UAE staff told to wait until next year for salary increases

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• Employers cautious about bumping up wages to match inflation
• Budgeting for rises next year to offset employee inflation concerns
• Dichotomy between keeping costs down and competing for talent

The majority of UAE companies are resisting giving staff a boost in their salaries to help compensate for the rising cost of living, with most putting any increases off until next year.

Reuters reported in August that Emirates NBD, Dubai’s largest bank, had given its staff a pay rise of up to eight percent to help offset the impact of rising inflation.

However, a survey of 200 companies in the UAE by consultancy firm Mercer found that while 67 percent had been asked by staff for a salary increase, only 16 percent had taken any action, ranging from one-time lump-sum payments to salary increases.

“Employers are being cautious about immediately bumping up wages to match inflation,” said Andrew El Zein, senior associate consultant for the Middle East and North Africa at Mercer.

“Many are considering short-term actions with less permanent implications such as lump-sum amounts or retention bonuses or are investing in improving employees’ work experience by offering improved work-life balance, flexibility and training.”

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“Having said that,” El Zein added, “companies are budgeting for higher rises next year, ultimately offsetting employees’ inflation concerns, and matching rising pay expectations.

“This requires a structured approach that balances employee concerns with managing a challenging and unpredictable fiscal environment.”

The Central Bank of the UAE projected that inflation is likely to hit 5.6 percent this year, and while this is lower than in other developed countries Reuters reported that it would be the highest rate in the emirates since 2016.

“I run a couple of large Facebook groups and one is specifically for jobs,” Keren Bobker, a Dubai-based independent financial advisor and senior partner at Holborn Assets, told AGBI.

“It has been very clear from there, for quite some time, that salaries for most roles have been falling over the past few years. I am frequently surprised by the salaries offered even for professional roles.”

Bobker added: “From some polls I have run, the overwhelming response is that most employees in Dubai haven’t had any kind of pay increase in the past six to nine months.

“My view is that employers have a duty of care and, as they are likely increasing their own fees or prices to reflect general overheads, they should take steps to ensure their employees are not worse off. And yes, my own employees have had increases at or above the level of inflation.” 

The recent S&P Global monthly UAE Purchasing Managers’ Index (PMI) found that business activity in the non-oil sector was at a 38-month high in August.

Higher activity has meant that companies have had to clear growing backlogs of work, resulting in staffing levels rising for the fourth straight month and to the greatest extent in exactly one year.

“There is a real dichotomy for companies between keeping costs down and the war for talent in the region,” said Katy Holmes, general manager of the British Business Group Dubai and Northern Emirates.

“Companies naturally – and in many cases reluctantly – shed their workforce through the pandemic, then had an intense recruitment period to meet a quick recovery and are now competing to retain and attract the best talent in the region at the same time as managing inflation.

“We see companies being creative in providing flexible and/or home working options and implementing employee wellbeing programmes as added value while maintaining salaries. 

“We have also seen a significant increase of new coaching and development companies joining our membership in the last three months and they’re really thriving – suggesting companies are significantly investing in their people but perhaps not through wage increases.”

Dubai-based Rupert J Connor, partner at Abacus Financial Consultants, said that company bosses are standing pretty steadfast in not giving out pay rises.

“Ideally, salaries should keep in line with inflation however, in practice, this is certainly not always the case here in the UAE as there is no requirement to.

“I have known individuals who stayed in the same role for +10 years and never received any sort of salary increase – which hardly seems fair. Over the past 10 years in the UK, the average salary and wage increase, I believe, has been circa 3.9 percent per annum,” he said.