An influx of overseas job seekers has kept the lid on wage increases this year as inflationary pressures hit people in the pocket.

The findings in a survey released yesterday by Hay Group highlight a competitive jobs market and rising costs for housing, school fees and health care.

That will lead to slower growth in purchasing power as pay struggles to keep pace with costs, the global management consultancy said.

“We’re seeing more supply from abroad, and not necessarily from the usual hunting grounds like India and Pakistan,” said Vijay Gandhi, a regional director of Hay Group. “We’re seeing more western supply, and that is also helping to stabilise the compensation market.”

Of the 270,000 employees surveyed this year for Hay Group’s UAE Compensation and Benefits Report, 44,000 had begun work for a new company in the past 12 months, as compared with 34,000 last year.

Expatriates from stagnant European economies tended to have lower salary expectations than those arriving from Asian markets, where economic growth was in the double digits, said Harish Bhatia, Hay Group’s unit manager in the Middle East, and the report’s author.

Basic salaries across all sectors grew by 4.4 per cent this year, compared with 4.9 per cent last year, according to Hay Group.

Basic salary increased 5.8 per cent in oil and gas, followed by a 5.5 per cent increase in retail and 4.8 per cent in transport.

Of the more than 600 companies surveyed by Hay Group, 85 per cent increased salaries in the past 12 months, with none reporting a cut in wages.

Salaries are forecast to increase by 5 per cent next year. The growth will be driven primarily by the retail sector, which is forecast to post salary increases of 6 per cent during the coming year.

But higher inflation meant that such salary increases would represent a much smaller increase in employee purchasing power, said Mr Gandhi.

Employer perceptions of inflation was far greater than that suggested by mainstream figures, he said.

“When we ask HR professionals what the assumed rate of inflation is that they’re using for next year that figure is double the official number, close to 5 per cent,” said Mr Gandhi. “In the next two years we don’t see real incomes rising by more than 2.5 per cent, but this is still far better than previous years where we’ve seen zero to negative purchase power growth.”

Purchasing power increased by 3.3 per cent this year, compared with 4.2 per cent last year. The figure is forecast to fall to 2.5 per cent next year.

Rising costs of housing, insurance and children’s tuition fees were key inhibitors of consumer purchasing power, added Mr Gandhi.

“The Government has kept a cap on rental and tuition increases, but this is a temporary band-aid solution to a medium-term issue that won’t go away until more housing and schools are built,” he said.

Health insurance premiums are forecast to rise between 25 and 30 per cent in the coming year in response to rising in-patient charges from hospitals, said Mr Gandhi.

Private-sector employers continued to face challenges in the hiring and retention of Emiratis, said Mr Bhatia. The report found that 80 per cent of nationals worked in oil and gas, banking and the public sector.

“These sectors pay around 20 per cent higher than the rest of the private sector aggregate,” he said. “With a small pool of nationals focused on the private sector, the demand is fierce and employers in other industries find themselves competing with higher-paying private sectors, as well as the public sector, for national talent.”

Hay Group’s report found that there was very little discrimination between men and women when it came to salaries. The difference between men and women’s pay for equivalent roles was less than 1 per cent, the report found.

source: http://www.thenational.ae