Hi,
Can someone please shed some light on Middle East salary structuring? Basically, I want to know if there is a process that can be followed in making the salary grid for employees traveling to the Middle East. What are the major components? Is there a minimum wage to be taken into account?
Currently, we would need to focus on Abu Dhabi and Dubai (UAE).
Thanks,
PJ
From India, New Delhi
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Can someone please shed some light on Middle East salary structuring? Basically, I want to know if there is a process that can be followed in making the salary grid for employees traveling to the Middle East. What are the major components? Is there a minimum wage to be taken into account?
Currently, we would need to focus on Abu Dhabi and Dubai (UAE).
Thanks,
PJ
From India, New Delhi
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We have tried to break down the components of salary to give you a basic understanding of what to expect when trying to negotiate your contract.
Basic Salary
This is obviously the main component of your compensation package and is paid monthly. Other components of your compensation may be based on this amount, such as an annual bonus, for example.
Accommodation
While the trend is moving towards paying all-cash packages, there are still a number of companies that provide actual accommodation in lieu of a housing allowance. The housing allowance component is to compensate you for the rent of the accommodation that you take. This is usually paid monthly and more and more does not actually cover the actual rent, due to the significant increases in the cost of housing in recent years. Furthermore, despite the allowance being paid monthly, landlords usually require payment of rent on an annual, bi-annual, or quarterly basis. This may require you to have the cash upfront or take a loan for the amount payable, and so interest would increase the actual cost to you. For those that receive accommodation in lieu of a housing allowance, this is paid for by the company and covered to a limit. This, of course, is significant considering the rising cost of housing and will only start to settle at some point around 2008 when housing supply starts to meet the ever-growing demand of workers. If accommodation is taken above the limit, the employee would pay the difference, either in cash upfront to the employer or landlord, or it is taken monthly from the employee's salary. Some firms even offer a shifting grant to cover the costs involved in moving home if your rent is increased, although this is usually offered once every 4 years, if at all. Finally, there may be an option of accommodation or cash, and some companies force one of the options depending on certain criteria.
Transport Allowance
Companies provide a transport allowance to cover general traveling considerations to and from work and inclusive of travel with regard to work. Significant other travel on behalf of work would be covered by a separate per diem policy, mission allowance, or paid expenses. For more senior staff, there may be a car allowance either in provision of a car to a certain level or an allowance for the purchase of a car depreciated over two to four years, along with a fuel allowance. The cars are either linked to the status of the position or to tasks undertaken. For example, sales jobs may require that you have a car to travel between certain pitches, whereas a director may need to display a certain status indicative of the position and have to be seen driving a new Mercedes. Some companies make it a requirement for you to have your own car already and as part of the job requirements and compensate you accordingly for petrol used at around 60 fils per kilometer.
Utilities
To cover the cost of water and electricity, some senior employees receive a utility allowance or a payment of actual bills. This is, on occasion, applicable to telephones, both landline and mobile, as well.
Education Allowance
Due to the nature of the education system, some payment could be made to cover the education of the employee's children. This could be limited by the number of children, location (i.e. only UAE-based children) or nationality. So typically, you could receive fees coverage of 2 or 3 children to a maximum limit of, say, 10,000 Dhs per child per year, provided that they study in the UAE. Of course, the range is wide with this, from nothing at all to unlimited children with full fees paid. This all depends on the employer. It is worth noting that adopted children are neither covered here nor recognized as legitimate within the confines of the UAE; however, this is increasingly being ignored.
Furniture Allowance
While this allowance used to be more of a norm, it is less and less prominent, and provided more at a senior level, if at all. The amount is usually paid as a one-off lump sum on engagement, to be repaid on a depreciation level of four years if the employee were to leave during this time. Some companies pay this amount on a monthly basis, with no repayment required, and some pay it every four years. (It may also only be applicable for those on a transfer basis to the UAE for a period of time. However, in this instance, staff are sometimes provided with furnished accommodation).
Bonuses
It is more usual than not for companies to offer bonuses, even some of the Dubai Government companies such as Dubai Holding, for example. However, bonus specifics are usually not stated in contracts. Bonuses are essentially wide-ranging, from performance-related bonuses linked to your meeting of specific objectives to company-wide schemes. In some cases, both are applicable. However, it is never safe to assume that you will receive a certain amount unless it is explicitly stated. In some instances, only senior staff at the director level and above will receive a bonus. Again, this all depends on the company - and the calculation of set bonus versus performance could be linked to basic salary or gross salary. Typically, if a performance-related bonus is offered, it would be linked to a multiple of basic salary, from one time for average performance to three times for over performance of objectives. To be safe, assume in your calculations you will receive nothing, and then any bonus will be just that, a bonus!
