Salaries in Middle East IT sector dive by 40 per cent

Salaries in the Middle East technology sector have dropped between 20 and 40 per cent over the past year due to the global downturn and are not expected to return to previous levels until 2010, say analysts.

The sector was previously one of the best in terms of employee perks but there have been cutbacks in this area as well, they added.

"In our experience salaries for new hires have gone down by approximately 20 per cent for the same role between last year and recent months," Peter Spaans, Human Resources Manager at Hewlett Packard ME, told Emirates Business.

"We do not foresee a change this year and it will most likely be 2010 before rates improve. The economic downturn and subsequent correction of rental prices have caused a decrease in remuneration for job seekers. It is better to have a job with lower pay than no job.

"The IT industry was offering above-average perks. Because of the economic downturn, some companies have revised their benefits but the IT industry is still offering above-average packages."

The timing of a return to previous salary levels will depend on market conditions, according to Paula Leech, HR Director of Microsoft Gulf.

"The overall reaction to the downturn has been to stop giving pay increases," she said. "A return to last year's remuneration levels will be determined by how quickly the external environment recovers.

"Additionally, improvements in pay levels are very closely linked to productivity gains in an industry as well as supply and demand in the talent market for that industry."

A senior consultant from Dubai-based Lobo Management Services said salaries and perks had declined up to 40 per cent and would not recover before next year.

However J Trivikram, HR Manager at Acer Computer (Middle East), said salaries had not fallen and the major impact of the downturn had been on recruitment.

"Remuneration has remained the same but what has changed is the availability of positions. If there were 10 people being recruited by an IT company last year, now that has reduced. This scenario has made the whole market look like less attractive in terms of remuneration. On the regional level, salaries are still stable but there may not be growth.

"Salaries and recruitment are directly dependent on the gross domestic product of a country. In the last two quarters, conditions have not been attractive but the third and fourth quarters may see some hiring. If the government and public sector started spending, it would show optimism in the market as they are the biggest customers for IT.

"After speaking to HR departments and job agencies it is clear that IT companies in the Middle East were previously increasing the workforce by 15 to 20 per cent a year but now it is less than five per cent.

"IT was one of the highest paid sectors because many professionals were being poached by the real estate and financial sector in 2007-08. But now there is a correction going on and it has affected the trend."

Many IT companies have taken steps to control costs and improve profitability – and this has affected staffing levels and salaries.

Leech added: "In general the greatest impact has been on basic pay. Most of the companies have stopped reviewing annual salary. Some of them have even reduced salaries to a certain extent. Furthermore, some companies have cut certain benefits and short-term incentives as well. Considering the fact that the external environment is most-affected, the industry's relative pay levels remained stable. However, the long-term effects are yet to be seen."

As employees get laid off, the IT market is increasingly becoming an employers' market as those seeking jobs are ready to take moderate packages.

Spaans said: "For people changing jobs now and in the near future supply and demand factors are defining new ground rules which will result in lower packages. For employees, who are not changing jobs , remuneration remains the same."

The Lobo consultant added: "Consider the business scenario that Dubai has been in for the last seven months – there has been no increase in salaries for employees, there has been a reduction in the incentives and bonuses and new recruits have been taken on at much lower salaries than what the market was offering in 2008."

Redundancies in the US and Europe have made job seekers look towards the UAE, which has increased the supply of talent and put pressure on salaries.

A source at the Clarendon Parker IT team said: "Due to the increased number of jobseekers in the market, salaries and benefits for IT sector have decreased. Large number of candidates who are coming to the UAE or are already based here are seeking immediate work.

"However, we are also seeing a significant decline in the cost of living, especially rents which are much lower than a year ago. So in spite of the lower salaries, jobseekers are not necessary in a much worse position than before."

Clarendon Parker is expecting a shift in the situation as the summer progresses. This is mainly because many of the people made redundant will leave the country during the summer holidays when children are no longer at school and families have time to relocate back to their home countries.

The source added: "More competition for top quality candidates will drive salaries back up in this kind of a situation. Whether they reach the same levels as a year ago will really depend on the cost of living hitting the same heights as the months before the credit crunch."

UAE technology companies stayed on top in terms of remuneration while Egypt, Lebanon, Kuwait, Oman and Bahrain were on the lower side. Saudi Arabia is still attractive in terms of savings and therefore has a lot of potential for job seekers.

The Clarendon Parker source said: "Some countries in the region have not seen the same dip in salaries as the UAE. Saudi Arabia is still investing heavily at the moment and the salaries for quality professional and technical personnel are still high."

Leech said there was no global salary standard as each market was unique and had its own local characteristics. "One cannot do a meaningful comparison of salaries and packages by converting them into a common denominator, such as the US dollar, and draw conclusions," she said. "Additionally, the impact of the recent downturn has not been the same in each country. Therefore we cannot talk about a global standard."

Salaries and perks at HP are based on local markets. Spaans said: "We have a global methodology to evaluate roles and responsibilities to ensure global equity. Our salary structures and some of the benefits, however, are always benchmarked locally against market practice and are competitive for the IT industry.

"For example, it is uncommon to have pension schemes in the Middle East but France or Germany do have end of service benefits or gratuities."

Trivikram said multinationals had to maintain a balance between different offices by participating in global salary surveys.

"Employees will continue moving from one country to another," he said. "Companies need to have awareness by participating in such surveys. It is essential to have a global view and understand salary structures in all countries."

In terms of salary structures in the technology sector, many software and service companies operate commission-based systems.

"Every technology firm is different but at networking or high-end software companies up to 60 per cent of remuneration is variable and 40 per cent fixed. Variable mainly focuses on incentives and commissions and are therefore linked to performance."

Spaans agreed that multi-nationals generally had competitive remuneration strategies but said software companies also tended to offer competitive packages.

"However, sometime small companies operating in niche markets can afford higher packages as they do not have large workforces."

For technology companies, positioning among peer group companies is an issue.

Leech said: "In any given local context, companies determine pay levels based on how they want to position themselves among a number of peer group companies and what they can afford. Therefore we cannot isolate a certain subgroup of companies and say they are paying more or less than others."

"When there is less recruitment you want to hire the best. In a downturn, even the best can lose their jobs and therefore it is a good time for companies to hire these professionals. Now companies have different hiring and interview procedures, making it all very stringent," said Trivikram.

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