x

Abu Dhabi, UAESaturday 20 October 2018

Dubai salaries drop as recruiters and employers drive a harder bargain

Experts say the trend is a 'maturing' of the market as companies move away from inflated wages — and that jobseekers are lured more by the lifestyle

Morning commuters leave Noor Bank Metro station in Dubai. Demand is outpacing supply for jobs in the city, causing companies and recruiters to cut wages and benefts packages. Victor Besa / The National
Morning commuters leave Noor Bank Metro station in Dubai. Demand is outpacing supply for jobs in the city, causing companies and recruiters to cut wages and benefts packages. Victor Besa / The National

Salaries among Dubai's workforce have dropped on average as recruiters drive a harder bargain and the job market undergoes a natural correction.

Dubai’s income level, as measured by GDP per capita, stood at $45,000 (Dh165,300) in 2013, before falling to $37,000 in 2018. It is expected to fall again to $36,000 in 2020, according to a new analysis by ratings agency Standard and Poor’s.

Rather than a cause for alarm, experts say the development marks a maturing of the market.

Artificially high salaries in some sectors are a hangover of the days when the UAE was seen as more of a "hardship posting". Now professionals from across the globe are attracted to the emirate and the lifestyle, as well as the still-generous, tax-free reimbursement packages.

In Dubai, the evening-out of wages has been confounded by the fact that population growth has outpaced economic growth, according to the S&P report.

“Over the last five years, population growth in Dubai has averaged at around 7.5 per cent, driven by a relatively high influx of both skilled and unskilled resident workers.

"Over the same period, nominal GDP growth has averaged 3.6 per cent,” said the report.

This is affecting wages because there are now more workers in the market and less demand, say experts.

“Supply and demand is the major determinant of salaries,” said Mohammed Osama, managing director of Gulf Recruitment Group.

And if there are more people fighting for jobs, salaries suffer. But that is not the only reason for the fall.

_______________

Read more:

UAE's 'gold old packages' fade away as companies target younger professionals

Dubai school fees fall by up to 15 per cent

Is the UAE's new five-year visa a game changer for expat retirement?

_______________

Companies, particularly multinationals with operations abroad, have in recent years brought in recruits from overseas rather than residents who are already here. And those new residents often have lower salary expectations than existing residents of Dubai.

That, combined with the fact that more people are eager to move to the emirate, means there is no shortage of employees willing to accept a posting.

“Now you have a lot of people sitting in France, Germany, the UK, the US, South America and in Asia who are suddenly very open to being relocated to Dubai because it is a good place to live and it pays well," Mr Osama said.

“There has been a lot imported of talent, at least with the multinationals. Then, subsequently what happens is these people get to like Dubai, but their job tenure ends,” said Mr Osama.

This is a common occurrence, he explained: many candidates reach out to his company to say they have come to the end of their secondment and are now being forced to move to another assignment outside of Dubai, but they want to stay because their family view it as home. And because they are so desperate to stay, many are happy to accept a lower salary.

“This person who is earning Dh50,000 a month is now available for Dh45,000 because he doesn’t want to go back home,” said Mr Osama.

The imbalance in the demand and supply of labour is mostly at the junior level, though, said Vijay Gandhi, regional director of the Korn Ferry.

Average pay rates are down by 16 per cent at the junior level, according to studies by the management consultant.

“If a business has to replace a sales person on the floor, they are able to get the new talent at 16 per cent less compensation than they did last year,” he said.

“We don’t see this strain at the senior management and executive level, where the new hires are coming in at 2 to 5 per cent more pay. That's pretty much flat,” said Mr Gandhi.

Fujairah, UNITED ARAB EMIRATES. 19 September 2017.The Gulf Intelligence Energy Markets Forum 2017 at the Novotel Fujairah. Robin Mills, CEO Qamar Energy. (Photo: Antonie Robertson/The National) Journalist: Leanne Graves. Section: Business.
Robin Mills, CEO of Qamar Energy and a columnist for The National, said salaries may rise with oil prices. Antonie Robertson / The National

Certain professions are also more affected than others, according to the 2018 Salary Guide by Robert Half.

Salaries in the finance and accounting industry are reaching a “steady plateau” in the UAE, according to the report, while pay in the technology industry is flat.

In the financial services industry, changing roles and pursuing new opportunities is considered “too risky” for some professionals, given the current climate of uncertainty and change, says the report.

“Professionals are approaching employers with inflated expectations regarding salaries, bonuses and benefits,” it also said.

Those who have unrealistic reimbursement requests tend to be people who came here in the “good old days”, said Mr Osama. They earned, and in some cases still do earn, more than their “real worth”.

“They are beginning to realise that they should consider themselves lucky – when they do try to go out in to the job market, they realise no one wants them.”

“So they try to hold on to their current position, and whenever their company reduces their perks or does whatever, they just stay there. So this is another thing that’s happening at the moment.”

Salaries are not, however, flat across the board — UAE businesses are looking to increase lawyers’ salaries, for example, by 5 per cent in the near future.

“Multinational law corporations are showing the most interest and are often willing to pay higher salaries for candidates,” said the 2018 Salary Guide by Robert Half.

Salaries may also pick up again in the oil and gas sector as the oil price rises, said Robin Mills, chief executive of consultant Qamar Energy and a columnist for The National.

“If the oil price remains where it is or even goes up, the level of activity will increase and there will be a lot more hiring. And it will start putting upward pressure on salaries again,” said Mr Mills.

However, that is all assuming that demand does not completely outpace supply in the jobs market. If everyone has a job, and more jobs continue to be created, the battle for talent will push salaries up.

But it if there are more and more people flying in from the UK, Pakistan, India, Ukraine, Lebanon or elsewhere, it will continue to drive down salaries.