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

1. © IIR MIDDLE EAST. All rights reserved 1
The approach to compensation and benefits
in the Middle East and Africa (MEA) has
traditionally lagged behind what followed
in developed economies. Remuneration
structures are heavily biased towards base
salary and supplemented by guaranteed
allowances. The generous allowances
which have historically been paid in“expat
packages”have found their way into many
local contracts. For employers, allowances
have provided an attractive mechanism for
keeping the base salary and component part
of packages low, reducing their liabilities
under the end-of-service benefits schemes
which are entrenched in the labour laws of
many of the countries in the region.
Labour shortages seem to be driving shifts in
the approaches taken to compensation and
benefits. In a period of economic growth,
and continued globalisation, companies are
being forced to re-examine how they can
attract and retain skilled employees. The rigid
salary and allowance packages of the 80s
and 90s are giving way to more flexible and
innovative approaches as companies strive
to offer reward packages which will motivate
and retain their top employees.
Recent reports from leading consultancies
suggest that salaries are likely to increase
in 2013 in emerging and high growth
markets. Mercer’s prediction is that Middle
East employees are looking at a“predicted
average pay rise of 5.4% for 2013”, a rate
which they claim is well above the rate of
inflation.
As companies review their reward strategies,
they need to consider carefully how
sustainable the costs are in the long run,
and balance this with the need to attract
and retain their key talent. According to
Mercer, high tax-free salaries and generous
allowances have contributed to people
wanting to move to the region. As an
attraction strategy they work. But they are
costly and with allowances having become
the market standard for local employees as
well as expatriates, the costs can be high.
In this environment, it seems prudent for
companies to look beyond doing what
they have always done, and take a fresh
look at flexible alternatives and their overall
Employee Value Proposition (EVP).
GCC COMPENSATION AND BENEFITS
TRENDS IN 2013
The MEA region
continues to
offer economic
opportunities to
companies but,
on the downside,
there continues to
be a shortage of
appropriately skilled
talent.
INSIGHTS FROM TOP COMPANIES
A STUDY BY

2. © IIR MIDDLE EAST. All rights reserved 2
THE LANDSCAPE OF REWARDS INTHE
GCC: LEGACY AND OUTLOOK
IIR Middle East recently conducted a qualitative study of
leading companies to gain some insights into how they see
the predicted changes and how they are responding to the
challenges they face.
RETENTION IS TOP PRIORITY
The study suggests that the overall approach
to compensation and benefits taken for
2013 by the surveyed companies does not
differ radically from that taken in 2012. That
said the“talent war”remains an ongoing
issue for most companies. Attracting and
retaining key talent remain a top priority and
strategies to address this are being actively
considered, alongside the imperative of cost
control.
In the face of an international skills shortage
in the oil and gas sector Shawn Cramer,
Head of Compensation, Benefits & HRIS,
Maersk Oil Qatar, echoed these sentiments
commenting that their main challenge is
to provide a total rewards framework that
“recognises the critical and scarce market”.
For Paul Johnstone, Compensation and
Benefits Manager—MENA, GE, the challenge
is to get the Employee Value Proposition
(EVP) right“to ensure that employees fully
value the benefits that we provide and that,
in return, we as an employer get a bigger
return on investment.”
A MOVE TO A TRUE TOTAL
REWARDS MODEL
In a bid to improve retention rates for key
employees and to attract talent, many
companies have made a shift towards a Total
Reward approach, incorporating the five
elements of:
§ Compensation
§ Benefits
§ Work-Life
§ Performance and Recognition
§ Development and Career Opportunities
“The main challenge is really focusing on
total rewards. Many look at just the salary
and incentives but do not focus on the
whole" commented John Ohrnberger, Head
of Performance and Reward at Abu Dhabi
Investment Authority (ADIA).
The main concern with the introduction
of Total Rewards strategies seems to be
the potential for costs to increase, and
companies are actively looking at ways to
introduce greater cost sharing. However, it is
seen as a strategy that can positively impact
the challenges facing talent attraction and
retention.
COMPENSATION AND
BENEFITS THAT SERVE
BUSINESS OBJECTIVES
The drive to link compensation and benefits
strategies to corporate objectives is not a
new one. Companies have long recognised
that incentives can drive performance. They
also recognised that other factors come into
play when it comes to determining what
impacts performance—factors such as the
perceived fairness, or lack of fairness of the
system. Some companies are revamping
their sales incentives plans whilst others are
also focusing on non-sales roles.
According to Noor Investment Group’s
Head of Rewards, Nisheeth Pathak, they are
seeking to align their incentive measures
with organisational strategy more effectively.
Pathak commented that“there is more
focus now on productivity and sales
effectiveness.”He continued by saying that
Noor Investment Group is conducting pilots
in two areas which include non-sales roles.
Maersk Oil’s Shawn Cramer also mentioned
the need to drive a more performance
oriented culture by“putting more pay at risk”.
“Retention of top
talent is a huge
challenge. The pool
of key talent is small
in MEA countries, and
skills are scarce.”
-David Rockey, Nokia