Vacation Allowance
This is sometimes known as Annual Ticket and after a year of service allows you to travel back to your home country or point of origin as defined by your passport. Most companies pay this in some form, but in different ways. The different options are as follows: a cash allowance based on a set rate; the payment of the actual ticket; whether the rate used is a certain level of IATA economy or business (for reference there are numerous levels of IATA); whether it is a peak, off-peak, or average rate; whether you receive a set predetermined amount; and whether your family is covered. A typical allowance would be cash in lieu of tickets at payment of standard IATA covering a spouse and up to three children, assuming the spouse does not already receive payment from another employer. Also, different rates and criteria could be used for different levels of the organization.
Insurance
Everyone receives the standard government healthcare, but many companies opt to provide some private coverage to either the employee or the employee's family with some level of restriction. In some cases, a premium would be paid by the employee on the use of a doctor or medical service. With regard to life insurance, more and more companies are offering this at different amounts relative to monthly basic salary, ranging from 1 to 3 years.
Holidays
The typical number of days holiday that companies give is 30 days, which could be inclusive or exclusive of some public holidays and weekends. For example, if you were to take two weeks of holiday and were to leave at the end of one week, you may have to include the middle weekend as part of your holiday entitlement. What you thought of as 10 days off may have to be counted as a 12-day holiday. This needs to be checked specifically in your contract. However, holidays can range from 25 to 60 days, and it would not be atypical to receive 40 days of leave. Many people take these holidays in one batch during the year, often during the summer periods when it is very hot, though increasingly, due to set manpower plans, people are splitting up their holidays, as per usual Western practices.
End of Service Benefit
Since there is no real retirement system per se, the labor law states that an end of service benefit must be paid after a year of service. This is usually 21 days a year after you have worked a year, which rises to 30 days for any additional year above that. Some companies pay more than this, typically at 30 days per year. This is usually based on basic salary, though it can include other allowances as part of the calculation.
Starting and Ending Service
Usually, you are covered for coming here and returning, by means of a ticket. Above this, some companies pay for extra elements, including the shipping of items, and tickets for the families. Obviously, if you do not return home after you finish your job, then this is not applicable.
In sum
We have tried to give you an outline of what you might expect, but, of course, each company is different and you would need to check each of these points separately. Do not be surprised if you only receive a couple of the elements listed. What we have done is covered all the elements so that you can get a fuller picture.
There may be other benefits or allowances that some companies provide such as health clubs and share options, but our foremost intention is to provide the main information that will help you to ask the right questions if you are offered a position to really determine your total compensation package and decide whether moving your family here is the move for you. Our advice would be to go into detail and clarify each point, especially if the contract is a translation of a set Arabic contract. Flexibility with regards to negotiating contracts is now more accepted, but do not be surprised if you cannot get them to budge. Just be clear what you are signing because once your contract is signed you are more or less bound by the agreement.
Some additional notes
Not all companies will pay all the allowances. Indeed, some companies will provide just an all-cash salary, with no breakdown of allowances, while others will break down the basic and allowance element. The percentage split between the fixed cash elements of basic salary and allowances is usually around 60 to 40.
Remember, companies are different and will provide their compensation differently. Some industries pay higher than others and similar jobs in different companies can pay disparate amounts. The Oil and Gas sector pays the highest, with some areas of banking also offering high salaries. Senior positions at multinational companies offer some very high wages.
For UAE Nationals, the breakdown of the allowance element is important as the housing element, along with
From Saudi Arabia
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13Basic Salary
This is obviously the main component of your compensation package and is paid monthly. Other components of your compensation may be based on this amount, such as an annual bonus, for example.
