30% of UAE companies plan to cut workforce, 10% reduce salaries: Survey

Market forecasts a 2021 salary increase of 4 per cent, industry figures vary significantly.

The direct impact of Covid-19 on the compensation and benefits landscape is less drastic than initially feared. Even though 10 per cent of UAE companies reduced salaries on a temporary basis, and 30 per cent have plans to cut headcount, according to a Mercer survey.

Overall, the market still experienced positive salary inflation and 25 per cent of companies have reported an increase in productivity as a result of employees working from home, it said.

Covered over 500 companies in the UAE, the survey results also revealed an actual annual salary increase of 3.8 per cent across the general market, although with 19.4 per cent of organisations indicating they froze salaries in 2020.

Notably, most 2020 budget and salary decisions had taken place early in the year, prior to the full economic impact of the government-mandated lockdown. Around 17 per cent of companies delayed their 2020 increases due to the Covid-19 pandemic, typically for six months.

Salary in 2021

While the general market forecasts a 2021 salary increase of 4 per cent, industry figures vary significantly. The sharpest projected rise has come from the life sciences (4.5 per cent) and consumer goods (3.8 per cent) industries. The energy industry continues to see some of the lowest increase in salaries with a 1.9 per cent forecast.
Covid-19 resulted in a rapid implementation of remote and flexible working measures with 66 per cent of companies having devised new remote working policies, while 25 per cent already had one in place. As a result, a quarter of employers reported increased productivity and expect flexible working arrangements to continue to remain in place in a post-Covid-19 landscape.

Ted Raffoul, Career Products Leader, Mena at Mercer said: "It is very encouraging to see that despite the economic challenges, a significant number of UAE employers have increased salaries in 2020. In response to the business effects of Covid-19, 10 per cent of companies reduced salaries, but almost all of these were on a temporary basis. Although uncertainty continues into 2021, UAE companies are making progress towards enhanced business strategies, with a majority of them expecting new working arrangements to continue to evolve towards permanent policies."