According to a survey by international consultancy firm WTW, employers in the UAE intend to raise salaries by an average of 4.4% in 2023 and are also contemplating advantages like retention bonuses in an effort to retain workers and recruit talent within a competitive labor market.
Companies are currently revising budgets for salary increases next year, with 35 percent of those surveyed citing a higher wage budget than previously projected and 38 percent saying they are reviewing salaries more often now.
Compensation packages are also under review, with companies planning to offer benefits including one-off cash payments such as a retention bonus or lump-sum payment, a higher base salary increase for all employees or more frequent salary increase adjustments, it added.
The WTW report surveyed 382 UAE businesses and received 22,570 responses from companies across 168 countries.
“Employers are having to pay more than they anticipated to cover inflation and stay attractive to existing and potential staff,” said Laurent Leclere, Director of Reward Data Intelligence at WTW UAE.
“The challenging economic climate and the rise of new ways of working are forcing organizations to keep a close eye on pay budgets. Those that don’t will find themselves uncompetitive — their staff will head for the door and at the same time they will struggle to replace them”, he added.
Globally, about 96 percent of companies increased salaries this year compared with 63 percent in 2020, while overall budgets have increased significantly over previous years, according to the research.
Amid the global “Great Resignation” trend, attracting and retaining talent has become a key focus for employers as staff demand flexible working models and enhanced benefits after the Covid-19 pandemic disrupted traditional work patterns.
About 49 percent of companies in the UAE are budgeting for higher salaries during their annual pay reviews this year, according to a June report by professional services company Aon.
The actual and budgeted amount for regular pay increases for a majority of companies in the Emirates ranges from 2 percent to 6 percent, the report found.
Meanwhile, 64 percent of UAE companies said they are allocating bigger budgets for pay rises to address a tighter labor market, while 59 percent reported rising costs and 44 percent said employees had higher pay expectations, according to the WTW research.
The proportion of UAE companies seeking to attract key talent has risen to 92 percent this year, up from 64 percent in 2021, while those that want to retain existing staff jumped to 90 percent, from 55 percent over the same period.
“The tough labor market, especially around certain key skills, means that organizations need to be much more creative to address attraction and retention challenges,” Mr Leclere said.
He also added, “It isn’t all about pay.”
Technology and engineering skills are the most sought after among employers, with 77 percent of companies in the UAE seeking to fill IT roles, while 71 percent want to retain existing IT staff.
For engineering roles, 54 percent of companies are looking to recruit and 48 percent want to retain staff, WTW research found.
About 69 percent of UAE employers have increased workplace flexibility to improve their attractiveness to new staff; 60 percent have put more emphasis on diversity and inclusion; while 41 percent offer financial incentives such as starting bonuses, the report said.
According to the study, 36 percent of companies are adjusting their compensation structures, such as base salaries and bonuses, while 57 percent of businesses expect to keep their current employees by increasing remote working alternatives.