More UAE firms offering bonuses, extra allowances instead of basic salary hikes

A majority of UAE employers – around 60 per cent – kept their staff’s salaries and bonuses unchanged in the first half of 2024 as they focused more on giving allowances rather than raising base salaries in order to retain talent, according to a new research conducted by Adecco, a global firm in HR solutions.

The survey found that nearly one-fourth – 24 per cent – of UAE employers have turned to alternative compensation strategies to attract and retain top talent.

It added that benefits such as housing bonuses, annual bonuses and various other allowances have become more prevalent and these serve as a way to enhance overall compensation packages without increasing base salaries.

Stay up to date with the latest news. Follow KT on WhatsApp Channels.

“The dynamics of the talent market continue to play a crucial role in shaping salary-related decisions among employers. In high-demand industries such as information technology, where specialised skills and talent are in short supply, companies are more likely to offer generous salary packages, bonuses and allowances to secure and retain key employees,” said Mayank Patel, SVP Adecco and head of EEMEA.

Some employers avoid increasing the basic salaries of their employees as this adds to their gratuity cost, unlike allowances.

“As we progress through 2024, employers will continue to navigate the complexities of the global economy while striving to attract and retain top talent. While salary increases may be slower than in previous years, the strategic use of bonuses, allowances, and other benefits will likely remain a key tool in the recruitment and retention,” the HR consultancy said.

The study found that factors such as inflation, fluctuating consumer spending, and a shift towards cost optimisation through automation and digital transformation may have contributed to a more conservative approach to salary increases.

Industries such as information technology, retail, banking and financial services observed slower salary growth during January-June 2024, it added.

A study released by Adecco in July revealed that approximately 7 out of 10 – 67 per cent – of UAE employees were seeking an immediate job switch, indicating a surge in job mobility and a willingness to explore new career paths, mainly due to limited career progression, uncompetitive pay, rising cost of living, poor work-life balance, inadequate employee benefits, and lack of work flexibility.

“Salary remains a significant motivator for candidates in the UAE, but other factors such as good work-life balance, company culture, career prospects and job security also play crucial roles,” Patel said earlier.

Oversupply of talent?

• Up to Dh200,000 fine in UAE: How employees can file case against employer for unfair practices