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29 November 2023

More jobs, pay hikes in store for UAE residents

Benchmarking study assesses what companies do on a daily basis to earn and sustain the trust and respect of their people. (Shutterstock)

By Shuchita Kapur

After a lull of a couple of years during the slowdown phase in the UAE, incomes have been going up in the country with annual pay hikes once again becoming the norm rather than exceptions.

The job market is also opening up each year with an increase in recruitment activity, especially after the UAE’s winning bid to host the Expo 2020.

As far as salary hikes are concerned, they are nowhere near the pre-slowdown phase, but single-digit increments are now quite common in the country.

Human resources firm Aon Hewitt predicts a pay hike of 4.8 per cent for employees in the country this year. This is lower than forecasts by UAE companies for 2014 and 2013, which was 5.1 per cent and 5 per cent salary growth, respectively.

Nevertheless, a rising income should obviously translate into a healthier kitty with the passing months but corresponding inflationary factors may mean that there may not be substantial gains for an average employee.

Residents in Dubai say their salaries are going up (albeit in single digits) but they can’t add to their savings. Rising rents in 2014 were a major factor that ate up into many households’ budgets in the city, maintain residents.

According to executive search firm Pedersen & Partners, pay hikes in the UAE and the Middle East at large are being offset because residents have to pay more for sustaining the lifestyle they lead.

“Remuneration packages across the Middle East have risen steadily since the recovery of the market following the financial crisis,” says Michael Cox-Hill, Managing Director for the Gulf region at Pedersen & Partners.

“While executives [in the UAE] receive higher remuneration packages than their western counterparts, the cost of living and the rate of inflation continue to escalate,” he says.

Cox-Hill lists a tax-free income as a major draw for expats but notes that rising rentals and children’s education costs may be neutralising that factor to an extent.

“Allowances, chiefly for housing and schooling, contribute to the overall compensation and benefit increases or cost-to-company, and whilst the tax-free component of residing in the region provides executives with a notable benefit if relocating from outside the Middle East, this is often offset by the continued escalation in the cost of living,” he maintains.

“In general, salaries are higher and continue to increase, but the tax-haven benefits that were available prior to the global recession are much less evident in 2014. While there is a moderate financial advantage to residing in the Middle East, other benefits should also be considered, such as lifestyle benefits, educational excellence, healthcare provisions and cultural diversity,” he notes.

According to Aon Hewitt, UAE companies are being more conservative with their budgets going forward are carefully considering what kind of hikes to dole out to employees.

On the other hand, inflation is expected to rise to between 2.8 and 3 per cent in 2015 as per National Bank of Abu Dhabi’s estimates. Likewise, a poll of economists by Reuters also expects inflation of 3 per cent in 2015.