© IIR MIDDLE EAST. All rights reserved	 1The approach to compensation and benefitsin the Middle East and Africa (MEA) hast...
© IIR MIDDLE EAST. All rights reserved	 2THE LANDSCAPE OF REWARDS INTHEGCC: LEGACY AND OUTLOOKIIR Middle East recently con...
© IIR MIDDLE EAST. All rights reserved	 3FLEXIBLE BENEFITS, ANYONE?The introduction of flexible benefits isanother issue w...
© IIR MIDDLE EAST. All rights reserved	 4There seems to be growing discussionand interest in flexible benefits for retenti...
© IIR MIDDLE EAST. All rights reserved	 5APPENDIX BWe are seeing more interest and activity from medium and large employer...
© IIR MIDDLE EAST. All rights reserved	 6ABOUTThe Annual Compensation and Benefits Forum is the industrys leading event in...
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GCC Compensation and Benefits Trends in 2013

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IIR Middle East recently conducted a qualitative study of leading companies in the GCC to gain some insights into how they see the predicted changes and how they are responding to the challenges they face.

For more info on the Forum: http://www.iirme.com/compensation
For a PDF of the report: http://www.iirme.com/Global/IIRME/Conferences/AY2014/brochure/Report-GCCCompensationandBenefitsTrendsin2013.pdf

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GCC Compensation and Benefits Trends in 2013

