BENCHMARKING LIFE IN ABU DHABISandrine Bardot - CompensationInsider

Agenda

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Compensation in the GCC Workforce Packages (cash) Packages (benefits) Packages (variable)

Challenges of living and working in the GCC Economy and the environment Cultural and HR considerations

Impact of the Arab Spring

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Compensation in the GCC - workforce

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Composition of workforce : 10%, max 15% are locals

Definition of “expat” and average life cycle in UAE < 3 years

Nationalisation quotas and challenges Demographics : local population is not enough

• 3.62 million expatriates in Dubai vs 864,000 Nationals (estimated)

• 60% of Abu Dhabi locals are less than 24 years old (estimated) Government pay higher than private sector in the UAE…. UAE Nationals in private sector ?

• Lack of family education• Productivity expectations

Expected speed to promotion Ambiguity of role of expats : needed but…

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Compensation in the GCC - packages

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Source : Mercer global online training

Compensation in the GCC – packages (cash)

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Allowances : Housing, transportation, utilities… Education and annual tickets, considered as benefits or as

compensation Usually paid in cash (with potential exception for housing)

Move towards one allowance Special allowances for UAE Nationals (children, social) and

eligibility for equivalent of airfare as well as all other allowances

Tax free (except US / green card holders) Overall packages higher than in Europe… at least apparently Low cost of living on some stuff (maid, driver, some services,

car and gas), expensive on others (quality housing, outside food & wine)

Transfer someone : don’t equalize or COLA-ize… go for local market compensation anyway

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Compensation in the GCC – packages (benefits) Nationals get pension and free

social security Expats get End of Service

(around 1m basic pay per year of service), medical (not legally mandated everywhere), life and sometimes disability, retirement

Strong sense of social hierarchy with salaries or allowances different by UAE Nationals / expats or even sometimes more differentiation

Low protection : minimal labour laws, trade unions are illegal, 1 month notice period, “visa run” for maintaining residence visa, bounced cheques mean going to jail…

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Compensation in the GCC – packages (variable)

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Due to cultural reasons, variable pay was not really related to individual performance (saving face – bonuses look more like even distribution of a pool or profit-sharing) even though practice of Pay for Performance is growing.

On-target bonuses lower than in Europe. Maximum payouts or stretch is also lower than in

Europe.

Very few LTIPs (but increasing trend in Financial Services due to international governance practices, especially KSA, Kuwait) Foreigners usually can’t own stock/equity LTIPs tend to be distributed in cash

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Living and working in the GCC - economy

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Young nations - strong nationalism, sense of cultural threat (minority in their own country)

Current level of economic development is a strange mixture : high rises and crumbling buildings, labour camps out of sight, some advanced infrastructures but no signs on roads and addresses….

Economy built on cheap labourers : Construction workers, taxi drivers, maids, low-level service

providers without family, fly home every 2 years NRIs, Philippinos, Sri Lankans… struggling to obtain minimum

wage Fixed currency peg and sending money back home

BUT there are tensions on educated NRIs as local home country salaries rise in India : sustainability of model ?

Government subsidies for citizens

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Living and working in the GCC - economy

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Oil still here but moving away Vision of local government – changing future sources

of income : Plan Abu Dhabi 2030 and The Dubai Strategic Plan2015

Impact of Dubai crisis/debt vs Abu Dhabi Increasing regional competition

Setting-up business : Capital ownership and FTZs Indirect forms of taxes Cost of labour : residence visa, work permit, ID card,

alcohol licence, driving licence registration, healthcare check up, translation of documents…

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Living and working in the GCC - culture

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Multicultural but not always mixing OK to recruit a “female Western PA aged 28 to 35” OK : speak English – lifestyle… (Saudi Arabia : in compounds)

but… Career of spouse ? Risk of social alcoholism Think of how to reintegrate the expat back in home country

(cultural, standard of living, financial, use of experience)

Islamic countries : No visa for girlfriend, or children of single mother Limited female possibility to sponsor husband Impact of Ramadan Male – female interactions Regional Christians (mostly Orthodox) : definition of identity

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Living and working in the GCC - culture

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Low governance and tribal managerial style of decision-making (top down, slow, majlis, tribal, face saving), personal relations and connections, gift giving…

No written culture, importance of relations for survival in harsh conditions : TRUST (handshake > contract)

From HR standpoint : Un-readiness of market for value-added solutions Compensation & Benefits is perceived same as

personnel administration Need lot of education towards modern HR practices,

especially in small, local and government entities.

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Impact of the Arab Spring

© 2013Credit : University of Notre Dame OpenCourseWare, Arabic and Middle East Studies

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Impact of the Arab Spring

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A quick overview of islam : 5 pillars Sunni vs Shia vs Wahabbis….

Concerned about terrorism risk in-country Balance Iran / Saudi Arabia Impact of First Gulf War

Impact of demographics and Lack of educational infrastructures Role of internet, globalisation and youth aspirations Few private sector opportunities while not sustainable for

governments to provide jobs for all like in the past (eg : proposal pension after 15 years….)

Unemployment means no marriage / family + perceived failure => tension

Different countries, different situations

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Impact of the Arab Spring

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Short-term impact on compensation (as per ECA spot survey, 2011) : some evacuations of expatriates and/or their families suspended business trips.

Currently no long-term impacts on Compensation but : Pay levels locally have decreased for Nationals in Tunisia,

Egypt and more due to economic difficulties as large parts of GDP are being lost,

Recruiting nationals from the Arab Spring countries is more difficult in semi-government organisations of the GCC (fewer visas approved by Immigration authorities)

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Resources from my blog

http://compensationinsider.com/the-uae-40th-national-day-and-the-compensation-manager/

http://compensationinsider.com/pensions-landscape-europe-and-gcc-part-ii/

http://compensationinsider.com/an-update-on-the-project-on-expat-retirement-schemes-in-the-uae/

http://compensationinsider.com/a-view-on-emiratisation-from-the-abu-dhabi-tawteen-council/

And the article I wrote on this topic for Compensation & Benefits Review, a Sage Journal (paying)© 2013

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Other free resources

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Crisis planning, an April 2011 article from ECA International about having a plan for when crisis strikes

Free report on employment and salary trends in the Gulf 2012 from GulfTalent.com a recruitment agency in the region.

Linking jobs and education in the Arab world, a still valid April 2011 McKinsey Quarterly article (requires free registration). If you like the article, it is worth following the link in the article and access the full report for free through their website

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Thank you !

Sandrine BardotConsultant,

trainer, speaker, blogger

+971 566 172 864Sandrine@Compensationinsider.co

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Twitter : @CompInsider© 2013

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