- Salary movements, bonuses and attrition rates in the GCC - What will happen to bonus payments this year? - Attrition rates in the GCC - the outlook for 2015 compared to 2014 - Top areas of interest for C&B professionals in 2015 - Views from the market on flexible benefits and total rewards - Employee wellness as an engagement tool - Reported development needs of GCC C&B managers

1. © Informa Middle East. All rights reserved 1
Research Scope and Methodology
In an era characterised by political uncertainty, unpredictable oil prices, and changing
workforce demographics, organisations in the GCC need to ensure that they
have strategies in place to engage and retain employees. Against the backdrop of
considerable economic and political uncertainty, most companies are focusing on
consolidating their positions in their existing markets. Some are looking at geographic
expansion into new markets; others are looking to open up new lines of business. For
all of them, the challenge remains: to attract and retain top talent.
For the 3rd year, this research study, conducted with 161 GCC organisations across
the full spectrum of industry sectors, highlights the continuing need to manage and
control C&B budgets to avoid spiralling costs, whilst simultaneously motivating the
workforce. As salary movements, in many cases, are barely keeping pace with inflation,
organisations need to consider how they package their rewards. A shift to Total
Rewards, to reduce the emphasis on individual allowances, is one strategy being used
in the region, but still high levels of uncertainty about bonus payments and salary
increases for the next twelve months are adding to the challenge of retaining staff.
Respondents were asked to report on key pay indicators inside their companies
during 2013-2015, to analyse major pay movements and trends. The report also
presents the companies’ views on regional trends in compensation and benefits
instruments, including flexible benefits and employee wellness programmes.
Finally, the report highlights the development needs of C&B professionals as they
tackle the strategic challenges that come with the regional economic maturation and
the associated changes in the world of work.
A STUDY BY
GCC COMPENSATION AND
BENEFITS TRENDS IN 2015
Retaining Talent in Uncertain Times

2. © Informa Middle East. All rights reserved 2
Salary Movements, Bonuses
and Attrition Rates in the GCC
(i) Reported pay Increases in 2014 were
below predicted
The upward trend in wages continued in 2014 and is predicted to continue throughout
2015, but considerable pressures on C&B budgets remain as many of the region’s pay
rises are falling behind inflation rates.
When we consider actual pay rises in 2014 in comparison to those that companies
predicted, we discover that significantly more organisations fell into the categories
receiving the lowest and the highest pay increases in percentage terms.
At the low end, 17.6% of companies predicted a pay increase of 3.5 percent or lower,
but the actual number of companies giving this level of pay increase was nearly double
that, with 30.1% of companies in this range.
This lower-than-predicted rise is also evident when we consider pay rises of 4.5
percent or less. Last year saw about a third of companies predicting that workers
would receive pay rises at this level. However, the actual figures show that nearly
one-half of the companies (46.4 percent) gave pay rises at the low end. Companies
are being cautiously optimistic about the outlook for next year with about two-thirds
predicting a pay increase above 4.5 percent.
At the other end of the spectrum only 10.1 percent of companies predicted a 6.5
percent or higher pay rise, but the actual figure was 17.1 percent.
The majority of companies (nearly 70 percent) stated that they had yet to feel the
effect of the drop in oil prices, but a significant minority suggested that lower oil prices
will have a negative impact on C&B budgets, affecting either salaries, bonuses or both.
Taking a different approach to controlling expenditure, just over 11 percent of
companies said that they plan to reduce the size of the workforce.
Pay rises in the gcc
% of pay increase
2014 Prediction 2014 Actual 2015 Prediction
%ofcompanies
35
30
25
20
15
10
5
0
3.5% or
lower
4% 4.5% 5% 5.5% 6% 6.5% or
higher
Don’t
know or
did not
answer
17.6
30.1
16.3
6.9
11.4
12.2
8.8
4.9
5.7
18.2
27.6
15.4
4.4
4.9
8.9
5.0
4.1
4.9
10.1
17.1
8.1
28.9
0
28.5

3. © Informa Middle East. All rights reserved 3
Bonuses and uncertainty over oil
The uncertainty over the oil price is also affecting the outlook for bonuses in the
region. The survey responses show that, this year, a much higher percentage of
companies (an increase of 17.2 percent over last year) are not certain what bonuses
they will be paying in relation to 2014.
Attrition Rates in the GCC
In 2014 more than 40 percent of companies reported expected attrition rates above 8
percent. This figure has improved with just over one-third of companies (33.3 percent)
reporting such high levels of attrition. Moreover, more companies reported low
attrition (less than 4 percent). While employee retention remains a major concern, the
data suggests that some headway is being made.
Employee attrition rates
% of attrition
45
40
35
30
25
20
15
10
5
0
<4% 5% 6% 7% 8% 9% 10% or
higher
Don't know
What will happen to bonus payments in your
company next year?
2015
 Lower than last year 12.2%
 Same as last year 29.3%
 Higher than last year 13%
 Don’t know yet 45.5%
 Lower than last year 15.7%
 Same as last year 34.6%
 Higher than last year 21.4%
 Don’t know yet 28.3%
2014
2015 Prediction2014 Actual
%ofcompanies
30.8
11.3
6.9
4.4
12.6
10.7
17.6
5.7
38.2
9.8
4.9
5.7
7.3
5.7
20.3
8.1

