UAE Businesses Prove Resilient Despite Covid-19 With 3.8% Annual Salary Increase In 2020

According to the 2020UAE Total RemunerationSurvey (TRS) by Mercer, the direct impact of COVID-19 on the compensation and benefits landscape is less drastic than initially feared. Even though 10% of UAE companies reduced salaries on a temporary basis, and 30% have plans to cut headcount, overall the market still experienced positive salary inflation and 25% of companies have reported an increase in productivity as a result of employees working from home.

Mercer’s TRS research of over 500 companies in the UAE also revealed an actual 2020 annual salary increase of 3.8% across the general market, although with 19.4% of organisations indicating they froze salaries in 2020. Notably, most 2020 budget and salary decisions had taken place early in the year, prior to the full economic impact of the government mandated lockdown. 17% of companies delayed their 2020 increases due to the COVID-19 pandemic, typically for 6 months.

While the general market forecasts a 2021 salary increase of 4%, industry figures vary significantly. The sharpest projected rise has come from the life sciences (4.5%) and consumer goods (3.8%) industries. The energy industry continues to see some of the lowest increase in salaries with a 1.9% forecast.

Covid-19 resulted in a rapid implementation of remote and flexible working measures with 66% of companies having devised new remote working policies, while 25% already had one in place. As a result, a quarter of employers reported increased productivity and expect flexible working arrangements to continue to remain in place in a post-Covid-19 landscape.

Commenting on the findings of the survey, Ted Raffoul, Career Products Leader, MENA at Mercer said: “It is very encouraging to see that despite the economic challenges, a significant number of UAE employers have increased salaries in 2020. In response to the business effects of COVID-19, 10% of companies reduced salaries, but almost all of these were on a temporary basis. Although uncertainty continues into 2021, UAE companies are making progress towards enhanced business strategies, with a majority of them expecting new working arrangements to continue to evolve towards permanent policies.”

Although 30% of organisations planned an average headcount decrease of 10% in 2020, the extent to which companies took this type of action varies depending on their industry and resilience to the impact of COVID-19, with the largest decrease in headcount occurring in the retail sector. In 2020 there has been an increase in headcount in the logistics sector, specifically for express and last mile delivery, in order to meet the strong demand from the e-commerce boom, caused by the national stay-at-home orders.

Carolina Vorster, Workforce Products Leader, MENA at Mercer, said: “Even though we expect uncertainty to span into2021, the Total Remuneration Survey results promise a more optimistic new year as companies are increasingly reporting positive hiring sentiments compared to those indicated at the onset of the COVID-19 pandemic. Companies continue adapting to the new normal with 55% of them anticipating keeping flexible working arrangements once the pandemic is over and have employees have proved their commitment towards employees by offering home subsidies for remote workers such as online learning, covering the cost of office set up and furniture, mobile phones and more.”

Mercer’s annual salary surveys are conducted regionally in over 15 countries across the Middle East and North Africa. In the UAE specifically, more than 500 organisations were surveyed across all industries, including manufacturing, retail and wholesale, high tech, chemicals, consumer goods, life sciences and energy.