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30 May 2024

UAE salaries up by 14.5 per cent

By Emirates Business


Companies must start matching their employees’ pay rises with inflation or risk losing their most talented staff, experts have warned.

Salaries in the UAE rose an average 14.5 per cent during 2007, leaving little after cost-of-living increases to reward valued workers. The forecast for the year ahead is for similar increases, although that may not be enough to attract and retain quality staff – already in short supply – in the current economic climate.

And there are fears any substantial raises in pay could exacerbate the very situation they attempt to resolve – by further adding to inflationary pressures.

Government figures place inflation in the UAE at around nine per cent, but unofficial estimates say the figure could be between 12 and 18 per cent. Already the rising cost of living is a deciding factor on whether people relocate to the nation.

“Salaries have gone up by 14.5 per cent [in 2007], in line with inflation. This means that there is not much that has gone in an individual’s pocket,” said Matthew Taylor, the Dubai-based International Director of Macdonald and Company, a British recruitment consultancy focusing solely on the property industry.

Next year, he said, the pay rise ought to be more to make up for the previous year’s situation. “Next year, the increase may be of the same level or slightly more.”

Santosh R, a software engineer with one of the large family owned automobile dealers in Dubai, said: “I’m waiting for next year’s raise to take a call on whether to stay here or go back to Bangalore… the salaries back home are beginning to match what’s on offer here, and with rents and inflation here it is not leaving me with much of a nest-egg. I’ll be better off going back if I do not get a sizeable raise this time round.”

Any jump in salaries is expected to be the highest in the banking and real estate sectors, the two industries supposedly witnessing the most acute shortage of skilled staff.

“In the banking sector, you have to be flexible as they tend to pay good bonuses. Fixed salaries may be relatively stable. We can expect a seven to 12 per cent pay rise [in 2008],” said Gary Thomson, director of the Dubai office of StantonChase International, the executive search consulting services firm.

Worldwide, the fight to find talent is fiercer than ever. The arrival of aggressive multinationals in the region – banks, consultants, even hedge funds – means the battle is going to get even bloodier here. Maggi Johnston, executive director, Team One Recruitment, said: “Senior candidates with GCC experience can command a premium and have become much more selective as to what types of companies they will consider working for. In the finance sector, we are seeing upward pressure on salaries in order to attract overseas talent and retain existing talent.”

Thomson added: “Real estate is tied to the financial sector and maybe the hike is higher. There is a lot of activity going on in the real estate sector in the region, especially Saudi. There is demand for qualified people so the salary levels will go up.

“There is a growing shortage of talent and this is a global phenomenon.”

The situation in the region is also exacerbated by ample liquidity sloshing around in government and corporate coffers due to high oil prices. And with big money chasing limited talent, the salaries could shoot through the roof.

“There are plenty of petrodollars going around and companies are not short of cash,” said Macdonald’s Taylor. “If they [the employers] want their projects to be completed on time, they need good, qualified people and for that, they should be willing to pay.”

What is the alternative?

Companies are puting more emphasis on

staff development and training as an alternative to using pay rises

as a weapon to recruit and train employees, said a leading recruitment expert.

Rabea Ataya, CEO of online recruitment company bayt.com, believes companies are starting to appreciate the value of long-term investment in retaining their best staff, even though the impact on bottom line may at first appear negative.

“Without a doubt, I think companies now are starting to focus more on long-term talent recruitment, which means a greater emphasis on staff development and training. In the short-term, a company’s bottom line might not look so good with this strategy because of the expense required in developing an employee’s skills over time, but the employers are beginning to believe the volumes will catch up in the long run, so their investment in the staff member will pay off.

“We’ve seen some employers take the money they would have used for salary increases and put it into staff development instead – it’s a long-term investment to curb the immediate pressures of salary hikes.” (Anthony Richardson)