As the economic forecast for the region brightens up, many organisations are preparing for business growth and expansion. This has a great impact on the people operations in the business and especially on compensation and benefits to ensure employee pay and benefits are competitive to retain and engage top talent. The report summaries a GCC wide survey conducted with nearly 160 companies across many sectors. Respondents were asked to report on key pay indicators inside their companies in 2012 – 2014 to analyse major pay movements and trends. A trends analysis of various compensation and benefits instruments in the region including flexible benefits and employee wellness is then presented. The report also outlines the key strategic priorities for the profession in the next 3 years while forecasting some of the key challenges to C&B that come with growth

1. © Informa Middle East. All rights reserved 1
GCC COMPENSATION AND BENEFITS
TRENDS IN 2014
INSIGHTS FROM TOP COMPANIES
Summary
As the economic forecast for the region
brightens up, many organisations are
preparing for business growth and
expansion. This has a great impact on the
people operations in the business and
especially on compensation and benefits
to ensure employee pay and benefits are
competitive to retain and engage top talent.
The report summaries a GCC wide survey
conducted with nearly 160 companies
across many sectors. Respondents were
asked to report on key pay indicators inside
their companies in 2012 – 2014 to analyse
major pay movements and trends. A trends
analysis of various compensation and
benefits instruments in the region including
flexible benefits and employee wellness is
then presented.
The report also outlines the key strategic
priorities for the profession in the next 3
years while forecasting some of the key
challenges to C&B that come with growth.
Salary movements, bonuses
and attrition rates in the
GCC
There seems to be an upward trend in
annual pay reviews in 2014 compared to
2013. Last year, nearly half of companies
survived reported salary increases of 4.5% or
less. That number dropped significantly to
about one third of companies in 2014. This
signalled a big jump in salary increases of
over 4.5%.
Nearly 25% have or will pay 5 or 5.5%, while
only 14.5% of companies reported 6%
increase or higher in 2014.
The survey also highlighted that a full 29%
of companies did not know how much they
would pay on salary reviews in 2014.
Given the trends and comments on inflation
and rising cost of living, it is not surprising to
see a significant increase in the numbers of
companies paying 5.5% or 6% and higher on
pay reviews in 2014.
A STUDY BY
Don’t know
6.5% or higher
6%
5.5%
5%
4.5%
4%
3.5% or lower
29%
34% 18%
15%
5%
5%
6%
10%
27% 18%
4%
9%
7%
4%
10%
2014
2013
Reported pay review increase in 2013 vs projected increase in 2014
With economic
recovery and positive
market outlooks, total
rewards professionals
are presented with a
new set of challenges
and priorities.

2. © Informa Middle East. All rights reserved 2
The movement of bonus payments is also
expected to continue to 2015 as 56% of
companies estimate they will be paying the
same rate or higher.
This trend could be attributed to a multitude
of factors but namely the renewed growth
outlooks for the region, as well as the impact
of the Dubai Expo 2020 and the 2022 FIFA
World Cup in Qatar.
Employee retention remains
a big concern
More than 40% of companies in the region
have reported an alarming 8% or more
attrition rate in 2013 with nearly 20% of
those expecting more than 10% attrition.
These figures are reflective of the‘war of
talent’the region is experiencing as a result
of economic recovery and changes in the
regional labour landscape.
Employee Attrition Rates in
2013
How 2014 is looking compared to 2013
Employee engagement is now
top priority
Participants were asked to indicate the top 3
priorities for their total rewards strategies in in
2014 - 2015, and the results are quite telling.
Employee engagement is now at the top of
strategic agendas for HR in the region. More
and more, companies are realising the long-
term imperative of an engaged workforce.
Naturally, employee retention comes 2nd
and
as seen earlier, reward managers now clearly
see the link between engagement, retention
and total rewards overall.
Revamping salary scales to accommodate
the changes in pay trends in the region has
now become a key priority for compensation
professionals for 2014 and beyond.
Divided reactions to
increasing housing costs
For about one third of respondents, cost of
living and inflation pressures were identified as
significant enough to become a new focus of
their C&B strategy this year. Most notably in the
UAE, the rise in housing costs and employee
expectations is now a major concern.
This however does not seem to apply to
all companies. A selection of respondents
declared that they are not going to do
anything about housing costs as their
packages are currently well positioned to
accommodate the changes.
Some have also highlighted that there is now
more“noise”from employees, but as the costs
were not reduced in the deflation following
the recession in 2008, they feel they are still in
a good position to manage.
For companies who have already taken
actions to mitigate housing cost, it is obvious
that every company is approaching the issue
differently. The key approaches by companies
in the GCC can be summarised as follows:
 Increasing housing allowances is the most
popular approach at the detriment of
basic salary increases
 Increasing base pay or gross salary
 Adjusting the Cost of Living approach
 Linking housing allowance to housing
cost indices
 Looking for accommodation at lower
costs
 Moving back to providing company
accommodation
Similarly, a significant number of companies
expressed concern over education costs and
that they are monitoring such costs as they
may have an impact in 2015.
The impression however, is that while there
is adaptation to increasing costs, companies
are cautious not to get into an uncontrollable
spiral of increasing labour costs. A typical
reaction was:
4% or lower
5%
6%
7%
8%
9%
10% or higher
Don't know
31.0%
11.4%
7.0%
3.8%
12.7%
10.8%
17.7%
5.7%
Employee
engagement is now
at the top of strategic
agendas for HR in
the region. More and
more, companies are
realising the long
term imperative of an
engaged workforce.

