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06 June 2023

Bank employees face big cuts in bonuses but no major layoffs

By Shuchita Kapur

The UAE's banking sector will see little or no bonuses being disbursed this year, although basic salaries are likely to remain the same and no major layoffs are in the pipeline, Emirates Business has learnt.

Recruitment agencies believe that while there will be no layoffs as far as the core staff is concerned, hiring will also come down to a trickle, if not a standstill.

Ian Giulianotti, Associate Director, HRM Consulting at Nadia Recruitment, said there were minuscule chance of bonuses for banking staff this year, which make up a big portion of their yearly pay packages.

"I expect no bonuses this year in the banking sector and if they are paid any it will be very small. However, it is highly unlikely that people working in this sector will take any salary cuts. It is easier to make one person redundant than ask 10 people to take a cut in their salary. This will leave those 10 people de-motivated. Moreover, employees have a contract with the bank and cutting salaries means breaching the contract and breaking the labour law. Besides, banks also want to retain people," he said.

"Bonuses and perks, on the other hand, are not set in stone and are subject to change," he added. "Bonuses are important for bank employees as they are nearly three-fourth and sometimes equivalent to their annual salary."

Mahmoud El Sharkawy, Head of Middle East Private Banking at Pathway Resourcing, said it is unlikely banks will give bonuses.

"Judging by the trends we see in private banking, the guaranteed element of compensation is being reduced, with more emphasis on rewarding performance. Within the private banking sector, bonuses could be down by as much as 30 per cent," he said.

Noha El Shazly, Country Managing Partner for UAE, Egypt and Lebanon at GulfBankers, believes no salary cuts are in sight but big bonuses for 2009 seem doubtful.

"As far as salaries are concerned, we saw steep hikes in the first three quarters of 2008. This also included bonuses. But things became more stable in the last quarter. I expect employees to get their bonuses for 2008 as banks in the country made big profits."

Going forward, though, she sees the scene changing. "We are scared about 2009 and that is what we are speculating about. People may have to forego things like welcome bonuses in 2009. But I do not expect any major cuts in salaries. Rents are still high in the country and the cost of living remains the same. Having said that, I would like to stress that we will not see big jumps in salaries, like 30, 40 or 50 per cent, as its used to be in previous years. Salary structures for 2009 will become clearer by mid-2009; it is too early to tell now," she said.

Doing away with bonus or whittling it down to a very small one may not go down well with the employees. A secretary in a leading bank said not getting a bonus would make a big impact on her finances. She earns Dh18,000 per month and her bonus is equivalent to eight months' pay, she revealed to this paper on condition of anonymity.

Let us take a look at the salary structure of bank employees for 2008.

According to data provided by Nadia Recruitment, the average salary of a country head/CEO is Dh150,000 per month and this is excluding the bonus in a retail bank. The head of a retail banking division earns Dh75,000 per month. What is important is that over and above their salaries they receive bonuses, which are three-fourth of their annual salary and at times even equal to it.

Branch managers get around Dh30,000-35,000. The salary levels may differ in this category as nationals are preferred for these positions and are entitled to some extra allowances. In investment banks, the average monthly salary of a vice-president is around Dh60,000 and managing director gets Dh100,000. Here the bonus is approximately two or three times their basic salary.

According to Giulianotti, we may see an increase in salaries in the Islamic banking sector because the current situation offers the sector many opportunities.

This is one area within the banking sector which remains of particular interest. Giambattista Atzeni, Mena Strategic Business Development Manager, Global Corporate Trust, at The Bank of New York Mellon in Dubai, said Islamic finance will play a larger role in the international arena and will come to account for a bigger share of the market.

"Products will recover at different speeds. The sukuk market will reopen earlier compared to the loan market. In the sukuk space, for 2009 we expect gradual increase in the number of transactions as opposed to 2008, where we saw a gradual winding down. Market participants are just waiting for one or two issuances to be successfully closed and then everybody else will follow that lead," Atzeni said.

In the recruitment sphere, experts do not see any major layoffs and believe it is premature to predict the trends for 2009. "It is too early to say if recruitment will fall within the banking sector. Traditionally, recruitment in the banking sector takes place in the first five months of the year. Then it slows down in summers and picks up again after October. This time we have not seen that trend so far. Hiring did not increase after the summer months last year and that is the change. As for the rest of 2009, a few weeks is a very short time to predict what is going to happen for the rest of the year," said Giulianotti.

"There is a reduction in hiring since September/October 2008. This is because the financial crisis has gripped everybody. It could also be because the last quarter of the year is a lean period in banks during which they are busy closing their accounts," said Shazly.

Ihab Hashwa, Regional Operations Manager, CareerJunction Middle East, said: "Recruitment in the banking and financial sector, specifically in Dubai, will be considerably slow in 2009. We have seen a sharp decline in banking and financial jobs across the board since November 2008 and things are not moving at a rapid pace anymore specifically in this sector. Our clients have also reported a major drop in the number of positions being advertised for banking sector jobs. However, there is a major influx of financial talent from all over the world specially the United Kingdom, the United States and European markets into the Middle East."

"We have seen a lot more people applying – not unemployed people but those looking for options. Hiring is still going on but there is a lack of confidence and it will take longer for banks to take decisions. And, this is not just limited to banks but can be seen across all sectors," added Giulianotti.

He said banks these days face three big problems: defaults on credit cards, car loans and personal loans.

"Banks are more cautious in lending now. Five to six months back we would get one or two calls each week on a pre-approved credit card but that is changing as banks are not that willing to lend. It is in these departments that we are hearing about redundancies. But these people were not bank employees to begin with. They come in the outsourced category and if banks are in such circumstances when they want to limit lending, these employees are not required. We have not heard of corporate bankers or trade finance people losing their jobs. On the other hand, we may see a surge in recruitment as far as compliance jobs are concerned," he said.

Down but not out

The broader financial services sector, including asset management, insurance and private equity, is much less affected than the banking sector. Private equity funds struggle to deploy and leverage assets effectively, but still have assets to invest and there is a growing interest in GCC economies as they are seen as relatively protected from the global financial storm, said Ihab Hashwa, Regional Operations Manager, CareerJunction Middle East