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UAE: 67% of firms asked by employees to raise salaries

Cautious employers are choosing to invest in short-term actions with less permanent implications, such as lump-sum amounts or retention bonuses, says senior consultant

Around 67 per cent of companies in the UAE say that they have received requests from employees to increase salaries and allowances to offset the impact of rising inflation – but a large number of them are resisting employees, according to a new survey conducted by Mercer.

The survey’s findings revealed that only 16 per cent of firms have taken some form of action, including one-time lump-sum payments, off-cycle salary increases and housing allowance increases, as they look to retain talent. The firms increased salaries by an average of four per cent during annual salary increase cycles at the beginning of 2022.

However, 84 per cent of businesses have yet to adjust employee compensation this year in response to higher than normal inflation.

“Employers are being cautious about immediately bumping up wages to match inflation, and many are considering short-term actions with less permanent implications such as lump-sum amounts or retention bonuses – or they are investing in improving the employee work experiences by offering improved work-life balance, flexibility and training,” said Andrew El Zein, senior associate consultant, career, Mena at Mercer.

“Companies are budgeting for higher rises next year, ultimately offsetting employees’ inflation concerns and matching rising pay expectations. This requires a structured approach that balances employee concerns with managing a challenging and unpredictable fiscal environment,” he said.

5 per cent salary hikes next year

The Central Bank of the UAE projected inflation to reach 5.6 per cent in 2022.

While the GCC’s second-largest economy still sees relatively low inflation compared with other parts of the world, business activity in the UAE has been on the rise in 2022, resulting in the increased need for businesses to attract and retain talent to ensure business output remains on track. Furthermore, employee pay expectations are also rising in a tight labour market, as they are increasingly asking companies to take action to offset the rise in inflation.

As a result, companies are planning for budgeted annual salary increases for 2023 at five per cent, which is higher than the 3-4 per cent in recent years.

The survey, which covered over 200 global and local companies from all sectors in the UAE, revealed that most businesses in the UAE are resisting employee demands.

It is estimated that 47 per cent of companies are not planning to take any action in 2022, while 37 per cent of companies are either considering or planning some form of off-cycle adjustment to compensation in 2022, Mercer said.

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