Local Business

30% of UAE companies plan to cut workforce, 10% reduce salaries: Survey

Staff Report/Dubai
Filed on October 19, 2020 | Last updated on October 20, 2020 at 06.57 am
dubai, uae, jobs, covid, salary


While the general market forecasts a 2021 salary increase of 4 per cent, industry figures vary significantly.

The direct impact of Covid-19 on the compensation and benefits landscape is less drastic than initially feared. Even though 10 per cent of UAE companies reduced salaries on a temporary basis, and 30 per cent have plans to cut headcount, according to a Mercer survey.

Overall, the market still experienced positive salary inflation and 25 per cent of companies have reported an increase in productivity as a result of employees working from home, it said.

Covered over 500 companies in the UAE, the survey results also revealed an actual annual salary increase of 3.8 per cent across the general market, although with 19.4 per cent 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. Around 17 per cent of companies delayed their 2020 increases due to the Covid-19 pandemic, typically for six months.

Salary in 2021 

While the general market forecasts a 2021 salary increase of 4 per cent, industry figures vary significantly. The sharpest projected rise has come from the life sciences (4.5 per cent) and consumer goods (3.8 per cent) industries. The energy industry continues to see some of the lowest increase in salaries with a 1.9 per cent forecast.
Covid-19 resulted in a rapid implementation of remote and flexible working measures with 66 per cent of companies having devised new remote working policies, while 25 per cent 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.

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 per cent 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 per cent of organisations planned an average headcount decrease of 10 per cent 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 into 2021, 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 per cent 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."  


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