UAE Salaries are Evolving for a Younger more Digitised Workforce

How salaries are structured and who is securing the best deal is changing in the UAE.

The average age of the UAE workforce is now under 30 and packages are becoming all-inclusive, meaning “the days of highly inflated salaries and subsidies to cover living costs … are now a thing of the past,” according to the 2018-2019 Salary Survey and Review from Gulf recruiter and training institute Nadia Global.

The company, which predicts salary increases of 3.5 to 5 per cent in 2019, says pay gaps between different nationalities are also diminishing. The employment market is set to be “significantly impacted” by the digital transformation – from Artificial Intelligence, to machine learning, Big Data analytics, Blockchain and more.

The study also found a shift in employee expectations for their work-life balance and a number of government-led reforms on visas, economic investment and adoption of new technologies will all define market trends in the coming years. But what does all this mean for your personal income?

Here, Ajay Malhotra, Nadia Global’s chief executive, who is based in the company’s Dubai office, breaks down the data:

Your 2019 forecast for salary increases is 3.5 to 5 per cent. Who’s getting these rises?

When we forecast the pay rise, it takes into consideration factors like inflation in the UAE. As an employer knowing that your employees have higher costs, it’s prudent to give them a salary increase of 3.5 per cent on average so they don’t have a negative provision.

So, it’s more of a recommendation?

We forecast a salary increase of 3.5 per cent for this year but whether or not employers add it on is really their choice.

Why are the days of inflating salaries and generous housing packages over?

For a number of years, the UAE has been moving away from expatriate packages where the typical extras included housing allowances as standard. It has now become an all-inclusive package that covers all benefits at a standard market rate. So there is a realignment in the average employee package, which is more comparable to the standard expatriates would expect in their home countries. It means the UAE has become much more competitive on a global level.

So are we earning less now?

Not less, but it is a different way of structuring; it’s more an all inclusive mentality now rather than ‘this is your schooling and this is your education’.

Is the pay gap between nationalities changing?

The UAE has become a very cosmopolitan environment especially when it comes to an employment destination. What we’re seeing is that the market is moving towards awarding packages based on qualifications, experience and skills rather than their passports. Hence we see the gap diminishing gradually. You have traditional resource countries like India, which are booming with a huge start-up environment kicking off, so even attracting talent from India has become more expensive. There are more opportunities there for talented people, so to bring them into the UAE the packages have to be aligned with the skills you are bringing in.

The report mentions a “justified expense of a decline in disposable income”. Why is it justified?

To attract the best talent in the world, as the UAE wants and desires to, you have to reinvest in your country. The regulation enhancement, infrastructure spend focused on lifestyle and education and better healthcare – these investments will in the long-term secure economic growth, prosperity and dividends for all residents in terms of having a better quality of life and better remuneration packages. There’s also been a shift in moving away from the reliance on oil and diversifying the economy – plus the introduction in VAT – but VAT is effectively there to enable sustainable investment into the country and make it more prosperous for residents. So the expense is justified in the sense that there is investment for long-term opportunities for everyone.

What work-life balance trends are you noticing now?

There are a lot of initiatives driven by the government such as the happiness initiative and even employers are aware that while it’s all about work, there has to be a work-life balance approach taken. There are additional benefits that have been used to attract the best talent and to retain your talent. All good things take time but we are definitely seeing movement in that direction.

Are lower rental rates affecting salaries?

Yes they are. Typically when employers budget salaries they follow a 60/30/10 ratio where 60 per cent is your salary, 30 per cent is your housing allowance and 10 per cent is your transportation allowance. In 2007/2008, there was a constant increase in rental rates, which had a significant impact on employees’ salary expectations; there was an expectation that due to a rising rental market – employers should factor in those higher costs. Over the last 10 years there has been a shift towards more an all-inclusive market rate and hence the remuneration has been offered in line with the current market rate.

Does the UAE’s young workforce mean companies get more for their money?

It’s a shift in mindset so a younger workforce tends to lower the salary levels as a whole because their expectations are less on the salary side and more on the opportunity side.

How can older employees compete in such a market?

Throughout your life, you should invest in learning and upgrading your skills so my suggestion – especially in line with the fourth industrial revolution and the younger workforce – don’t stop the learning process. Educate and grow yourself; and you will benefit, because you will be up to date with the latest trends in the market and what is actually in demand. A younger workforce is more about opportunities and an older workforce is more about security and stability and learning. So there is definitely a change that happens as we all get older.

What other big salary trends will we see in 2019?

2019 is very exciting year on a global level and local level. There is a lot of buzz around the fourth industrial revolution and we’ve all seen the reports of the long-term impact of a digital transformation and how this displaces a number of jobs in the long-term. This year will definitely be about blockchain, AI and increased awareness around that, but as we become more automated and digitised we see the importance of human skills, soft skills growing because there is only so much you can digitise. There’s an aspect of human nature that cannot be replicated by any form of AI. We also believe you will see companies investing more in their people in the form of training to provide that learning and development career path, so a lot of training within companies, fostering of growth and investment in knowledge addition.

If demand is focused on highly skilled digital staff, can they command the best salaries?

There’s a worldwide shortage. It’s not just local it’s everywhere. The fourth industrial revolution and the impact on industries is the future so certainly people who have work experience, knowledge expertise – whether it’s AI, machine learning, cyber security, digital marketing, data science, data analytics – these are the future areas of demand. The salary range for AI, cyber security and robotics start at Dh13,000 per month for junior roles and up to Dh95,000 a month for senior strategic roles.

Who will get the best pay rises this year?

The sectors enjoying the best rises are construction, retail, hospitality, healthcare and insurance. Those not going to do so well are the banking and oil and gas sectors. As digitisation becomes more prevalent, that will be on the rise in demand, but for the immediate demand we’re seeking risk management, finance, logistics and sales in demand.

And what about job retention rates?

Retention rates have actually improved. The team registered over 200,000 new applicants in 2018 and received an average of 300 responses for each assignment advertised. According to our data, staff turnover lowered from 11 to 8 per cent in the UAE.

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