• Companies plan for bumper pay rises of 5% in 2023 as over two thirds of companies receive employee requests for higher compensation  

Dubai, UAE: Firms are feeling the pressure to adjust compensation packages according to global consulting firm Mercer, with its latest spot survey revealing that 67 per cent of businesses have received requests from employees regarding compensations and allowances to offset the rising inflation in the UAE.

More than 200 global and local companies from all sectors were surveyed for Mercer’s 2022 UAE Inflation Spot Survey, with only 16 percent having taken some form of action, including one-time lump-sum payments, off-cycle salary increases and housing allowance increases, as they look to retain talent, and have increased salaries by an average of four per cent during annual salary increase cycles at the beginning of 2022.

Most business in the UAE however are resisting employee demands. Even with inflation in the UAE projected to reach 5.6 per cent in 2022, according to the latest data from the Central Bank of the UAE (CBUAE), and with Dubai ranking among the world’s most expensive cities to live and work in for expatriates this year, according to the 2022 Cost of Living survey by Mercer –  47 per cent of companies are not planning to take any action in 2022, while 37 per cent of companies are either considering or planning some form of off-cycle adjust to compensation in 2022.

While the GCC’s second largest economy still sees relatively low inflation compared with other parts of the world, business activity in the UAE has been on the rise in 2022, resulting in the increased need for businesses to attract and retain talent to ensure business output remains on track. Furthermore, employee pay expectations are also rising in a tight labor market, as they are increasingly asking companies to take action to offset the rise in inflation. As a result, companies are planning for budgeted annual salary increases for 2023 at five per cent, which is higher than the 3-4% we observed in recent years.

Andrew El Zein, Senior Associate Consultant, Career, MENA at Mercer said: “Employers are being cautious about immediately bumping up wages to match inflation, and many are considering short-term actions with less permanent implications such as lump-sum amounts or retention bonuses, or are investing in improving employees’ work experience by offering improved work-life balance, flexibility and training. Having said that, companies are budgeting for higher rises next year, ultimately offsetting employees’ inflation concerns and matching rising pay expectations. This requires a structured approach that balances employee concerns with managing a challenging and unpredictable fiscal environment.”

Organizations that participated in the survey include a mix of some UAE’s biggest companies and international organizations.