3. © Informa Middle East. All rights reserved 3
More companies are now
considering flexible benefits
The issue of flexible benefits in the region
seems to be causing a big divide. While some
companies are interested in the concept and
are actively considering it at varying levels,
a lot believe it won’t work in the region and
have dismissed it entirely. Only one company
reported that there is a‘flex’program in place
in their organisation.
Just like in 2013, most are sceptical of its
application in the Middle East. This is very
clear as‘employee benefits’are at the bottom
of strategic priorities for Compensation &
Benefits in 2014, as reported above.
The enforcement of mandatory medical
benefits in Abu Dhabi and Dubai was
occasionally highlighted as an opportunity
to implement flexible benefits. Generally
speaking however, the sentiment now is that
“it is doable, but requires an organisation that
is ready for it. Before it is introduced, it needs a
corporate culture that is open to flexible benefits
and more importantly, the expertise to establish,
manage, communicate and administer the
program”.
Some common advice was to start with a
small number of benefits, or apply flex for
“certain categories, not all, with appropriate
awareness and education”.
And“whilst this is favourable to employees, it
has the potential to become a higher direct
salary cost for employers where certain benefits
are restricted to certain grades. It is important
to show a holistic approach to benefit
management if considering this option. The
balance of costs needs to be taken into account,
as well as employee retention and attraction to
really see the value of such a model”.
Another respondent commented that“it is
very expensive to hire someone to manage and
integrate flex. It would be a very valuable tool for
employers if it can be done in-house”.
Some of the main challenges to
implementing flexible benefits as highlighted
by respondents:
 There is no tax advantage to flex in the
GCC
 Providers in the Middle East don’t seem
well equipped to handle requests for
flexible benefits yet
 The portfolio of benefits offered by
companies is limited to statutorily
required or practice driven - hence
offering flexibility really adds no value
 With fixed labour contracts, the chances
of easy implementation are weak
 Flexible benefits are not envisaged at this
stage for blue collars and low-skilled /
low-pay employees
 Many expats in the region are looking for
fixed pay and cash compensation, and
a major challenge is to drive change in
employee mind-sets
Employee wellness is now a
trend in the GCC – or is it?
More than half of companies interviewed
seem to have some form of an employee
wellness programme in place. A number
of companies indicated they are working
on introducing or revamping their schemes
based on results from internal opinion
surveys or employee engagement surveys,
showing that they are taking into account
feedback from these studies.
52%
Top Areas of Strategic Focus
Improve employee engagement
Improve employee retention
Revamp salary scales / grades
Manage cost of allowances
Manage salary increases
Moving to a Total Rewards framework
Other issues related to compensation
Working on an EVP Model
Integration with HR
Employee mobility
Other issues related to benefits
Executive compensation / retention
Introduce employee wellness programmes
44%
43%
30%
25%
24%
16%
11%
11%
10%
10%
10%
6%
No flexible benefits
revolution in the
Middle East in sight,
but more regional
companies are
starting to consider it.

4. © Informa Middle East. All rights reserved 4
More growth is expected but
new challenges emerge
When asked about growth and expansion
plans, most respondents indicated that their
organisations are planning to grow primarily
in the GCC, with some moderate expansion
and growth planned for the Levant and
Africa.
Challenges however are outlined in the
difficulty to obtain good and relevant
compensation data for these new markets.
This is coupled with fierce competition to
attract and retain talent in these markets
with few skilled local Nationals and hard-to-
mobilise expats - due to real or perceived,
risk levels - in the Levant and Africa.
Looking 3 years ahead, respondents also
identified a series of challenges in managing
Total Rewards in their industry.
After years of relatively stable packages
during the aftermath of the global crisis,
employee expectations are on the rise again.
There concerns about cost of living increases
and higher inflation, especially in respect
to housing and schooling, which are major
expenditures for all families in the GCC.
This will have a big impact on retention and
attraction of talent, especially in view of the
expected increase in competition in the
market. Companies anticipate a renewed
war for talent fuelled by the return of solid
growth in the region, and compounded by
the impact of hosting World Expo 2020 in
Dubai, and the 2022 FIFA World Cup in Qatar.
Nationalisation in the GCC at
the forefront
Nationalisation challenges become more
pressing and are expected impact the work
of Compensation professionals. In Saudi
Arabia, it is said that over 900,000 expats left
the country at the end of 2013 following
the crackdown on illegal workers spurring a
direct increase in labour costs.
All GCC countries have national plans in place
to increase the number of local Nationals in
the private sector. Attracting and retaining
Nationals will be a key challenge to HR and
C&B specialists. There will be a need to
become creative in designing schemes that
allow their companies to make the best of the
available local talent pool.
Respondents have also forecasted a need
to create or introduce flexibility in package
design. Many organisations, especially
local ones, are conglomerates in the region
and even though they address different
industries, they often offer unified packages.
This may have to change in order to
effectively face the specific needs of each of
the industries they operate in. Total Rewards
approaches will have to be developed,
accompanied by intense awareness and
communication campaigns to educate
employees and ensure they understand the
full extent of the value of their package.
Better performance management and
individualisation of pay was also forecasted
to be needed in order to keep attracting and
retaining key talent. As one respondent puts
it:“Transitioning to a skills/performance-based
pay will become our key challenge.”
In contrast, about the same number of
respondents said that they had introduced
wellness plans in their organisations, but
faced a number of challenges in the uptake
from employees which may be due to issues
in properly executing and communicating
the scheme.
Others indicated challenges in identifying
suitable providers and getting top-level
buy-in as well as resistance from middle
managers.
Majority of companies however believe that
there is still much education needed in some
organisations to convince all stakeholders
(management as well as employees) that
wellness programmes have a tangible
impact on the bottom line through
reduced absenteeism, lower increases in
healthcare premiums, and higher employee
engagement.
A 3 years outlook for Total Rewards
in the GCC
Nationalisation in the
GCC is now among
key priorities for
compensation and
benefits in the region.

