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Abu Dhabi, UAESunday 22 July 2018

GEMS plans to halt teachers’ salary increases after Dubai’s freeze on school fees

GEMS Education to cut 75 jobs at corporate head-quarters, sources said

Teaching staff at all Gems schools in Dubai are having their salary increases frozen for the 2019 academic year. Courtesy Gems
Teaching staff at all Gems schools in Dubai are having their salary increases frozen for the 2019 academic year. Courtesy Gems

GEMS Education, the Dubai-based school operator backed by Blackstone Group, is planning to freeze teachers’ salary increases in 2019 and cut corporate jobs after the emirate said it would cap school fees.

The privately-held company told its education staff that Dubai’s decision to cap school fees will lead to a halt in incremental salary increases, Gems Education confirmed in a statement to The National. GEMS Education will also cut 75 jobs at its head-quarters, three sources familiar with the matter said, requesting anonymity as the information is not public.

“The current move to hold salary increases is based on the recent school fee freeze decision,” a GEMS Education spokesperson said. “This is not an unusual measure to take in uncertain times. Our priority remains on providing quality education. Teachers within the GEMS Education network of schools are our most valuable resource and are at the core of our profession.”

GEMS Education declined to comment on the job cuts at the corporate level, saying it does not comment on rumours and speculation as per company policy.

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GEMS, one of the largest education providers globally, owns and operates 47 schools and nurseries in the UAE, Saudi Arabia and Qatar, according to its website.

The company told its education staff that Dubai’s decision to freeze tuition fees has had a “dramatic” impact on its future plans and that it has “significant” financial obligations to meet, according to a letter from GEMS Education chief executive Dino Varkey, which was seen by The National.

“The decision to freeze salary increases for the 2019 financial year is not one that we have made lightly and we know that this will have an impact on a significant number of you,” Mr Varkey said in the letter. “The decision by the Dubai executive council to freeze tuition fees for the next academic year was unforeseen and has had a dramatic effect on our plans for the future. The company has significant financial commitments that must be maintained and serviced if we are to continue to operate as we do at present.”

In its statement, GEMS said it has invested “significantly” in teachers’ salaries and benefits over the past five years.

“The cumulative salary increase was 25 per cent to 48 per cent when the Education Cost Index only increased by approximately 11 per cent,” it said. “We created 7,000 new jobs over the same period.”

Staff from the company’s schools were called into a meeting at the end of the work day on Tuesday and were informed about the freeze on incremental salary rises next year and the non-education staff’s job cuts, the sources said. Contracts signed in January will be re-issued to reflect the lack of salary increases in the 2019 fiscal year.

“We also know that we will need to work hard to rebuild your trust in our company in the future,” Mr Varkey said in the letter. “We sincerely hope that you remain committed to your school, now and further into the future.”

The company, which is owned by founder Sunny Varkey, Dubai-based private equity firm Fajr Capital and Bahrain’s sovereign wealth fund Mumtalakat Holding, is also planning to delay an initial public offering after the Dubai government decision to freeze school tuition fees, Bloomberg reported last week.

GEMS is studying the potential impact on its earnings projections from the government decision, according to Bloomberg.