Salary increases in the UAE signal positive outlook amidst diversification efforts

Sunday 04 November 2018
Dubai - MENA Herald:

Mercer, a global consulting leader in advancing health, wealth and careers, and a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC) today announced an overall increase in the base salary in the UAE across industries, according to the annual Total Remuneration Survey.

Mercer’s survey revealed that the overall salary in the UAE increased by 4.5% in 2018 across industries, with the highest increase shown at 5% in the Life Sciences industries. Furthermore, the annual salary increases in the UAE for 2019 is forecasted to grow by 4.8%, one of the highest in the region. Notably, real wage growth (salary increase minus inflation rate) is also expected to steadily rise in the region. And, while forecasts vary quite widely across specific industries, the strongest push is likely to come from the life sciences, consumer goods and high-tech industries. The Energy industry, which was previously the highest paying has now seen a downward shift.

Additionally, the Energy sector is projected to perform below the market with an expected increase of 4%. That being said, it is the highest increase rate seen since 2015 for the industry. In contrast, the Life Sciences sector is expected to outperform the market with a 5% increase. These projections are in line with the UAE’s vision of economic diversification.

Ted Raffoul, Career Products Leader, MENA at Mercer said, “The GCC is a market that is continuously progressing and thriving. With the UAE’s vision of diversifying away from oil, we’re seeing new trends in industries with regards to employee compensation, hiring and talent. Sectors such as the High Tech and Life Sciences industries have evolved due to the growing population and the need for digital transformation across the entire market, which is generating more employment opportunities and salary increases.”

The overall hiring outlook in the UAE is positive with close to 50% of companies looking to increase their headcount and 45% looking to maintain headcount. Additionally, 3% of companies have stated salary freezes in 2018 compared to 10% in 2016.

The survey also looked at pay parity (in terms of annual total cash) at different levels of management in the region. The ratio of salary difference rises steeply (up to 10 times) as employees reach senior level positions in the UAE, compared to the average of 5 times in developed markets. This trend is commonly seen in emerging markets as talent scarcity plays a major role, and there are extremely high premiums to be gained by those people with the right skills. Most notably, the highest-ranking executives in the UAE out-earn their peers in the US and UK.

GCC Talent trends

The survey also looked at talent trends in the region. It found that 78% of organizations expect an increase in competition for talent in the GCC. Furthermore, 47% of organizations noted that there aren’t enough experts in niche fields, and that scarcity of required talent may pose a potential challenge. The reason for this trend could be due to the UAE’s diversification efforts which is giving rise to niche fields in specific industries like healthcare and IT, resulting in the need for specialized experts.

“53% of respondents placed labor nationalization requirements as a top GCC economic and social issue that is likely to have an impact on organizations over the next two years. This will have a clear and direct impact on the hiring trends firms will adopt, particularly on the reward mechanisms that are put in place to attract local talent. Packages offered and opportunities for advancement will need to compete with those offered in the public sector,” says Maxime Jallageas, Associate at Mercer.

When looking at the economic and social issues that are likely to impact regional organizations over the next two years, the survey found that 39% of organizations noted fiscal policy adjustments, such as the implementation of VAT will most likely impact the organization.  Additionally, the National Allowance has slowly been introduced to employee salary packages, which is a trend that has been increasing quickly over the years with Emiratization initiatives. In 2018, there was a 71.4% increase in companies offering National Allowances compared to 2017, which aims to motivate local talent to accept and hold positions in the private sector.  

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