UAE: Employers will not increase compensation packages by base salary, but will add bonuses and allowances – News
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A majority of employers in the UAE – about 60 percent – left their employees’ salaries and bonuses unchanged in the first half of 2024 as they focused on giving allowances rather than increasing base salary to retain talent, according to a new study by Adecco, a global HR solutions company.
The survey found that nearly a quarter (24 percent) of employers in the UAE have resorted to alternative compensation strategies to attract and retain the best talent.
It further said that additional benefits such as housing allowances, annual bonuses and various other allowances have become more important and serve to improve the overall compensation package without increasing the base salary.
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“Talent market dynamics continue to play a critical role in employers’ salary decisions. In high-demand industries such as information technology, where skills and talent are in short supply, companies are more likely to offer generous salary packages, bonuses and allowances to attract and retain key employees,” said Mayank Patel, SVP Adecco and Head of EEMEA.
Some employers avoid increasing their employees’ base salary because, unlike bonuses, this increases their severance costs.
“Throughout 2024, employers will continue to navigate the complexities of the global economy while seeking to attract and retain top talent. While salary increases may be slower than in previous years, the strategic use of bonuses, allowances and other benefits will likely remain an important tool in recruiting and retaining employees,” the executive search firm said.
The study found that factors such as inflation, fluctuating consumer spending and a shift toward cost optimization through automation and digital transformation may have contributed to a more conservative approach to salary increases.
Sectors such as information technology, retail, banking and financial services will see slower salary growth in the period January to June 2024, it said.
A study published by Adecco in July found that around 7 in 10 – or 67 percent – of workers in the UAE are looking to change jobs immediately, indicating an increase in job mobility and willingness to explore new career paths, mainly due to limited career opportunities, uncompetitive wages, rising cost of living, poor work-life balance, inadequate benefits and lack of work flexibility.
“Salary remains an important motivating factor for applicants in the UAE, but other factors such as good work-life balance, company culture, career opportunities and job security also play a crucial role,” Patel said previously.
Oversupply of talent?
Following the Covid-19 pandemic, the UAE experienced a major jump in population as the economy grew exponentially and created more jobs in various sectors. In addition, the confidence of investors and high net worth individuals in the UAE’s ability to overcome challenges grew due to the successful management of the pandemic.
As a result, according to Adecco, in industries with an oversupply of talent, the pressure to increase salaries is reduced because companies know they can maintain their compensation levels and know that there is a steady flow of candidates available.
Conversely, if skills or niche knowledge are in high demand in the industry, companies may be more willing to pay bonuses and allowances to retain key employees.
“This delicate balance between supply and demand makes it important to have a strategic compensation approach tailored to the individual needs of each industry,” said Adecco.
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