5. © Informa Middle East. All rights reserved 5
Data, managing costs and
political stability are on top
of the list
When asked about the most challenging
aspects of being a C&B specialist in the
region, many respondents reported some
technical aspects of the job.
Obtaining good quality data in the region
has been notoriously difficult for years,
and the comments are still as valid as ever,
citing issues around availability and validity
of market data as well as transparency and
credibility of data providers.
In particular, a significant number of
respondents highlighted the lack of reliable
information by industry, which is very much
needed to assess packages, especially with
the current backdrop of renewed war for
talent.
In such a context, keeping up-to-date with
trends proves difficult, and attracting talent
while keeping costs low in a context of
increasing competition is a conundrum that
many are facing. As one reward professional
said, it is a struggle to maintain the balance
“between a company’s capacity and willingness
to pay, and market rates”.
A few factors, specific to the region,
complicate things further.
The political instability of the region, leading
to uncertainty along with the speed of
change in that landscape, has left many C&B
specialists struggling to play effective roles in
their organisations.
Furthermore, the composition of the
workforce creates its own challenges, with
a very diverse workforce with different
expectations.
Nationalisation has had an indirect impact
on rewards offering and the ability to be
consistent and communicate a transparent
framework to other employee segments. The
constant focus of some Nationals on career
development without as much emphasis on
gaining experience is influencing the reality
of salaries. Compensation professionals
reckon that it is still difficult to attract, retain
and develop Nationals in the current context.
On the expatriate side, the issue of‘transient
population’where employees focus on
a job rather than a career and are willing
to move on for a small increase in pay is
making it difficult to keep staff motivated for
a long time. This highlights the imperative
need for stronger employee engagement
programmes.
Lastly, a general lack of transparency about
pay is seen as a breeding ground for further
issues such as having to deal with exceptions
and individual rewards. When employees
don’t know their salary bands or compa-
ratio, it is more difficult to get buy-in to move
into a pay-for-performance culture.
A call for the recognition
Just as importantly, there seems to be a need
for more recognition of the role of C&B in the
business, and the education of management
to help move away from a traditionally
administrative role. C&B specialists feel
they need to be looked at as people with
insight and knowledge into the fabrics of
the workforce that will be used to improve
overall performance. They however have
to be agile and ready to respond to change
in the new dynamic reality of business
nowadays
What it is like to be a compensation
manager in the Middle East
Great times for C&B
in the region with
big opportunities to
aid business growth
but challenges will
intensify.

6. © Informa 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. 2014 marks the Forum’s 18th edition of bringing together heads of compensation
& benefits, rewards, performance and HR strategy to discuss the discipline’s hottest topics and
pressing issues in the Middle East and beyond. See more at www.iirme.com/compensation
#TotalRewardsME
Compiled By
Sandrine Bardot
For almost 20 years, Sandrine took on positions with increasing responsibilities in Compensation &
Benefits in multinationals such as Microsoft, Apple, Airbus and Fiat, leading to global positions of Head
of Performance and Reward at Majid Al Futtaim (Dubai) then Mubadala (Abu Dhabi). She is now offering
specialised C&B training, consulting and keynote speaking services throughout the GCC and Asia. As part
of her outreach to educate the HR community on these topics, she authors a blog, Compensation Insider,
with over 250 articles published to date. See more at www.compensationinsider.com
2014 FORUM SPONSORS
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About the report
We would like to thank all the compensation professionals who took part in this edition of the
survey and helped to reach a realistic glimpse of the priorities and challenges they face across
the region.
This report cannot be considered as professional advice as it only aims to give an overview of
some complex contextual issues.
160 companies from the GCC participated in this anonymous survey. Respondent were from the
UAE, Saudi Arabia, Oman, Kuwait, Qatar and Bahrain.