Accommodation
While the trend is moving towards paying all-cash packages, there are still a number of companies that provide actual accommodation in lieu of a housing allowance. The housing allowance component is to compensate you for the rent of the accommodation that you take. This is usually paid monthly and more and more does not actually cover the actual rent, due to the significant increases in the cost of housing in recent years. Furthermore, despite the allowance being paid monthly, landlords usually require payment of rent on an annual, bi-annual, or quarterly basis. This may require you to have the cash upfront or take a loan for the amount payable, and so interest would increase the actual cost to you. For those that receive accommodation in lieu of a housing allowance, this is paid for by the company and covered to a limit. This, of course, is significant considering the rising cost of housing and will only start to settle at some point around 2008 when housing supply starts to meet the ever-growing demand of workers. If accommodation is taken above the limit, the employee would pay the difference, either in cash upfront to the employer or landlord, or it is taken monthly from the employee's salary. Some firms even offer a shifting grant to cover the costs involved in moving home if your rent is increased, although this is usually offered once every 4 years, if at all. Finally, there may be an option of accommodation or cash, and some companies force one of the options depending on certain criteria.
Transport Allowance
Companies provide a transport allowance to cover general traveling considerations to and from work and inclusive of travel with regard to work. Significant other travel on behalf of work would be covered by a separate per diem policy, mission allowance, or paid expenses. For more senior staff, there may be a car allowance either in provision of a car to a certain level or an allowance for the purchase of a car depreciated over two to four years, along with a fuel allowance. The cars are either linked to the status of the position or to tasks undertaken. For example, sales jobs may require that you have a car to travel between certain pitches, whereas a director may need to display a certain status indicative of the position and have to be seen driving a new Mercedes. Some companies make it a requirement for you to have your own car already and as part of the job requirements and compensate you accordingly for petrol used at around 60 fils per kilometer.
Utilities
To cover the cost of water and electricity, some senior employees receive a utility allowance or a payment of actual bills. This is, on occasion, applicable to telephones, both landline and mobile, as well.
Education Allowance
Due to the nature of the education system, some payment could be made to cover the education of the employee's children. This could be limited by the number of children, location (i.e. only UAE-based children) or nationality. So typically, you could receive fees coverage of 2 or 3 children to a maximum limit of, say, 10,000 Dhs per child per year, provided that they study in the UAE. Of course, the range is wide with this, from nothing at all to unlimited children with full fees paid. This all depends on the employer. It is worth noting that adopted children are neither covered here nor recognized as legitimate within the confines of the UAE; however, this is increasingly being ignored.
Furniture Allowance
While this allowance used to be more of a norm, it is less and less prominent, and provided more at a senior level, if at all. The amount is usually paid as a one-off lump sum on engagement, to be repaid on a depreciation level of four years if the employee were to leave during this time. Some companies pay this amount on a monthly basis, with no repayment required, and some pay it every four years. (It may also only be applicable for those on a transfer basis to the UAE for a period of time. However, in this instance, staff are sometimes provided with furnished accommodation).
Bonuses
It is more usual than not for companies to offer bonuses, even some of the Dubai Government companies such as Dubai Holding, for example. However, bonus specifics are usually not stated in contracts. Bonuses are essentially wide-ranging, from performance-related bonuses linked to your meeting of specific objectives to company-wide schemes. In some cases, both are applicable. However, it is never safe to assume that you will receive a certain amount unless it is explicitly stated. In some instances, only senior staff at the director level and above will receive a bonus. Again, this all depends on the company - and the calculation of set bonus versus performance could be linked to basic salary or gross salary. Typically, if a performance-related bonus is offered, it would be linked to a multiple of basic salary, from one time for average performance to three times for over performance of objectives. To be safe, assume in your calculations you will receive nothing, and then any bonus will be just that, a bonus!
Vacation Allowance
This is sometimes known as Annual Ticket and after a year of service allows you to travel back to your home country or point of origin as defined by your passport. Most companies pay this in some form, but in different ways. The different options are as follows: a cash allowance based on a set rate; the payment of the actual ticket; whether the rate used is a certain level of IATA economy or business (for reference there are numerous levels of IATA); whether it is a peak, off-peak, or average rate; whether you receive a set predetermined amount; and whether your family is covered. A typical allowance would be cash in lieu of tickets at payment of standard IATA covering a spouse and up to three children, assuming the spouse does not already receive payment from another employer. Also, different rates and criteria could be used for different levels of the organization.
Insurance
Everyone receives the standard government healthcare, but many companies opt to provide some private coverage to either the employee or the employee's family with some level of restriction. In some cases, a premium would be paid by the employee on the use of a doctor or medical service. With regard to life insurance, more and more companies are offering this at different amounts relative to monthly basic salary, ranging from 1 to 3 years.