4. © Informa Middle East. All rights reserved 4
(ii) The Outlook for 2015 Compared
to 2014
Unsurprisingly employee engagement remains the top priority for HR in the region
and this continues to present considerable challenges to HR in general, and to
C&B in particular. Employees have high expectations and managing retention in an
environment where pay increases are not seen to be keeping pace with inflation,
especially when it comes to the cost of housing and education, is not easy. In February
2015, Bahrain News Agency reported that inflation rates in the GCC countries ranged
from 3.1 percent (UAE) to 0.8 percent (Oman) in the year to December 2014. For many
employees, 3.5 percent or lower pay rises will see them barely able to keep up with
inflation, and such low pay increases are unlikely to have any positive motivational effect
on employees.
Many organisations are shifting their focus to a Total Rewards approach to increase the
perceived value of non-cash benefits, and to encourage employees to focus on a ‘whole
pay’ approach rather than the individual elements of their compensation packages.
By researching
their employees’
needs and wants,
and establishing
a robust EVP,
they will be one
step closer to
retaining their
valued employees
without an
overemphasis on
compensation
Employee engagement remains important because of its impact on employee
retention. While efforts to retain employees do seem to be paying off, it would be a
mistake to stop paying attention to the issue. The survey respondents again rated
retention as their second-highest priority this year. As regional countries strive to
increase levels of National employment, sometimes under substantial government
pressure, organisations are forced to increase salaries to prevent staff that they have
trained from moving to another company that is offering them a better package.
Educating the workforce to see beyond compensation and benefits and to consider
other aspects of the Employee Value Proposition (EVP) is not always easy. Companies
need to consider the EVP as a whole, and take a creative approach to such issues
as working conditions, career development, work-life balance, corporate social
responsibility, and employee recognition. By researching their employees’ needs and
wants, and establishing a robust EVP, they will be one step closer to retaining their
valued employees without an overemphasis on compensation.
“Competitive pressure on talent is creating upward pressure on salaries and
benefits. Total Rewards need to be managed through perceived benefits being
greater than the monetary benefit. For example, we can do this by providing
time off to be with children for sports day or other events, or by introducing
flexible working, where employees are measured on their individual key
performance indicators and how they impact company profitability and success.”
(2015 Survey respondee)

5. © Informa Middle East. All rights reserved 5
“Major costs are
health insurance,
housing and
schooling, all
of which have
been spiraling
in UAE. How do
you manage
expectations and
retain people?”
2015 survey
respondent
Housing Costs
Pressure on housing costs has continued and when workers take rent increases into
account, their annual pay increases will mean that they can continue to pay their bills—
but for many there won’t be much more.
The largest increase in housing and utility prices was in Qatar (7.3%), but this price
category also rose substantially in Bahrain (6.1), the UAE (5.39) and Kuwait (5.03). In
Saudi Arabia the increase was 2.5% and there was a marginal increase of 0.38% in
Oman.
There have been some reports of lower house prices and an expected flow-on effect
on rents in Dubai, but this has been contradicted by recent reports which suggest
that rents will remain fairly stable until 2016. In Qatar there is considerable ongoing
pressure on rents with some expatriates reportedly spending more than a third of
their income on housing. The undersupply in Qatar is expected to continue for the
next three years, increasing pressure on rents.
Companies continue to adopt different approaches to managing housing expenses,
but the survey responses suggest that many companies are not planning to change
their allowances. C&B professionals are wary of increasing these allowances because
it is easy to end up in an ever increasing cost and employee expectation spiral, which
will put pressure on reward budgets. That said some do plan to increase housing
allowances. Other approaches include:
§ Repackaging salaries into a total package,
§ Removing allowances allocated for housing and education,
§ Introducing or expanding the provision of company accommodation, and
§ Linking housing allowances to housing cost indices.
“Housing costs in particular will increase pressure but it is important that
employers resist this pressure and do not respond to opportunistic landlords
seeking to "talk up" the housing market. In a maturing employment market
there is a need to move away from the artificial segregation of basic pay
and benefits. Employees should receive a remuneration package that is
commensurate with the job without the complication of housing, travel and
other benefits. There should however be more emphasis on variable pay for
performance.”
(2015 Survey respondee)
Top areas of interest For C&B Professional
Improve employee engagement
Improve employee retention
Manage cost of allowances
Revamp salary scales / grades
Manage salary increases
30.1%
32.5%
39.0%
56.1%
63.4%
25.20%
30.80%
42.80%
43.40%
51.60%
2015 2014

