Pay freeze expected for parts of Middle East in 2016

Author: Kirsty Tuxford | Date: 16 Dec 2015

”There is a cloud of cautiousness in the UAE,” says Hay Group’s Vijay Ghandi

Wage increases in the Middle East are slowing down and some organisations are even considering a pay freeze for 2016.
Despite a predicted global real wage uplift of 2.5 per cent, increases in the GCC are forecast at just 2.3 per cent, according to the newly released Korn Ferry Hay Group 2016 Salary Forecast. Once inflation is taken into account, Jordan (5.3 per cent) is expected to see the highest real wage increase in the Middle East, with the UAE set to see the slowest growth (0.9 per cent, down from 2.8 per cent last year). High inflation in Egypt means it is the only country in the region set to see a cut in real wages (-0.4 per cent).
Vijay Gandhi, regional director for productised services at Hay Group said: “There is a definite feeling of slowdown in the market, with around 15 to 20 per cent of organisations now suggesting they will introduce a pay freeze for 2016. We are already seeing adjustments in sectors including real estate, luxury retail, financial services and oil and gas services.
“There is no doubt that there is a cloud of cautiousness in the UAE, as organisations focus on restricting increases in fixed costs, improving their profitability and top-line revenue and restructuring to gain higher efficiency from their current staff. In addition to lower pay increases, we’re expecting this to result in lower bonus payouts than recent years.”
However, executive talent is still in high demand across the GCC region, with a shortage of key talent at senior management level. Gandhi says organisations looking to retain their top employees are creating enterprise value schemes and incentive plans that reward leaders over the longer term.
Gandhi says: “Long-term incentives tie in with corporate goals and reward high performance. Our data shows that the fixed pay of executives is broadly competitive with the UK, Europe and Australia; however, the total variable pay received significantly lags behind these markets.
“Executives have come to understand that the rewards for high performance over a slightly longer period of time can be significantly greater than a short term salary increase. Coupled with the dynamic nature of the Gulf markets and the potential in the MENA region, this can be very motivating to senior executives.”
The potential salary freeze in the GCC is not seen as a deterrent to executives, as research shows that they tend to stay for the medium to long term. “Traditionally, GCC markets have been perceived as a ‘short-term option’, particularly by European expatriates,” says Gandhi. “However improvements in the standard of living, especially in healthcare and education, have led to many expatriates seeing GCC markets as a longer-term home. The GCC also offers an exciting opportunity for many executives to work in a quickly growing and politically stable environment while enjoying year-round sunshine and the tax advantages of this market. In fact, our data shows that over 70 per cent of executives have been with their current employer for more than five years.”