Holidays
The typical number of days holiday that companies give is 30 days, which could be inclusive or exclusive of some public holidays and weekends. For example, if you were to take two weeks of holiday and were to leave at the end of one week, you may have to include the middle weekend as part of your holiday entitlement. What you thought of as 10 days off may have to be counted as a 12-day holiday. This needs to be checked specifically in your contract. However, holidays can range from 25 to 60 days, and it would not be atypical to receive 40 days of leave. Many people take these holidays in one batch during the year, often during the summer periods when it is very hot, though increasingly, due to set manpower plans, people are splitting up their holidays, as per usual Western practices.
End of Service Benefit
Since there is no real retirement system per se, the labor law states that an end of service benefit must be paid after a year of service. This is usually 21 days a year after you have worked a year, which rises to 30 days for any additional year above that. Some companies pay more than this, typically at 30 days per year. This is usually based on basic salary, though it can include other allowances as part of the calculation.
Starting and Ending Service
Usually, you are covered for coming here and returning, by means of a ticket. Above this, some companies pay for extra elements, including the shipping of items, and tickets for the families. Obviously, if you do not return home after you finish your job, then this is not applicable.
In sum
We have tried to give you an outline of what you might expect, but, of course, each company is different and you would need to check each of these points separately. Do not be surprised if you only receive a couple of the elements listed. What we have done is covered all the elements so that you can get a fuller picture.
There may be other benefits or allowances that some companies provide such as health clubs and share options, but our foremost intention is to provide the main information that will help you to ask the right questions if you are offered a position to really determine your total compensation package and decide whether moving your family here is the move for you. Our advice would be to go into detail and clarify each point, especially if the contract is a translation of a set Arabic contract. Flexibility with regards to negotiating contracts is now more accepted, but do not be surprised if you cannot get them to budge. Just be clear what you are signing because once your contract is signed you are more or less bound by the agreement.
Some additional notes
Not all companies will pay all the allowances. Indeed, some companies will provide just an all-cash salary, with no breakdown of allowances, while others will break down the basic and allowance element. The percentage split between the fixed cash elements of basic salary and allowances is usually around 60 to 40.
Remember, companies are different and will provide their compensation differently. Some industries pay higher than others and similar jobs in different companies can pay disparate amounts. The Oil and Gas sector pays the highest, with some areas of banking also offering high salaries. Senior positions at multinational companies offer some very high wages.
For UAE Nationals, the breakdown of the allowance element is important as the housing element, along with
From Saudi Arabia
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Hey, guys,
Thanks for your help; we have been able to set the salary grid for UAE. Your inputs were of great help. However, I just wanted to confirm if there is a lot of difference in the cost of living for Saudi. Can the same grid (converted into SAR) be used for employees working in Saudi too?
From India, New Delhi
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Thanks for your help; we have been able to set the salary grid for UAE. Your inputs were of great help. However, I just wanted to confirm if there is a lot of difference in the cost of living for Saudi. Can the same grid (converted into SAR) be used for employees working in Saudi too?
From India, New Delhi
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Hi!
I suggest that you get hold of The Hay Group Compensation Report, which is prepared annually in the GCC. This report provides very comprehensive information across almost all industries operating in the region.
Foreigners working in GCC countries must understand that the compensation rates there are based on nationality. Hence, Americans and Europeans are paid the highest, while Indians, Pakistanis, and Bangladeshi nationals are paid the least. Among Arabs, the Lebanese, Egyptians, and Jordanians are the most trusted and receive the highest rates among technocrats in the region.
Best wishes.
Ed Llarena, Jr. Emilla Consulting
Tel: 00632-787-0423
(Helps improve corporate governance worldwide, especially in Asia, the Middle East, Africa, and the Pacific Region)
From Philippines, Parañaque
Acknowledge(0)Amend(0)
I suggest that you get hold of The Hay Group Compensation Report, which is prepared annually in the GCC. This report provides very comprehensive information across almost all industries operating in the region.
Foreigners working in GCC countries must understand that the compensation rates there are based on nationality. Hence, Americans and Europeans are paid the highest, while Indians, Pakistanis, and Bangladeshi nationals are paid the least. Among Arabs, the Lebanese, Egyptians, and Jordanians are the most trusted and receive the highest rates among technocrats in the region.
Best wishes.
Ed Llarena, Jr. Emilla Consulting
Tel: 00632-787-0423
(Helps improve corporate governance worldwide, especially in Asia, the Middle East, Africa, and the Pacific Region)
From Philippines, Parañaque
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Salary & Compensation Guidelines.zip