Time to hunker down: 20 percent of GCC companies plan salary and benefit freezes

Published December 8th, 2015 - 04:10 GMT

Employees in the UAE will receive modest or no increases in their salaries and bonus payouts next year as companies are getting cautious about spending more money on staff wages amid the economic slowdown.

According to a report released on Tuesday, around 15 to 20 per cent of companies in the Gulf Cooperation Council (GCC) region are likely to impose a freeze on wage adjustments, while workers in the UAE are set to receive the lowest increase in real earnings.

A forecast issued by Korn Ferry, an organizational advisory firm, however, showed that workers around the world will see real income growing faster at 2.5 per cent, the highest in three years.

Growth in real earnings in GCC countries will average 2.3 per cent. The highest will be in Oman, at 3.1 per cent, followed by Qatar (2.9 per cent), Bahrain (2.7 per cent), Saudi Arabia (2.6 per cent) and Kuwait (1.6 per cent).

Professionals in the UAE are set to see a 5 per cent increase in their salaries next year, but if inflation is taken into account, the real growth in incomes will only be 0.9 per cent, the lowest in the region and down from 2.8 per cent in 2014.  

Real wage figures factor in living costs or inflation, hence they may appear lower than the actual or nominal wage. They show whether or not people’s actual earnings are keeping pace with the rise in the cost of goods and services.

Vijay Gandhi, regional director for productized services at Hay Group, said UAE companies are seeking to minimize their fixed costs, including payroll-related expenses, hence the salary outlook in the country is more sombre compared to other labour markets.

“There is no doubt that there is a cloud of cautiousness in the UAE,” Gandhi said.

“Organisations in the UAE are being particularly cautious in their forecasts for next year. Despite being the most diversified economy in the Gulf region, the oil price has a significant influence on overall sentiment,” he told Gulf News.

“With the plunge in oil prices we’ve seen over the last twelve months, and worsening even further this week, UAE businesses are very focused on minimizing their fixed costs and one of the biggest fixed costs for any business is wages.”

He said employers in oil and gas services, real estate and financial services, in particular, are looking for ways to cut back on their outgoings “to drive efficiencies.”

In contrast, the prospects are brighter for other markets outside the region. In Europe, workers are set to see an average salary increase of 2.8 per cent, and with inflation at 0.5 per cent, real earnings will rise by 2.3 per cent.

Workers in Asia will enjoy bigger pay increases averaging at 6.4 per cent, though the rate is slightly down by 0.4 per cent from last year. Real wages are forecast to rise by 4.2 per cent, the highest globally.

In the United States, real income growth will be around 2.7 per cent, while people in Canada can expect salaries to rise in real terms by 1.3 per cent.

The salary forecast is based on data gathered from 73 countries, excluding Ukraine and Venezuela, where political turmoil and high inflation have led to real wage decreases of 36.8 per cent and 52.6 per cent, respectively.

By Cleofe Maceda

Editor’s note: This article has been edited from the source material

© Al Nisr Publishing LLC 2022. All rights reserved.

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