3. © IIR MIDDLE EAST. All rights reserved 3
FLEXIBLE BENEFITS, ANYONE?
The introduction of flexible benefits is
another issue which HR professionals in
the region have been debating over recent
years. In many developed economies,
flexible benefits were introduced to create
income tax breaks, but that has not been an
important consideration in the Middle East.
The survey responses suggest that a few
companies are thinking of“testing the water”
but many seem to be waiting to see how it
works for others before they go too far down
the“flexible benefits”path.
HOUSING COSTS FLUCTUATE,
HEALTHCARE PREMIUMS ON
THE RISE AND MORE TALK
ABOUT RETIREMENT
In recent years the trend has been to
convert many allowances and benefits to
cash. This reduces the administrative load
in companies, and allows employees more
flexibility. For example, many companies
which previously provide air tickets now
provide cash allowances, delinking the
allowance from actual travel. This has also
been done with housing and education
allowances.
Whilst housing costs in some countries are
going down, this is by no means across the
board. Housing legislation in the UAE for
example has resulted in increased housing
costs for employees. According to Mercer,
UAE visa requirements for each employee to
have a housing contract in their own name
“will increase pressure on rents.”Meanwhile,
the Abu Dhabi government is insisting that
its employees live in the emirate, creating a
“captive rental market and a causing rising
rents.”
Health insurance costs are increasing to keep
up with“medical inflation”. Some companies
are looking at the concept of co-sharing to
allow employees to upgrade their level of
benefits. Other companies are introducing
wellness initiatives for example regular
checkups and inoculations in a bid to reduce
insurance claims, thus maintaining affordable
premiums. Mercer reported typical annual
premium increases of 20%. Robin Wells
of Medstar Insurance commented on the
emerging trend of companies becoming
more involved in the scheme and working
with insurers and brokers who can“actively
tailor the design to meet the client’s
requirements as they evolve.”
Education costs and other costs of living
have increased considerably in some
countries resulting in an ongoing need
to adjust salaries and allowances to
compensate.
Recognising that the“end-of-service benefit”
provided by law in many countries is not
enough to attract, retain and motivate key
employees, some companies have started
to introduce pensions and savings plans.
They recognise that while the end-of-service
benefit schemes provide a lump sum when
someone leaves an organisation, they fail
to give employees the retirement benefits
that can accrue from years of pension
contribution payments.
CONCLUSION
The study suggests the need for companies to be strategic, flexible
and cost conscious when designing their reward strategies. The
Total Reward approach is increasingly attractive to companies that
are fighting to attract and retain skilled employees in a growing
economy with skilled labour shortages. Cost sharing for benefits,
sales bonuses and long-term incentive plans are taking their place
in a mix where the trend seems to be to increase “pay at risk” and
minimise the base salary component of packages.
Inflation is being
felt in many benefits
areas—in particular
healthcare, housing
and education.