  1. 1. © IIR MIDDLE EAST. All rights reserved 1The approach to compensation and benefitsin the Middle East and Africa (MEA) hastraditionally lagged behind what followedin developed economies. Remunerationstructures are heavily biased towards basesalary and supplemented by guaranteedallowances. The generous allowanceswhich have historically been paid in“expatpackages”have found their way into manylocal contracts. For employers, allowanceshave provided an attractive mechanism forkeeping the base salary and component partof packages low, reducing their liabilitiesunder the end-of-service benefits schemeswhich are entrenched in the labour laws ofmany of the countries in the region.Labour shortages seem to be driving shifts inthe approaches taken to compensation andbenefits. In a period of economic growth,and continued globalisation, companies arebeing forced to re-examine how they canattract and retain skilled employees. The rigidsalary and allowance packages of the 80sand 90s are giving way to more flexible andinnovative approaches as companies striveto offer reward packages which will motivateand retain their top employees.Recent reports from leading consultanciessuggest that salaries are likely to increasein 2013 in emerging and high growthmarkets. Mercer’s prediction is that MiddleEast employees are looking at a“predictedaverage pay rise of 5.4% for 2013”, a ratewhich they claim is well above the rate ofinflation.As companies review their reward strategies,they need to consider carefully howsustainable the costs are in the long run,and balance this with the need to attractand retain their key talent. According toMercer, high tax-free salaries and generousallowances have contributed to peoplewanting to move to the region. As anattraction strategy they work. But they arecostly and with allowances having becomethe market standard for local employees aswell as expatriates, the costs can be high.In this environment, it seems prudent forcompanies to look beyond doing whatthey have always done, and take a freshlook at flexible alternatives and their overallEmployee Value Proposition (EVP).GCC COMPENSATION AND BENEFITSTRENDS IN 2013The MEA regioncontinues tooffer economicopportunities tocompanies but,on the downside,there continues tobe a shortage ofappropriately skilledtalent.INSIGHTS FROM TOP COMPANIESA STUDY BY
  2. 2. © IIR MIDDLE EAST. All rights reserved 2THE LANDSCAPE OF REWARDS INTHEGCC: LEGACY AND OUTLOOKIIR Middle East recently conducted a qualitative study ofleading companies to gain some insights into how they seethe predicted changes and how they are responding to thechallenges they face.RETENTION IS TOP PRIORITYThe study suggests that the overall approachto compensation and benefits taken for2013 by the surveyed companies does notdiffer radically from that taken in 2012. Thatsaid the“talent war”remains an ongoingissue for most companies. Attracting andretaining key talent remain a top priority andstrategies to address this are being activelyconsidered, alongside the imperative of costcontrol.In the face of an international skills shortagein the oil and gas sector Shawn Cramer,Head of Compensation, Benefits & HRIS,Maersk Oil Qatar, echoed these sentimentscommenting that their main challenge isto provide a total rewards framework that“recognises the critical and scarce market”.For Paul Johnstone, Compensation andBenefits Manager—MENA, GE, the challengeis to get the Employee Value Proposition(EVP) right“to ensure that employees fullyvalue the benefits that we provide and that,in return, we as an employer get a biggerreturn on investment.”A MOVE TO A TRUE TOTALREWARDS MODELIn a bid to improve retention rates for keyemployees and to attract talent, manycompanies have made a shift towards a TotalReward approach, incorporating the fiveelements of:§ Compensation§ Benefits§ Work-Life§ Performance and Recognition§ Development and Career Opportunities“The main challenge is really focusing ontotal rewards. Many look at just the salaryand incentives but do not focus on thewhole" commented John Ohrnberger, Headof Performance and Reward at Abu DhabiInvestment Authority (ADIA).The main concern with the introductionof Total Rewards strategies seems to bethe potential for costs to increase, andcompanies are actively looking at ways tointroduce greater cost sharing. However, it isseen as a strategy that can positively impactthe challenges facing talent attraction andretention.COMPENSATION ANDBENEFITS THAT SERVEBUSINESS OBJECTIVESThe drive to link compensation and benefitsstrategies to corporate objectives is not anew one. Companies have long recognisedthat incentives can drive performance. Theyalso recognised that other factors come intoplay when it comes to determining whatimpacts performance—factors such as theperceived fairness, or lack of fairness of thesystem. Some companies are revampingtheir sales incentives plans whilst others arealso focusing on non-sales roles.According to Noor Investment Group’sHead of Rewards, Nisheeth Pathak, they areseeking to align their incentive measureswith organisational strategy more effectively.Pathak commented that“there is morefocus now on productivity and saleseffectiveness.”He continued by saying thatNoor Investment Group is conducting pilotsin two areas which include non-sales roles.Maersk Oil’s Shawn Cramer also mentionedthe need to drive a more performanceoriented culture by“putting more pay at risk”.“Retention of toptalent is a hugechallenge. The poolof key talent is smallin MEA countries, andskills are scarce.”-David Rockey, Nokia
  3. 3. © IIR MIDDLE EAST. All rights reserved 3FLEXIBLE BENEFITS, ANYONE?The introduction of flexible benefits isanother issue which HR professionals inthe region have been debating over recentyears. In many developed economies,flexible benefits were introduced to createincome tax breaks, but that has not been animportant consideration in the Middle East.The survey responses suggest that a fewcompanies are thinking of“testing the water”but many seem to be waiting to see how itworks for others before they go too far downthe“flexible benefits”path.HOUSING COSTS FLUCTUATE,HEALTHCARE PREMIUMS ONTHE RISE AND MORE TALKABOUT RETIREMENTIn recent years the trend has been toconvert many allowances and benefits tocash. This reduces the administrative loadin companies, and allows employees moreflexibility. For example, many companieswhich previously provide air tickets nowprovide cash allowances, delinking theallowance from actual travel. This has alsobeen done with housing and educationallowances.Whilst housing costs in some countries aregoing down, this is by no means across theboard. Housing legislation in the UAE forexample has resulted in increased housingcosts for employees. According to Mercer,UAE visa requirements for each employee tohave a housing contract in their own name“will increase pressure on rents.”Meanwhile,the Abu Dhabi government is insisting thatits employees live in the emirate, creating a“captive rental market and a causing risingrents.”Health insurance costs are increasing to keepup with“medical inflation”. Some companiesare looking at the concept of co-sharing toallow employees to upgrade their level ofbenefits. Other companies are introducingwellness initiatives for example regularcheckups and inoculations in