x Abu Dhabi, UAEMonday 22 January 2018

The UAE 'expat package' is back - but this time bonuses are more modest

Hay Group, the global management consultancy, expects the return of bonuses and perks for UAE workers next year as Asia becomes more competitive and companies fight hard for talented hires.

Salaries were expected to rise 4.6 per cent in the UAE next year. Silvia Razgova / The National
Salaries were expected to rise 4.6 per cent in the UAE next year. Silvia Razgova / The National

The "expat package" of bonuses and allowances is making a comeback as pay increases in emerging markets force UAE companies to step up the competition to attract talent, according to a new study.

However, a return to the levels of largesse from company to employees during the hiring spree before the crisis is not happening this time, said Hay Group, the global management consultancy.

Instead, companies were hiring selectively, with bonuses on a more modest scale than before the financial crisis, when luxurious company cars, lavish housing allowances and multiple flight tickets home were commonplace.

Performance-based pay is on the increase, but potential hires were also taking a "holistic" view of their remuneration once more, said Vijay Gandhi, a regional director at Hay Group.

"Bonuses are back, but companies are being cautious not to increase the whole fixed package," he said. "Salaries are rising across the board, but not as much as in Asia."

But amid the increase in pay packets, companies were being forced to be more choosy about their hires in an effort to slim down staff costs that have become bloated during the past few years, added Mr Gandhi.

"If you look at the trend over the last five to eight years, salaries have increased by 50 to 60 per cent," said Mr Gandhi. "To remain competitive, businesses are increasingly being pushed to look to economies of doing business."

The Middle East is expected to experience an average growth of salaries of 5 to 6 per cent this year, firmly above developed markets where debt-laden governments are struggling to deleverage.

However, the region is expected to lag Asia, where economies are growing rapidly and salaries are racing ahead at an expected rate of 7.5 per cent, led by a "war for talent" in China.

The study found that salaries were expected to rise 4.6 per cent in the UAE next year.

In the Arabian Gulf, that compares with as much as 5 per cent in Saudi Arabia and Kuwait and 4.3 per cent in Bahrain.

The expected boost to wages comes after a year when salaries in developed markets remained in a state of stagnation, according to the International Labour Organisation, the UN agency specialised in labour rights.

"In developed economies, the crisis led to a "double dip" in wages: real average wages fell in 2008 and again in 2011, and the current outlook suggests that in many of these countries wages are growing marginally, if at all, in 2012," the agency said in a report released last week.

Anaemic economic activity in Europe is expected to contribute to earnings growth of just 3.3 per cent, after the euro zone fell into its second recession since the start of the financial crisis during the third quarter.

However, with an economic recovery in the United States finding its feet, many Americans who had headed to the Gulf to avoid the financial crisis in 2008 are now finding improved prospects at home.

Non-farm payrolls in the US rose by 146,000 last month, almost twice the expected rate, as the unemployment rate in the world's largest economy fell to a four-year low of 7.7 per cent.

However, Hay Group's forecast is for 2.9 per cent salary growth in North America during the year ahead.