4. © IIR MIDDLE EAST. All rights reserved 4
There seems to be growing discussion
and interest in flexible benefits for retention
purpose, cost management, increase
in diverse employee needs, wanting
employees to appreciate and understand
the value of the benefits offered by the
company. We are still evaluating it.
Elaine Ong, Schlumberger
Flexible benefits have been around for
over 20 years in the US. I think it is doable
in this region if there are certain minimums
and protections built within. There is an
expectation of a safety net in this region
and I believe that companies will need to
provide it. We are considering it along with
a number of other options.
John Ohrnberger, Abu Dhabi
Investment Authority
It is doable, however there will need
to be a greater emphasis by the insurers
on developing the systems - IT and
underwriting - to make this work. We have
not yet introduced it, but are seriously
looking at it.
Paul Johnstone, GE MEA
Our markets are maturing to a point
that the introduction of flexible benefits
does not seem to be far off. We are most
likely waiting to see a few companies
introduce this prior to adapting it as
‘common practice’.
Shawn Cramer, Maersk Oil Qatar
I do not think the Middle East is ready
yet for Flex. There are few tax benefits
under Flex - which tends to be a reason for
introducing it - so don’t see what savings it
would bring.
David Rockey, Nokia India and
MEA
I feel the region is not ready to
introduce flexible C&B. The reward vendors
do not have the capacity to model out
a flexible C&B in the region let alone
providing us with basic C&B tools. There is
also a legal factor and I believe it will not be
possible to introduce flexible benefits in the
region due to legislative requirements.
Muhammad Jamal, Halliburton
The main thrust seems to me to
be the better and more cost effective
management of allowances; it is unlikely
that a menu type arrangement will take
off given that most expats rely on their
allowances to provide a degree of financial
security.
Tim Knight, Kuwait Finance House
Flexible benefits are probably a
few years away from being perceived
meaningful by employees in the Middle
East. The focus has been more on cash
than on benefits. Some benefits have been
designed to deliver cash in the hands of the
employee and may over a period of time
get cashed-out as compensation structures
get simplified.
Nisheeth Pathak, Noor
Investment Group
APPENDIX A
IS THE MIDDLE EAST READY FOR A
FLEXIBLE BENEFITS REVOLUTION?
POSSIBLY NOT YET
More companies
are considering Flex
but many believe
the region is not yet
ready.

5. © IIR MIDDLE EAST. All rights reserved 5
APPENDIX B
We are seeing more interest and activity from medium and large employers in facilitating
workplace retirement savings opportunities for their employees. There is growing recognition
that‘end of service gratuity’obligations are not enough to attract, retain and motivate key
employees.
Caroline Groothoff, Zurich Life Insurance Company
Our clients face challenges with healthcare plans as quality of insurance players fluctuates
due to inconsistency of strategies at all levels. Premiums continue to inflate due to abuse by
medical care providers and other elements. Employee satisfaction of health insurance is harder
to achieve since many see it as a right and not a benefit. We also see more focus on employee
wellness programmes.
Rasha Moukayed, Guardian Insurance Brokers
We are expecting clients to want to have a greater role in the design and management of
their medical programmes. To be more involved in the scheme as a whole. By extension, this
will favour providers that are able to provide more on-going visibility on scheme performance
and can actively tailor the design to meet employers’requirements as they evolve.
Robin Wells, Medstar Insurance
WHAT REGIONAL BENEFIT VENDORS
ARE SEEING
Mercer. (2013) Study Shows the Picture Is Varied
across Europe, the Middle East and Africa
(EMEA) when It Comes to Pay Rises in 2013.
Retrieved from
WorldatWork. (2013) The New Pay Reality—
Summary of Global Salary Increase
Expectations. Retrieved from
Mercer. (2013) Compensation and Benefit
Trends in the Middle East. Retrieved from
Reed. (2013) Reed Recruitment Launches
Middle East Salary Guide. Retrieved from
BIBLIOGRAPHY
Serious albeit slow
talk about pensions
and retirement for
expats in the region.

6. © IIR MIDDLE EAST. All rights reserved 6
ABOUT
The Annual Compensation and Benefits Forum is the industry's leading event in the Middle East
and Africa. 2013 is the Forum’s 17th edition to bring together heads of compensation & benefits,
rewards, performance, organisational development, talent management and HR strategy to
discuss the discipline’s hottest topics and pressing issues in the Middle East and beyond.
www.iirme.com/compensation
#TotalRewardsME
John Ohrnberger, Head of Performance and Reward,
Abu Dhabi Investment Authority
Shawn Cramer, Head of Compensation, Benefits & HRIS,
Maersk Oil
Nisheeth Pathak, Head of Rewards, Noor Investment
Group
Nelly Nassif , Area Head of Reward – MENA, British
American Tobacco
Muhammad Jamal , Total Compensation Manager -
Eastern Hemisphere, Halliburton
David Rockey, Head of Performance & Reward - India &
MEA, Nokia Corporation
Rasha Moukayed, Manager of the Life & Medical
Department, Guardian Insurance Brokers
Robin Wells, Regional Manager, Middle East and
Asia, Medstar Insurance
Tim Knight, HR and C&B Advisor and Former Head of
C&B, National Bank of Abu Dhabi
Elaine Ong, Regional Compensation & Benefits
Manager, Schlumberger
Paul Johnstone, Compensation and Benefits Manager -
MENA, GE
Caroline Groothoff, Marketing Manager, Zurich Life
Insurance Company
THANKS
IIR Middle East would like to thank the following speakers and
sponsors for their contribution to the compiling of this report:
2013 FORUM SPONSORS
GULFTALENT.com