Why your rent allowance, perks in UAE may rise

Unhappy about your landlord demanding a double-digit increase in your annual rental? Worried about a potential hike in school fees of your children?

There may be some good news for UAE residents as firms across the country are said to be acknowledging these rising costs and making an effort to retain top talent by offering compensation in line with the increases.

According to the latest GCC Allowances and Benefits Survey conducted by Aon Hewitt, companies across the UAE are recognising the need to introduce new measures and are starting to shift their budget allocation to employee allowances and benefits.

The report is based on an analysis of over 100 companies across different sectors. Last week, Emirates 24|7 reported another study that arrived at similar conclusions. Read: Rising rents? Your HRA could go up this year.

That general industry survey, published by HR consultancy Towers Watson, said 2014 could well be a year of change for employees’ remuneration in the UAE, to help them foot the increasing bills. It noted that UAE salary increases are projected to average 5 per cent during 2014 and a significant number of organisations are considering reviewing their housing allowance in the face of rising rents in the country.

The findings of the latest survey also made same conclusions. The study maintains that education assistance allowance in the UAE has increased by almost 30 per cent, and now ranges between $8,000 and $12,000 (Dh30,000 and Dh44,000) per child across job roles.

The survey also points out that in line with the allowance, the number of employees eligible for it has also gone up. Education assistance eligibility has also increased dramatically, with almost half of the companies across the UAE now providing children’s education assistance not only to management but also to other staff.

But the study maintains that despite rental prices across the country increasing in excess of 20 per cent over the past year – higher than any major global market – housing allowance in the UAE remains relatively stable across all job roles ranging from $20,000 to $53,000 (Dh73,000 to Dh195,000).

The increasing cost of living, nevertheless, is a global phenomenon and not limited to the UAE or the region. Last month, the 2014 Worldwide Cost of Living survey published by Economist Intelligence Unit (EIU) showed that living in Dubai has become a tad more expensive than the year before, with the emirate’s cost of living rank inching up from No. 96 last year among 131 metropolitan cities surveyed to No. 94 this year.

But what’s most interesting is the fact that despite a very modest rise in cost of living in Dubai this year, the emirate remains in the bottom one-third among global cities in terms of cost of living. Read: Cost of Living 2014: Dubai among most affordable cities

Nevertheless, there has been an acceleration in the UAE’s real estate market in the last six months, with rentals and property prices increasing at a steady pace. “The momentum sustained by the [Expo 2020] announcement as well as the rapid infrastructure development has seen rental and purchase prices start to rise again to pre-crisis levels – all the while housing allowances have stayed the same,” said Robert Richter, Compensation Survey Manager at Aon Hewitt Middle East.

He added that the company anticipates “that organisations will start revising their allowances such as housing in the interest of talent retention.”

However, there remains discrepancy in data analysis by different survey firms. Aon Hewitt maintains that housing allowance in the UAE and Qatar is in the region of 35-40 per cent of basic pay; this is usually only 25 per cent for the rest of the GCC.

On the other hand, Towers Watson maintains allowances such as housing and education make up 25 to 40 per cent of an employee’s total pay package in the UAE.

Source: Aon Hewitt

Towers Watson figures show that the current median housing allowances in Dubai are $54,000 (Dh198,347) per annum for executives and $29,000 (Dh106,519) per annum for professionals, while in Abu Dhabi, they are slightly higher, at $58,000 (Dh213,039) and $31,000 (Dh113,866) per year, respectively.

The most commonly provided allowances and benefits in the GCC are housing, transportation, children’s education assistance and home leave benefits. Housing and transportation is typically provided on a monthly basis as a cash payment; children’s education and home leave benefits are usually provided at actual cost of the school fees or the cost of the ticket respectively.

The average given for housing allowance and children’s education assistance across the GCC, as per Aon Hewitt data, is currently highest in Qatar, averaging $37,000 (Dh136,000) and lowest in Oman at $28,500 (Dh105,000).

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