Pay rises signalled but only for top managers, study finds

Employers across the Emirates are beginning a new round of salary rises after a year of pay freezes, according to a study of recruiters. A report from Hay Group said salaries in the UAE would rise 5.2 per cent next year, among the fastest rates of nominal salary growth in the Gulf. However, the report warned that companies would aim the largest pay increases at the top performers at management level.

"As recession recedes, a full-blown recovery is not in place yet," said Vijay Gandhi, a regional director at Hay Group. The global recruitment consultancy upgraded its previous estimates of salary growth, based on a larger sample size and an increased number of pay rises in July and last month. The report found that rising salaries would not be spread universally, with companies instead tempting their top performers with the most lucrative contracts. "Bonuses are back, but they're targeted," Mr Gandhi said.

"There's more money around than last year. "However, organisations are using the benefits more wisely to differentiate between key talent." Long-term incentives, such as stock options and deferred cash payments, were becoming more common as a means of retaining senior staff over a number of years, he said. The survey found that fewer companies had offered bonuses this year, with only 50 per cent offering performance-related pay, compared with 69 per cent last year.

On the other hand, the total value of bonuses rose by 8 per cent. However, some recruiters disagreed with the diagnosis of the labour market, saying salary increases were not felt universally. "Some of our clients are still implementing pay freezes and we're still encountering redundancies," said Christo Daniels, the managing director of the Dubai recruitment firm IQ Selection. He had seen little evidence of perks to retain employees in the long-term, he said.

"In the boom times, people were offering interest-free loans - that's the kind of long-term commitment that we're seeing less of," Mr Daniels said. "I'm seeing employers trying to consolidate benefits into the basics." Changes in salary were less a measure of businesses' strength than the number of employees they hire, said Samer Kherfi, an assistant professor of economics at the American University of Sharjah.

"In the UAE, when you have a crisis, although pay is affected, it's not a major way by which companies adjust," he said. "Because most of the labour force is foreign, the easiest thing to do is reduce the labour force. "Though both dimensions have been affected, my guess is the impact on pay is smaller." The Hay Group study, based on a survey of more than 400 companies, said salary growth in the UAE would leapfrog Oman, Saudi Arabia, Qatar and Lebanon next year.

Kuwait, Jordan and Bahrain were predicted to be the best-performing regions for nominal salary growth in the Gulf. Egypt is likely to be the only country in the region with double-digit salary growth, with increases of 10 per cent anticipated next year. However, much of that growth will be eroded by the country's inflation rate, expected to top 9.5 per cent next year, according to the IMF.