Expatriates are demanding higher pay packages from prospective employers in the UAE, creating a headache for managers competing for skilled workers.
Four in 10 human resources directors surveyed have complained salary demands from prospective candidates are outstripping market levels of remuneration, according to a study of 75 companies based in Dubai released last week from Robert Half, a recruitment firm.
Just over half of firms surveyed said candidates' pay packet expectations were in line with market trends and 5 per cent said salary expectations were below the market average.
The lack of sufficient home-grown talent, a long-term problem in the region, is one reason expatriates have tried to bargain up remunerations.
"If there's a skills shortage and a talent gap, clients have to look beyond the UAE," said Gareth El Mettouri, the associate director at Robert Half Middle East.
"When [prospective employees] think of Dubai, they think [it is] a majorly expensive place to live," Mr El Mettouri said.
"The biggest expense is normally accommodation but that's come down over the past 24 months."
"Typically, there was a full expat package and we're seeing that now eliminated," Mr El Mettouri added.
In recent years, firms have cut back on allowances such as for cars and accommodation that characterised the boom years, particularly in Dubai.
However, although headline inflation figures are declining because of a fall in rents as a result of the property slowdown, Dubai remains the most expensive city in which to live in the Middle East, according to a study by UBS.
Increased salary expectations also come during a year when most workers' pay packets have already risen, with the economy strengthening and companies seeking to attract top talent to pursue expansion plans.
The vast majority of UAE companies and their Arabian Gulf counterparts increased salaries this year, said Harish Bhatia, a regional manager at Hay Group, a global management consultancy.
The reason for higher wage packages is because during the past decade, real rates of pay increases in the Gulf failed to keep up with persistent high inflation, he said.
Another factor pushing up pay packets is the lack of long-term incentives such as share options, said Mr Bhatia. Companies in the UAE, long accustomed to a transient workforce, were often unwilling to grant stock options to employees and boosted pay instead.
However, that strategy may now be a little out of date as an increasing number of expatriates look to settle in for the long haul in the Emirates, Mr Bhatia added.
"The UAE now is looked at as a place to be and live for the long term," he said. "But it's not like America or Europe where the population of your company's workforce are sticking around."
Although basic salary increases have tended to take precedence over perks, Mr Bhatia said education allowances were one exception where companies were spending more to help employees meet the rising cost of school fees.
Despite western economies' troubles in struggling back to life in the midst of multiple recessions, Robert Half's study also found a third of human resources directors were finding the number of expatriate hires on offer had decreased.
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