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30% UAE companies plan to slash headcount, 10% to cut pay

20 October 2020

The direct impact of Covid-19 on employment and compensation landscape is less drastic than expected, despite the fact that 10 percent of UAE companies reduced salaries on a temporary basis, and 30 percent have plans to cut headcount, according to a Mercer Survey.

Overall, the market still experienced a positive salary inflation, with 25 percent of companies having reported an increase in productivity due to employees working from home, the survey said.

employment UAE

Overall, the survey covered 500 companies in the UAE, and the results revealed an increase of 3.8 percent in actual annual salary across the general market, despite the fact that 19.4 percent of organizations chose to freeze salaries in 2020.

It was noted that in the year 2020, most of the budget and salary related decisions were taken early in the year, before the complete economic impact of the government-mandated lockdown. About 17 percent of companies delayed their salary increases in 2020 owing to the Covid-19 pandemic, for about six months.

Market forecast for 2021

The general market forecast for 2021 indicates a salary increase of 4 percent, however, there is significant variation in industry figures. The steep rise was noticed across two industries, namely, life sciences at 4.5 percent, and consumer goods at 3.8 percent. The energy industry has shown the least increase in salaries marking 1.9 percent increase.

Given, the rapid implementation of remote and flexible working measures, 66 percent of companies have devised new remote working policies, while 25 percent already had it in one place. Therefore, a quarter of employers reported increase in productivity and felt that this flexible working arrangement would continue to be in place even after the Covid-19.

The report said that although 30 percent of organizations are planning a 10 percent decrease of average headcount in 2020, the extent to which companies actually implement this, will depend on their industry’s resilience to the impact of Covid-19, as the largest decrease in headcount has been noticed in retail sector.

The year 2020 has seen an increase in headcount in logistics sector, particularly for express and last mile delivery, in order to meet strong demand from the e-commerce boom, caused by lock-down measures.

The Workforce Products Leader at MENA, Mercer, Carolina Vorster, says “Even though we expect uncertainty to continue 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 a new normal with 55 percent of them hoping for a flexible working arrangement post-pandemic, and the commitment by employers towards employees by offering home subsidies including online learning, covering cost of office set up, and furniture setup for remote workers.

Meanwhile, companies are continuing to adapt to the new normal with 55 percent of them awaiting flexible work arrangements post-pandemic, and have commitment from the employers who have offered remote workers some home subsidies including online learning, cost of office setup, furniture, mobile phones etc.

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