6. © Informa Middle East. All rights reserved 6
In September
2014, Mercer
stated, “43%
of those with a
comprehensive
choice program
report that it has
lowered their
overall benefits
cost, whereas
another 23%
report that it
has been cost
neutral.”
Flexible Benefits
Two views from the market on Flexible Benefits
Opinions on the usefulness and viability of flexible benefits in the region continue
to be mixed. Interest in the concept is higher than in the past, but a slight majority
still suggest that barriers to their introduction in the region remain, including legal
constraints, lack of tax incentives, the need for more employee education about
the concept, and the ‘cash mentality’ of many employees. Companies also reported
their perception that vendors in the region were not yet ready to provide flexible
alternatives at affordable rates, and they are worried about the cost of providing
flexible benefits.
In Europe outsourced providers create flexible packages covering a wide-ranging suite
of benefits, and consultancy firm Mercer reported that key motivations for employers
to provide a benefits choice programme include:
§ Remaining competitive,
§ Retaining talent, and
§ Improving employee engagement.
In September 2014, Mercer stated, “43% of those with a comprehensive choice
programme report that it has lowered their overall benefits cost, whereas another 23%
report that it has been cost neutral.”
Survey respondents in the GCC see flexible benefits as most applicable in the area
of medical insurance, but consider that the insurance companies are not yet flexible
enough to make them workable. There is also concern that the majority of employees
are still focused on cash rather than benefits.
If GCC organisations are serious about employee engagement and retention, flexible
benefits need to be considered. As research indicates that Generation Y and Millennial
employees tend to have different expectations, and requirements, from work and
workplaces, flexible benefits offering employee choice is an option that allows
employees to be rewarded in the ways that are most important to them.
“We have considered this in the past. There are no tax incentives to promote
this and insurers are not keen to underwrite aspects of care where only
those who want to claim will sign up for it. Much of the population is more
concerned about sending money home rather than having additional
benefits here and so prefers the option of higher salary and lower benefits.”
(2015 Survey respondee)
“Provided companies educate their employees about the options and
employees understand the responsibility they have to take, then yes, flexible
benefits could very well work in the Middle East. However, companies will need
start to communicate benefits and the role employees play now, in order to be
ready for the introduction in a few months or years.”
(2015 Survey respondee)

7. © Informa Middle East. All rights reserved 7
“It's a win-win
for all involved.
The challenge
will be to ensure
we have the
correct support
from external
partners and help
in maintaining
momentum /
getting Board
acceptance.”
2015 survey
respondent
Employee Wellness
While the majority of the survey respondents said they do plan to introduce wellness
programmes, the remaining companies either have wellness plans in place or are
considering them.
The reasons given for considering wellness programs were to:
§ Increase employee engagement,
§ Help control health insurance costs, and
§ Manage employee health risks
There has been no change in the main concerns about introducing these programmes
which are focused on gaining the top level support to fund the programs and to get
the buy-in of middle managers.
(iii) Compensation and Benefits
(C&B) Managers in the GCC
Need for Ongoing Skill Development
Many C&B managers in the region said that they would like to see organisations
invest in the development of in-house knowledge, rather than depending on external
consultants to design and implement reward strategies. The general perception
seems to be that C&B positions are often regarded as administrative ones, rather
than as pivotal HR roles that require a deep understanding of the workforce and its
motivations, and their relationship to company performance.
Reported Development Needs of GCC C&B Managers
Technical Skills
How to build a compensation and benefits strategy
Understanding the business
Accounting
Job evaluations
Pay-for-performance
Incentive design, including long-term plans
Managing insurance schemes
Analytics and research
Soft Skills
Understanding the local markets and cultures
Getting a better understanding of human motivation and psychology
Better communication and negotiation skills to interact with employees and get buy-
in from senior management
Customer-service orientation
"Too many people think that the area of Rewards is just about numbers. So they
assume that quantitative, analytical types are the only ones best suited to work in the
function. That leads to multiple disasters. Rewards professionals need to study and
understand human beings in the place of work. [...] Psychology and Organizational
Behaviour are more complex and difficult to predict and manage than numbers.
Numbers are just tools, the means, to help understand and manage people, not the
end."

8. © Informa Middle East. All rights reserved 8
References
Bahrain News Agency, “GCC Inflation rates between 0.8% and 3.1% in December 2014”, 24 Feb 2015,
http://www.bna.bh/portal/en/news/655704 (accessed 26 April 2015)
Gulf News, “Dubai rents won't fall significantly this year”, 22 Apr 2015, http://gccdaily.com/News/dubai-
rents-wont-fall-significantly-this-year/ (accessed 26 April 2015)
Jones, Robert, “Prices fluctuate in maturing real estate market”, MEED, 18 March 2015, http://www.meed.
com/sectors/construction/real-estate/prices-fluctuate-in-maturing-real-estate-market/3207189.article
(accessed 26 April 2015)
Mercer, “Employee Benefits Choice Gaining Favor in EMEA”, http://www.mercer.com.au/content/mercer/
asia-pacific/au/en/insights/view/2014/employee-benefits-choice-gaining-favor-in-emea.html (accessed 26
April 2015)
Special thanks to Sandrine Bardot, Managing Director of Bardot
Group for her assistance in the analysis and study of this report
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