Growing Inflation Translates Into Pressure

By: Towers Watson*

GCC wages are set to rise at an average of 5% in 2015, rebounding from a brief dip to 4.8% last year, according to Towers Watson’s latest Salary Budget Planning report. However, figures collected from general industry indicate that this rate of salary will descend back to 4.8% into 2016.

Against a distressing inflation rate in the UAE, expected to rise by 3.1% in 2016 and hitting a 6 years high earlier this year on rising housing and utility costs, the report offers some alarming insights for  workers at all professional levels, who should start feeling more and more pressure upon their disposable income in the near future.

Laurent Leclère, Senior Consultant and Data Services Lead for the Middle East said: “Across the Middle East and Africa, our research reveals that salary budgets are now being set with less and less connection to the Consumer Price Index than they might have been in the past. Particularly as inflation has been quite bouncy over the past few years. Pay growth is now being driven by the bigger picture; factors such as the competition for talent, growth expectations and also the shifting weight of base salary or guaranteed cash within the overall reward package against other elements such as car allowances and performance-related bonuses. In the Middle East, allowances are very prevalent and can be a substantial portion of the reward package.”

Laurent also added: “Our latest Global Workforce Study confirms that pay together with career growth opportunities remain the main factors in attracting and retaining talents. In the absence of a tendency of wage growth in the UAE, the challenge is working out how to use the salary budget more effectively to ensure sufficient recognition for top performers or those with critical skills, where the market might be moving at a faster pace. It really comes down to segmentation and differentiation and presenting a bigger slice of the reward pie to key members of staff that companies want to secure for the long-term.”

*Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 15,000 associates around the world, the company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Learn more at towerswatson.com.

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