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This mirrors the increasing prevalence so it was effectively a way of minimising of performance-related pay in Europe this cost. Employers are increasingly and parts of Asia. But what’s consistently looking to pay for the job rather than the surprising to external commentators is that family circumstances of the employee. the nascent Gulf economies have steadfastly That means allowances will be under declined to embrace increased cost pressure bonuses and benefits as they are consolidated packages. Indeed, there are into the ‘rate for the job’ signs that even relocation equation.” Hardship allowances that bridged the allowances, once a common compensation gap between aspect of Middle East expats and nationals are postings, are now virtually Method of salary review beginning to dwindle as unheard of, he adds. – 1995 vs 2015 large businesses come under Mosley says the 1995 2015 both financial and political trend towards a total Fixed 75% 10% pressure to reduce their compensation package is increments reliance on imported talent. closely aligned to broader “More and more economic prosperity. When Some fixed/ 20% 13% some merit companies are moving away times are booming, a range from discrete allowances and of individual allowances Merit only 5% 77% paying a total compensation are more likely; when the figure,” says McGuigan. “In economy takes a downturn, SOURCE: LEMON PIP CONSULTING the past, allowances were employers will reach for a appropriate when there was more consolidated model. a true expat culture and The broader economic people came and went. But this is no longer outlook means attitudes towards bonuses and the case. And the allowances were left out as benefits are likely to harden. “The GCC is a part of the end-of-service gratuity calculation, ‘cash now’ environment, and employees value

Reasons for a pay rise



People Management Middle East

base salary rises much more than bonuses,” says Nuno Gomes, principle information solutions leader at Mercer Middle East. “In most professional roles, bonuses don’t go above one month’s basic salary.” Whether it’s true or not, many business leaders fear implementing a more flexible range of benefits would raise overall base salary costs: people without children, for example, might opt out of those benefits relating to childcare and take cash instead. Enhanced medical and life insurance are two exceptions and are becoming more prevalent, particularly in the UAE. And a small number of companies have begun experimenting with allowing staff to adjust the amount of annual leave they take, sacrificing or increasing their salaries accordingly. For most, however, rigidity still rules. “The tax regimes in GCC countries do not create the incentive to implement flexible benefits programmes as they did in Europe a couple of decades ago,” says Gomes. “The tax-free environment almost enables the most flexible plan ever – everything paid in cash. Fewer than 10 per cent of organisations in Mercer’s most recent surveys had a flexible benefits package in place.”

People Management Middle East: Issue 2  

The CIPD magazine for the Middle East

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