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Survey Report

Education allowances remain the most volatile in the Gulf

Has austerity truly started to pinch the purse strings, what does HR need to do?

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Beyond Data

April 26, 2018

For years the sands of the Gulf seems impervious to the austere world around, has this now changed?

Whilst money may not grow on trees it seems to come from sand, being pumped regularly from the sands to support jewels in the desert, with no income tax, high wages and consistent growth. For years the sands of the Gulf seems impervious to the austere world around where living cost and stagnant wages meant less movement of people between jobs and HR had to think even more outside of salaries.

Expatriates in the Gulf enjoy a life like few others around the world, allowances being the monetary key to unlocking many of the benefits of choosing work in this region. Our Gulf Cooperation Council Cash Allowances Survey plots the cost of these trends over the years. 2017 saw stagnant growth and a move by some organisations to consolidated allowances, with organisations waiting to see what new legislation did and how to respond to a low oil price leaving an economic limbo to reach growth heights of years before. 2018 seems yet another year where these are stagnant, however with a few differences when we go deeper into the data.

Is there still growth?

Salaries are expected to grow at around 4.8% in 2018, stronger growth when compared to Western Europe, however with inflation set to rise by the same amount any growth is wiped out by the growing cost of living. And it is in this cost of living where allowances filled that gap, covering the utility bills, accommodation, travel, and education. For most, these allowances they will remain stable just as the markets for accommodation are in the major cities. Education is where the volatility comes in.

An increase of 10% of companies are now insisting on a cap on the number of children to receive this allowance. In amounts paid Kuwait saw a 20% increase for certain employee categories. Muscat similar, 10% growth at highest levels, but a 20% growth at lowest career levels. Jeddah was stagnant, but 10% drop at General Manger level. Riyadh again was largely stagnant, but 20% drop at General Manager level, with Dubai/Abu Dhabi supporting a roughly 5% reduction across all levels and Sharjah/RAK—mostly stagnant. The market has become more volatile in these levels of allowances meaning more concentration for HR to work with the business to appropriately consider the strategy for paying these to the workforce and identifying those areas critical to retain.

Working with the business challenges and understanding them can help HR in this environment to show value, by helping the business understand the people priorities. No area is currently more interesting than the expat one, dealing with a seemingly growing exodus of employees from organisations as the costs of living rise to support countries in the rising need to raise revenue in a time of low oil price.

Education allowances in the wider market

In Saudi Arabia this has been driven by the new expat levy which requests a monthly payment for the expat and per dependant to the government. This fee is also set to double each year, driving some to vote with their feet, and organisations needing to try to meet the cost in a market where business has slowed.

For education this has resulted in a market dilemma for some schools, less children in the region with less allowances available to those who are staying, coupled with austerity, leading many bar the top few to results their fees, becoming more competitive to try to retain or attract new children to these schools. For some this will help, as rising inflation, volatile or reducing allowances for education, and more school places may help to keep expat families in the country. However for the short term HR may be dealing with an expat workforce which is struggling with those costs, but no easy way to retain them with cash, as budgets are held, and recruitment frozen. All a part of the market not growing as it once did.

What does this mean for HR?

HR remains a key player in these situations, and it is time for professionals to help to work with the business in identifying areas where employees can perhaps be supported and retained through softer non hard dollar strategy. Professional development for junior levels and guiding those high performers to vacated senior roles, for perhaps a lower business cost, can retain staff and train them within the organisation, without high recruitment costs.

Moving some senior roles to remote working, in countries more cost effective to the business may also support and retain the skills and knowledge of the expats, but without the large costs associated with upkeep in country. There is also the local workforce, who, whilst dealing with some aspects in the rise in living costs do not have the allowances of the expat market, unlocking potential here is also an area for HR to consider as organisation demographics change.

Of course the central component to this is data, understanding the market pressures, costs, paid values and the movement in both salary and allowances across the organisation. Having the latest insights allows for you to stay current in volatile times, putting together the right advice to provide your business partners when they need it to make decisions. Especially for education at the moment where business seem to be most focused on. How these changes ripple across the region is yet to be seen, but they are being felt acutely as the market for expats experiences further volatility.

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