a bid to reduceinsurance claims, thus maintaining affordablepremiums. Mercer reported typical annualpremium increases of 20%. Robin Wellsof Medstar Insurance commented on theemerging trend of companies becomingmore involved in the scheme and workingwith insurers and brokers who can“activelytailor the design to meet the client’srequirements as they evolve.”Education costs and other costs of livinghave increased considerably in somecountries resulting in an ongoing needto adjust salaries and allowances tocompensate.Recognising that the“end-of-service benefit”provided by law in many countries is notenough to attract, retain and motivate keyemployees, some companies have startedto introduce pensions and savings plans.They recognise that while the end-of-servicebenefit schemes provide a lump sum whensomeone leaves an organisation, they failto give employees the retirement benefitsthat can accrue from years of pensioncontribution payments.CONCLUSIONThe study suggests the need for companies to be strategic, flexibleand cost conscious when designing their reward strategies. TheTotal Reward approach is increasingly attractive to companies thatare fighting to attract and retain skilled employees in a growingeconomy with skilled labour shortages. Cost sharing for benefits,sales bonuses and long-term incentive plans are taking their placein a mix where the trend seems to be to increase “pay at risk” andminimise the base salary component of packages.Inflation is beingfelt in many benefitsareas—in particularhealthcare, housingand education.
  4. 4. © IIR MIDDLE EAST. All rights reserved 4There seems to be growing discussionand interest in flexible benefits for retentionpurpose, cost management, increasein diverse employee needs, wantingemployees to appreciate and understandthe value of the benefits offered by thecompany. We are still evaluating it.Elaine Ong, SchlumbergerFlexible benefits have been around forover 20 years in the US. I think it is doablein this region if there are certain minimumsand protections built within. There is anexpectation of a safety net in this regionand I believe that companies will need toprovide it. We are considering it along witha number of other options.John Ohrnberger, Abu DhabiInvestment AuthorityIt is doable, however there will needto be a greater emphasis by the insurerson developing the systems - IT andunderwriting - to make this work. We havenot yet introduced it, but are seriouslylooking at it.Paul Johnstone, GE MEAOur markets are maturing to a pointthat the introduction of flexible benefitsdoes not seem to be far off. We are mostlikely waiting to see a few companiesintroduce this prior to adapting it as‘common practice’.Shawn Cramer, Maersk Oil QatarI do not think the Middle East is readyyet for Flex. There are few tax benefitsunder Flex - which tends to be a reason forintroducing it - so don’t see what savings itwould bring.David Rockey, Nokia India andMEAI feel the region is not ready tointroduce flexible C&B. The reward vendorsdo not have the capacity to model outa flexible C&B in the region let aloneproviding us with basic C&B tools. There isalso a legal factor and I believe it will not bepossible to introduce flexible benefits in theregion due to legislative requirements.Muhammad Jamal, HalliburtonThe main thrust seems to me tobe the better and more cost effectivemanagement of allowances; it is unlikelythat a menu type arrangement will takeoff given that most expats rely on theirallowances to provide a degree of financialsecurity.Tim Knight, Kuwait Finance HouseFlexible benefits are probably afew years away from being perceivedmeaningful by employees in the MiddleEast. The focus has been more on cashthan on benefits. Some benefits have beendesigned to deliver cash in the hands of theemployee and may over a period of timeget cashed-out as compensation structuresget simplified.Nisheeth Pathak, NoorInvestment GroupAPPENDIX AIS THE MIDDLE EAST READY FOR AFLEXIBLE BENEFITS REVOLUTION?POSSIBLY NOT YETMore companiesare considering Flexbut many believethe region is not yetready.
  5. 5. © IIR MIDDLE EAST. All rights reserved 5APPENDIX BWe are seeing more interest and activity from medium and large employers in facilitatingworkplace retirement savings opportunities for their employees. There is growing recognitionthat‘end of service gratuity’obligations are not enough to attract, retain and motivate keyemployees.Caroline Groothoff, Zurich Life Insurance CompanyOur clients face challenges with healthcare plans as quality of insurance players fluctuatesdue to inconsistency of strategies at all levels. Premiums continue to inflate due to abuse bymedical care providers and other elements. Employee satisfaction of health insurance is harderto achieve since many see it as a right and not a benefit. We also see more focus on employeewellness programmes.Rasha Moukayed, Guardian Insurance BrokersWe are expecting clients to want to have a greater role in the design and management oftheir medical programmes. To be more involved in the scheme as a whole. By extension, thiswill favour providers that are able to provide more on-going visibility on scheme performanceand can actively tailor the design to meet employers’requirements as they evolve.Robin Wells, Medstar InsuranceWHAT REGIONAL BENEFIT VENDORSARE SEEINGMercer. (2013) Study Shows the Picture Is Variedacross Europe, the Middle East and Africa(EMEA) when It Comes to Pay Rises in 2013.Retrieved fromWorldatWork. (2013) The New Pay Reality—Summary of Global Salary IncreaseExpectations. Retrieved fromMercer. (2013) Compensation and BenefitTrends in the Middle East. Retrieved fromReed. (2013) Reed Recruitment LaunchesMiddle East Salary Guide. Retrieved fromBIBLIOGRAPHYSerious albeit slowtalk about pensionsand retirement forexpats in the region.
  6. 6. © IIR MIDDLE EAST. All rights reserved 6ABOUTThe Annual Compensation and Benefits Forum is the industrys leading event in the Middle Eastand Africa. 2013 is the Forum’s 17th edition to bring together heads of compensation & benefits,rewards, performance, organisational development, talent management and HR strategy todiscuss the discipline’s hottest topics and pressing issues in the Middle East and beyond.www.iirme.com/compensation#TotalRewardsMEJohn Ohrnberger, Head of Performance and Reward,Abu Dhabi Investment AuthorityShawn Cramer, Head of Compensation, Benefits & HRIS,Maersk OilNisheeth Pathak, Head of Rewards, Noor InvestmentGroupNelly Nassif , Area Head of Reward – MENA, BritishAmerican TobaccoMuhammad Jamal , Total Compensation Manager -Eastern Hemisphere, HalliburtonDavid Rockey, Head of Performance & Reward - India &MEA, Nokia CorporationRasha Moukayed, Manager of the Life & MedicalDepartment, Guardian Insurance BrokersRobin Wells, Regional Manager, Middle East andAsia, Medstar InsuranceTim Knight, HR and C&B Advisor and Former Head ofC&B, National Bank of Abu DhabiElaine Ong, Regional Compensation & BenefitsManager, SchlumbergerPaul Johnstone, Compensation and Benefits Manager -MENA, GECaroline Groothoff, Marketing Manager, Zurich LifeInsurance CompanyTHANKSIIR Middle East would like to thank the following speakers andsponsors for their contribution to the compiling of this report:2013 FORUM SPONSORSGULFTALENT.com

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