Executive compensation in the UAE remains stagnant: Ma Foi

DUBAI — Executive compensation in the UAE has remained stagnant or gone down, even in terms of the top level management, according to managing director of one of the world's top recruitment and HR Consulting companies, Ma Foi.

By Lucia Dore (Senior Correspondent)

Published: Mon 14 Aug 2006, 10:43 AM

Last updated: Sat 4 Apr 2015, 2:12 PM

Speaking to Khaleej Times, K Pandia Rajan said: "Earlier an Indian could come here and get a 100 per cent [pay] differential, but it doesn't happen now. Managerial compensation has gone down in many sectors."

Competition is the main reason. Whereas once management positions would have automatically gone to a Western expat this is no longer the case. It is now possible to get people from developing countries, otherwise known as third country nationals (TCNs), who are every bit as good as an expat — and maybe even at a lower price, explained Rajan.

"There is a lot more competition for these positions. Local, expat and Indian professionals often all compete for the same job. In the last 10 years if there is one thing I have seen it is this development."

The result is that compensation based on the traditional class structure — local, expat and TCN — is breaking down.

"The three classes rarely apply and it is extremely tough on managerial compensation. Earlier it was very clear that a position would go to level one, level two or level three," said Rajan. "The three classes are no longer sustainable."

With this framework no longer working and employers recruiting from all over the world, employers are faced with the challenge of how much to pay new recruits and how to pitch increases. With compensation levels growing at varying rates around the world — from 10-15 per cent per annum in India and up to 20 per cent in the IT sector, compared with one to two per cent in the UK and the US- the task is not easy.

"In the UAE companies are not limited to emirates' compensation which makes it very tough," said Rajan.

The bottom line seems to be that the more global the industry, the more global the compensation package. Companies in financial services and the energy and infrastructure sectors for example are among the most global, as are their compensation packages, while companies in the trading sector are still catching up. "Hybrid" compensation packages are also becoming more common, and are based on rewarding diversity- "of manpower, of functions, and the sheer business differences of each division. But it's not just compensation alone. It's culture building," said Rajan.

If compensation packages are stagnating in the UAE, it is also becoming harder to recruit people from a traditional hunting ground, the UK. Brian Wilkinson, member of the board of Ma Foi's parent company, Vedior, the world's third largest staffing company, said: "The experience with the company's UK headquarters working with UAE companies shows that it is actually getting harder to recruit people to come here. Why? Relatively, compensation is not as high as it used to be. But it is quite a stabilising influence. We are still able to get people here, but it is not easy as it used to be."

He also said that UK recruits are still attracted to the lifestyle of Dubai despite the fact that it is considerably changed from the "Old Dubai" and that it is "easier to persuade young single people to come here than young married people."

Rajan also explained how recruiting executives is getting tougher. He said that Ma Foi's data for this year shows that out of the 58 key positions that have been filled in the region so far 50 people have rejected offers. "Earlier this was never the case, especially for the Middle East. Rejections have increased and people are leaving before their contractual duration," he said. To understand why people are choosing not to join a company or are departing early UAE companies are increasingly seeking the help of a "diagnostic" service offered by Ma Foi. "Companies are now attempting to find out why people are not joining, why people are exiting, and what the reasons are in terms of their own structure, systems and processes," said Rajan.

And with a handful of UAE companies surpassing the $1billion mark in terms of revenue, there is greater need to focus on the long term, he added. "Simple compensation packages and two-year contracts are not the case anymore."

UAE companies are also placing more emphasis on sourcing the developmental skills to train and develop local talent, explained Rajan. "Rather than merely sourcing personnel from the world, there is a much greater attempt to source developmental people from abroad to train here, which is a good thing," he said. Emiratisation is a clear driver as far as the training of HR management personnel is concerned.

"There is a huge need for people to upgrade themselves and bring in a global perspective. Positions have become available without people having acquired the competency. But this is buildable," said Rajan.

Ma Foi's HR Consulting, which includes its diagnostic services as well as developmental training, is growing at 100 per cent a year in the region.

And while demand for career transition advice is declining in the West it is increasing in the UAE, he added.

Rajan also maintains that UAE companies, especially the multi-billion dollar ones, need to develop a brand. They have to position themselves as an employer of choice, globally.

"There has been an assumption that people will join anyway — 'it's my company.' People once bought into Dubai as a brand; this was good enough. But now companies have to invest in an individual brand."

This brand must be internal as well as external. Rajan said: "It is important to evolve a cultural statement and to have mission values across the length and breadth of an organisation. There must be certain element of distinctiveness. What sort of company so you want to become and how is this translated into systems and processes?"

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