Last Updated on July 29, 2024 by Vadim
The global cost of living surge is reshaping how UAE businesses approach expat salaries. As inflation takes hold, companies are adopting innovative strategies to attract and retain top talent while managing expenses. This shift is transforming the landscape of expat compensation in the Emirates.
Scientific Approach to Salary Setting
UAE employers are increasingly embracing a data-driven model for determining expat salaries. Instead of relying on traditional negotiation tactics, companies are turning to international cost-of-living indexes as benchmarks for establishing base pay.
Mahesh Krishnamoorthy, Managing Director of Core Integra, a global HR firm expanding its UAE presence, explains: “Salary levels are becoming more rationalized in the UAE. Employers now consider global cost-of-living indexes when negotiating and setting basic salaries for expat employees.”
This approach marks a significant departure from past practices where salary negotiations were often based on simple supply and demand dynamics.
Understanding Cost-of-Living Indexes
Cost-of-living indexes are calculated using prices of representative consumer goods baskets in various cities. These indexes also factor in average income levels and purchasing power within each location.
According to World Data:
- UAE’s cost-of-living index: 72.3
- Average monthly income: $4,097
- Purchasing power index: 88.6
For comparison:
- Saudi Arabia’s index: 51.8
- Average monthly income: $2,307
- Purchasing power index: 69.6
- India’s index: 24.6
- Average monthly income: $199
- Purchasing power index: 12.6
Benefits of the Index-Based Model
This scientific approach to salary setting is gaining popularity among UAE companies, especially as they attract global talent from countries like the US, UK, Canada, and India. Many of these professionals are seeking new opportunities following layoffs at multinational corporations.
A Dubai-based HR executive notes, “Expat candidates appreciate this model because it provides a clear picture of their earnings and savings potential, rather than just estimates.”
The index-based system allows companies to easily factor in various living expenses:
- Rent
- Transportation costs
- Grocery prices
- School fees
- Entertainment and lifestyle expenses
HR professionals can access detailed research reports to make informed, data-backed offers during salary negotiations.
Challenges in Compensation Benchmarking
While the index-based model offers many advantages, it’s not without challenges. Krishnamoorthy points out that “compensation benchmarking can’t be as straightforward as currency value comparison. There’s a hidden bargain on the cost of living that employers and employees must align during the offer negotiation process.”
Dubai: A Rising Star in Global Cost Rankings
Mercer’s annual cost of living city ranking for 2024 places Dubai as the most expensive city in the Middle East for international employees. The emirate ranks 15th globally, climbing three places from 2023.
Other Middle Eastern cities in the ranking include:
- Tel Aviv
- Abu Dhabi (43rd globally)
- Riyadh (90th globally)
- Jeddah (97th globally)
Beyond Salary: What Attracts Global Talent to the UAE
While competitive salaries are crucial, UAE employers are finding that other factors play a significant role in attracting international talent. Krishnamoorthy emphasizes that “in today’s dynamic global landscape, factors beyond cost make a location attractive.”
Key considerations for expats include:
- Quality of life
- Safety and security
- Robust infrastructure
- Global connectivity
UAE companies are leveraging these strengths to appeal to professionals from around the world, including those from the US and Europe.
The Future of Expat Compensation in the UAE
As the UAE continues to position itself as a global business hub, its approach to expat compensation is likely to evolve further. While the transition to international compensation models is still in progress, the trend towards data-driven, index-based salary setting is clear.
Employers in the Emirates are striking a balance between offering competitive base salaries and providing attractive perks and incentives. This strategy allows them to tap into the global talent pool while managing costs effectively.
As the job market continues to shift and the cost of living remains a key concern for expats, UAE businesses that adapt their compensation strategies will be best positioned to attract and retain top international talent.
Vadim Kouznetsov is a distinguished entrepreneur and the visionary founder and CEO of JobXDubai.com, the UAE’s rapidly expanding job board. Renowned for his expertise in bridging the gap between job seekers and employment opportunities, Vadim has become a leading authority in the recruitment and job market of Dubai.
His innovative approach to matching candidates with their ideal roles has propelled JobXDubai.com to the forefront of the industry, making a significant impact on the region’s employment landscape.
Through his work, Vadim Kouznetsov has demonstrated a profound commitment to enhancing the job search experience, solidifying his status as a pivotal figure in the field of recruitment.