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Staff salaries on the chopping block

By Shuchita Kapur

As companies in UAE are bracing themselves for the financial downturn, cost-cutting has become a priority. Besides the reported official layoffs, companies are thinking of cutting salaries to control expenses, Emirates Business has learnt.

"A leading developer has proposed cutting salaries across the board to control expenses. I believe they haven't done it yet but such a measure is in the proposal stage," Ian Giulianotti, Associate Director, HRM Consulting, Nadia Recruitment, said.

That is not all. Some employers have found an alternative to slashing their work force. "A leading airline has come up with the concept of bringing forward leave. They have asked staff to utilise leave in advance when earlier they were not allowed to go on leave for more than two weeks.

"There are other companies, which are telling their employees to go on unpaid leave for three to six months. On the unscrupulous side, some firms are sending people home. If they don't call them back in six months' time, these people will not be able to enter the country and will not get their end-of-term benefits," said Giulianotti.

Panos Manolopoulos, Managing Partner for Middle East operations of Stanton Chase, said rumours are rife. "I have heard rumours companies are considering salary cuts. In times such as these, companies resort to two ways when it comes to controlling human resources costs. First, they just lay off people and secondly, they re-negotiate terms of employment with them.

"It may not necessarily mean just cutting salaries. The entire package is looked at and such things mainly happen to people in the senior layers. Companies have started revising their budgets and are now preparing themselves for the worst-case scenario," he said.

"I have not heard of this action [cutting salaries] yet but we expect bonus payments to be less this year, if they get paid at all. The majority of employees understand the reasons. Salaries for people starting new roles may well be same or slightly less than they were before with previous employers," said Matthew Carter, Managing Director, McArthur Murray.

"There is certainly downward pressure on salaries at present as the employment market has become more client-oriented in the past few months. This is being reflected in the case of new employees and, in some cases, salary renegotiations with existing employees. This seems to be a natural market correction following a prolonged period of rapid wage and price inflation. In some cases, employees prefer to accept a reduced salary rather than face possible redundancy or unemployment. However, unless there is a sustained fall in the cost of living, there is a limit to how much companies can reduce salaries," said Siobhan O'Reilly, Recruitment Manager, BAC Middle East.

Such moves, if they materialise, will not be good for the development of the employees and even for the companies they are employed with, said experts.

"If companies let people go , they will be creating a gap in the career development of these people and restrict their contribution to the company. I have seen that happening in the hotel industry," said Manolopoulos.

Experts are hopeful things should look better after a few months.