Majority of GCC companies are adjusting salaries or benefits to mitigate Covid-19 effects

Almost 40% will freeze recruitment, enforce terminations or place employees on furlough, Mercer survey finds

Dubai, United Arab Emirates - Reporter: N/A: Coronavirus / Covid-19. A new hashtag is displayed on Hessa Street saying 'We are all responsible'. Wednesday, May 20th, 2020. Dubai. Chris Whiteoak / The National

About 70 per cent of GCC companies plan to adjust one or more elements of their compensation and benefits policies to reduce the damage inflicted by Covid-19 on their business.

Hiring freezes, salary reductions and reviews of annual leave policies are among the most common measures being considered, according to the findings of a new study released on Monday by global consultancy Mercer.

The poll of 168 organisations operating in the six GCC countries revealed that 40 per cent have already made adjustments, 29 per cent plan to do so while 31 per cent harbour no such plans.

The survey was conducted between April 29 and May 10.

Overall, organisations in the GCC are optimistic that the economic effects of Covid-19 will be short-lived.

“Overall, organisations in the GCC are optimistic that the economic effects of Covid-19 will be short-lived as a result of stringent measures to contain the virus and stimulus packages offered by governments,” said Nuno Gomes, head of the careers business in the Middle East, North Africa and Turkey at Mercer.

The majority of organisations reducing base salaries intend to keep the cuts in place for up to three months amid hope that financial assistance from government entities will help contain the damage inflicted on their businesses within three to four months, the report said.

“With employee well-being remaining a key priority, organisations are trying to preserve the financial safety of their lower-level support functions by focusing salary reductions at the higher career streams,” he said.

“Furthermore, salary reductions have been mostly within the 15 to 25 per cent range and applied for a short period of time.”

The coronavirus outbreak forced many companies in sectors such as travel and retail to temporarily stop business, with employers taking drastic actions such as furloughing staff or putting them on unpaid leave.

Even as measures to contain the virus are eased and businesses are allowed to reopen, companies are evaluating their hiring and reward strategies to survive in the long term.

A total of 81 per cent of companies based in the GCC plan to make C&B adjustments, compared to 53 per cent of companies with their headquarters elsewhere, the Mercer survey showed.

Companies in the GCC plan to make fixed-cost reductions by suspending or delaying salary increases this year, or by temporarily reducing base salaries and allowances.

In the UAE, 28 per cent of the organisations surveyed have already or plan to cut the base salaries of one or more employee categories.

The figure was similar in other GCC markets such as Saudi Arabia at 30 per cent and Bahrain at 29 per cent.

The average reduction on base salaries is 15 to 25 per cent, with the majority of respondents planning to limit these reductions to three months.

Almost 40 per cent of organisations across the GCC have enforced, or plan to enforce, a hiring freeze, in addition to employee terminations or furloughs.

Meanwhile, 43 per cent of companies that have already made changes cited adjustments to leave policies, including obliging employees to take paid leave within set time periods, encouraging days off to be carried over or using leave balances to shorten work weeks.


Other actions include suspending promotions, changing short-term incentive policies, decreasing allowances, reducing benefits such as annual flights home, altering sales incentive plans and adjusting long-term incentive plans.

Carolina Vorster, Mena workforce products leader at Mercer, said organisations enforcing leave policies, reducing salaries or laying off employees must "consider the balance between business impact and the short- and long-term effects on the employees".