UAE salaries likely to rise by 4.4% in 2023, study finds

Companies are reviewing compensation packages that could include retention bonuses and higher base salaries for all employees

About 41 per cent of UAE employers are offering financial incentives such as starting bonuses to attract new staff, according to a report by WTW. Getty

Employers in the UAE plan to increase salaries by an average of 4.4 per cent in 2023 and are considering benefits such as retention bonuses in an effort to retain employees and attract talent amid a tight labour market, according to a report by global advisory company WTW.

Companies are currently revising budgets for salary increases next year, with 35 per cent of those surveyed citing a higher wage budget than previously projected and 38 per cent 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 organisations 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.”

Globally, about 96 per cent of companies increased salaries this year compared with 63 per cent 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 per cent 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 per cent to 6 per cent, the report found.

Meanwhile, 64 per cent of UAE companies said they are allocating bigger budgets for pay rises to address a tighter labour market, while 59 per cent reported rising costs and 44 per cent 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 per cent this year, up from 64 per cent in 2021, while those that want to retain existing staff jumped to 90 per cent, from 55 per cent over the same period.

“The tough labour market, especially around certain key skills, means that organisations need to be much more creative to address attraction and retention challenges,” Mr Leclere said.

“It isn’t all about pay.”

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UAE Salary Guide 2022 — in pictures

Technology and engineering skills are the most sought after among employers, with 77 per cent of companies in the UAE seeking to fill IT roles, while 71 per cent want to retain existing IT staff.

For engineering roles, 54 per cent of companies are looking to recruit and 48 per cent want to retain staff, WTW research found.

About 69 per cent of UAE employers have increased workplace flexibility to improve their attractiveness to new staff; 60 per cent have put more emphasis on diversity and inclusion; while 41 per cent offer financial incentives such as starting bonuses, the report said.

Meanwhile, 57 per cent of companies plan to retain existing talent by broadening their focus on diversity and inclusion; 51 per cent are increasing remote working options; and 36 per cent are changing pay structures such as base salary and bonuses, according to the research.