A year of change for employees' remuneration in the United Arab Emirates

Dubai, United Arab Emirates, 22 April 2014: Towers Watson launched their 2014 General Industry Survey at The Address Hotel Dubai Mall on the 14th April 2014.  The event was attended by over ninety local and international organisations from the region.

As well as launching their General Industry Survey, Towers Watson also provided insights from their following recent Remuneration studies:
     -    2014 Gulf Cooperation Council Cash Allowance Survey
     -    2014 Gulf Salary Increase Survey

Billy Turriff, Data Services and Technology Line of Business Leader, opened the forum by stating that the United Arab Emirates is expecting Gross Domestic Product growth during 2014 of approximately 4.5%.  This growth is the result of a combination of oil and non-oil related activities; such as, tourism, construction as well as the real-estate sector.  The strength in the overall economy has resulted in higher prices for house purchases and annual rents being paid by UAE residents.  Median housing allowances being paid to employees in Dubai and Abu Dhabi by organizations were reported to be as follows:

As a result of the strong rental market, a significant number of organisations are considering reviewing the housing allowance currently being paid to employees.  This is illustrated below:

Further highlights of housing policy are as follows:

Policy
More than half of the companies (60%) reported providing housing allowance to their employees in the form of a lump sum
While 23% of the companies provide housing allowances as a percentage of the base salary
17% have this allowance as part of a Consolidated Allowance package

Timing
Majority of companies (77%) reported providing housing allowances to employees on a monthly basis
The remainder provide a lump sum once a year

Requirement
85% of companies reported that they do not require a copy of the lease for the rental accommodation

Increases in annual education costs is also resulting in a number of organisations considering changes to their annual education allowance that is paid to employees in 2014.  This is illustrated below:

Billy Turriff, Data Services and Technology Line of Business Leader, said “salary increases are projected to average 5% during 2014 in the United Arab Emirates whilst inflation is expected to be at 2.5%.”  At first impression this would represent a real increase in disposable income for employees, however this rate of inflation is more representative of prices faced by the local Emirati population whom benefit from subsidies.  The actual inflation rate faced by the expatriate community (approximately 85% of the total UAE population) is likely to be significantly higher.  Consequently, expatriate employees are not likely to see any significant change in their disposable income during 2014.

Towers Watson’s data showed that typically 25 to 40% of an employee’s total package is made up of allowances such as housing and education.  A key decision for organisations going forward is to determine if they wish to continue providing multiple allowances to employees or if simpler packages focusing on salary, allowances and family status benefits would be more appropriate.

Such an approach would remove the need for organisations to tie their reward packages to external factors such as the housing or education market that they are not able to control.  In addition, in 2014 organisations will face the challenge of managing their total payroll spend in line with company budgets, whilst providing appropriate remuneration arrangements that meet employees’ needs.

Employees may also have to get prepared for remuneration arrangements in the future that are more cash based rather than being allowance driven as is the current case.

About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at www.towerswatson.com.