruiting talent and ultimately paying premiums to new employees with specialised skills in data analytics, data scientists, customer experience and digital transformation;
- While the oil and gas and financial services sectors continue to command the highest salary premiums in the UAE, the real estate, leisure and hospitality and food & beverage sectors reported the highest average salary gains.
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