Next year is set to be a year of fiscal prudence with regards to employee remuneration in the GCC, with caution being the key word, so says Mercer Middle East. The global human resources agency has just released its 2015 Total Remuneration Survey Results, with the annual report highlighting the drop in oil prices, the struggling financial market and regional political volatility as key factors that will see organisations across the region tighten their budgetary belts.
Nuno Gomes, Principal – Information Solutions Business Leader at Mercer Middle East, said: “There is no doubt that 2015 has seen one of the biggest shifts in economic momentum in the Middle East in recent years. The rapid decline in oil revenue, which has resulted from oil prices falling from over US$100 to less than US$50 a barrel, is having a significant impact on the growth plans for businesses in the region”.
“This fall in petro-dollar income has led to cuts in government spending observed in the last three to six months, which is compounding the situation. Added to this are underperforming financial markets and regional conflicts, with the overall picture one that is subduing companies’ confidence and curtailing investment”. Added Gomes.
Mercer Middle East’s 2015 Total Remuneration Survey reveals that salary increase forecasts for 2016 in the UAE and Qatar are now recorded at 4.9% – a figure below 5% for the first time in five years. In Saudi Arabia, the country in the region most affected by the sharp decline in oil prices, increases are expected to hover around 5%, much lower than the traditional 6% seen in the last few years.
Caution is also being witnessed with companies’ hiring intentions, which have considerably declined over the past year. In 2014, 71% of organisations interviewed for the survey stated they planned to increase headcount in 2015, but when asked the same question earlier this year, only 57% declared plans to increase personnel during 2015. In Saudi Arabia, the decline was from 79% to 66%.
“It is clear that 2016 is likely to be characterised as being a year of restrictions, caution and a focus on improved efficiency from an HR, compensation and benefits perspective. Companies are looking to introduce new and interesting approaches to rewards, and benefit from the macro-economic environment to make necessary or desirable changes”. Said Gomes.
Mercer Middle East, reports that many organisations are using the current economic climate to make changes that will simplify their compensation structures and policies, with the most common approach being the consolidating of guaranteed allowances. The organisation says that this phenomenon reflects the increasing pull of the region as a career or life choice, with a concomitant higher value placed by expatriates on monthly pay, irrespective of its form.
“One clear trend observed in Mercer Middle East’s 2015 Total Remuneration Survey was an increase in the consolidation of allowances, which we recorded as being at 19%, with predominantly housing and transportation being bundled. The prevalence was 13% last year and 9% in 2012. This doubling of the practice in just three years is something we attribute to the modern generation of expatriates seeking similar remuneration structures to those found in their countries of origin,” commented Gomes.
Other interesting information to emerge from Mercer Middle East’s 2015 Total Remuneration Survey concerned pension arrangements and flexible working. With regards to the first, the survey found that 10% of companies in the UAE have a pension scheme in the form of a savings plan, a differentiating factor for organisations seeking positive attraction and retention outcomes. In reference to the second, the poll found that 51% of organisations say they offer flexible working hours to their employees, a small increase from 49% in 2014 and 46% in 2013.
“Pension plans are likely to become more important for employees in the coming years and we anticipate that companies will start to adopt of formal schemes as opposed to the savings plans that we are currently seeing. When we look at flexible working, these are policies that always land well with employees in the UAE, as they cater for the diverse workforce found in the country,” said Gomes.
Mercer Middle East’s (TRS) Total Remuneration Surveys cover all forms of cash and non-cash compensation elements, for over 1,000 benchmark jobs. Across the Middle East and North Africa over 1,600 unique organisations representing almost 250,000 employees were surveyed in 2015. The poll highlights compensation trends from top executives to the administrative level and is conducted in more than 120 countries globally.