As UAE cost of living goes up will salaries keep pace?

A new recruit’s pay offer was the final insult for Omar Abu Hayyeh.

The 31-year-old had worked for his company in Saudi Arabia without an increase for four years when he discovered what a future colleague was in line to receive.

“I was the commercial sales manager. All offers issued from the company had to pass through me,” says the Jordanian.

“One person they brought in had been sacked by his previous company. And they gave him 42 per cent over and above my salary. They gave him almost 8,600 Saudi riyals (Dh8,421) extra [than me] per month. This was just the salary. He even had extra benefits.”

The role was almost the same as his own but with less responsibility, so Mr Abu Hayyeh, who says he received multiple letters of appreciation from his bosses during his time with the company, sent emails to the head of sales and head of HR asking for an explanation.

When they rebuked him, he resigned and now works as a medical sales manager for a different company.

While Mr Abu Hayyeh is hoping to relocate to the UAE with his new employer, whose regional headquarters is based here, he may not have better luck negotiating a salary increase here either, with many workers in the UAE grumbling about low or non-existent pay rises.

The 2014 Middle East Salary Survey revealed that 46 per cent of residents in the region were dissatisfied with their salaries, compared to just 4 per cent who said they were happy.

“A few years ago the prevailing feeling was that we were lucky to have a job in the first place, and so would tolerate pay freezes and our loyalty to our company would mean we would all stick it out together. This has changed,” says Toby Simpson, the managing director of The Gulf Recruitment Group. “There is only so much austerity an employees’ patience can handle in the face of rising prices in housing and education.”

Another survey last month of the Middle East and North Africa by suggest that while the majority of UAE respondents expected their cost of living to rise this year, more than half believe their financial position would improve in the next six months.

Some sectors of the economy are on the up – online jobs listings in banking and finance have grown 38 per cent in the past year, according to the latest Monster Employment Index – so are we right? Are we also in line for a significant rise in income this year?

Unfortunately for those working in the Middle East, the answer is not that simple.

“Prior to the financial crisis, so 2006 to 2008, salaries were increasing by double digits, anywhere from 12 to 13 per cent year-on-year,” says Jack Khabbaz, the manager of supply chain, sales and marketing at Morgan McKinley, a global recruitment consultancy with an office in Dubai.

But since 2010 the average budgeted salary increase has been about 5 per cent per year, according to Mercer, the global human resource consulting firm.

As a result, many employees choose to move between companies to secure a higher salary, a decision that can make the UAE workplace transient and raise recruitment costs.

“Employees who do move on because their financial aspirations cannot be met play a key part of corporate Darwinism where more dynamic and successful businesses can afford to pay more to attract the best talent,” says Mr Simpson. “That competition is essential for a growing and successful economy and of course for us headhunters.”

And it’s not only on salaries that increases are focused. Allowances have also been a key element of concern for employers and employees, according to Nuno Gomes, the information solutions leader for Mercer Consulting Middle East.

About a third of The Gulf Recruitment Group’s clients increased their employees’ housing allowances this year, and “many more” are considering rises of up to 20 per cent, according to Mr Simpson.

Companies started readjusting their housing allowances in 2013, according to Laurent Leclere, a senior consultant and data services lead for the Middle East for Towers Watson.

“However, it has been a controlled review, as the average median increase on the housing allowance reached 12 per cent on average, when the market shows rents increasing from 30 per cent to 60 per cent in some areas of Dubai,” he says.

“Although the situation in the real estate sector has calmed down in the past six months, the review on the housing allowance is expected to be maintained between 10 to 15 per cent for this year,” he adds.

Housing allowances may not have kept pace with rises in rent, and it looks as though salaries will not make up the shortfall this year either.

Many experts say, and they are backed by reports by both Morgan McKinley and Towers Watson, that salaries will only rise by about 5 per cent this year.

“Most industries are very much aligned to each other when it comes to annual salary increases, with few variances to the 5 per cent average budget,” says Mr Gomes.

“The one industry where we see a reduction in budgets at the moment is in oil and gas, mainly because of the reduction in oil prices and the lower expectation on revenues and profits for 2015.”

In fact, the oil price, which stood at $115 per barrel last June before plunging to below $44 in January, is a major reason salary hikes are expected to remain capped at about 5 per cent, according to Morgan McKinley.

As the recruiter’s 2015 UAE Salary Guide points out, the UAE is the world’s fourth-largest oil exporter and holds the world’s sixth largest reserves.

“Consequently, the oil and gas industry continues to make a huge impact on general employment trends in the UAE,” says the guide.

If oil prices rise above $60, the recruiter expects it to have a positive impact on increases. But if it dips below $30 it could represent a problem for the country and wider region.

“Projects could then start to be held up. At the moment projects are still continuing. There is a supply of properties coming to the market. There is a lot of infrastructure. Projects that are undergoing and have been awarded are working ahead,” says Mr Khabbaz.

What will happen with salaries next year is anyone’s guess. Again, the oil price will play an important part. If prices rise above $60 a barrel, salaries should also increase.

“But it’s a bit early to tell because last year at this time we would have said the same thing, and then the oil price slumped [and the] Russian currency slumped,” adds Mr Khabbaz.

Experts say those who plan to ask for a rise should be realistic about what they can achieve.

“They also need to be persistent, since jobs that offer bigger pay cheques also attract tough competition from fellow ambitious candidates. They need to take risks and even move jobs if their current employer can’t meet their salary and career development needs,” says Suhail Masri, the vice president of sales at

Fortunately not everyone is missing out on a pay rise. Khaled Assif, 29, from Lebanon, says he received an increase each of the eight years he worked with his previous UAE employer, from 2008 to 2015.

“It started with 7.5 per cent back in 2008 and [it reached] about 20 to 25 per cent, something like that,” he says, which gave him an extra Dh1,000 a month in his salary eventually.

“Each year the raise was depending on my performance and the budget,” admits Mr Assif.

Oil makes salaries slippery

Recruiters say the oil price plays a major factor in the salaries of people working in the Arabian Gulf. The price has fallen off a cliff in the past year, but how long is it expected to stay down?

What has happened to the oil price in the past year?

It has fallen sharply, and fast. Last June a barrel of brent crude was trading at US$115 a barrel, but it tumbled by more than 60 per cent to less than $44 in January. It has risen slightly since, and was $60.82 on Wednesday.


Experts say a number of factors have influenced the price, including weaker demand. The United States has become the world’s largest oil producer, which means it does not need to import as much. And Gulf producers, including Saudi Arabia, have refused to cut production to correct the price in order to maintain market share.

How long is it expected to stay low?

No one really knows. BP’s chief executive, Bob Dudley, says he expects prices to remain low in the “near to medium term”. But one thing is for certain: if sanctions are eased against Iran, prices could plummet still further – although it is unclear how quickly Iran could begin to pump more. Oil fell in early April after countries negotiating with Iran said they had reached a framework agreement on talks about the country’s nuclear programme. If Iran complies, sanctions against it could be relaxed, potentially bringing millions of barrels of Iranian crude into the market.

When will we know more?

The final deadline for talks is at the end of June. Only time will tell.

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