2023 Salary Guide: How is inflation affecting employment in the UAE?

By Gareth El Mettouri on 31st October 2022

How is inflation affecting employment in the UAE?

While the UAE has traditionally experienced lower levels of inflation, but as the economy becomes more globally connected it is more affected by economic instability elsewhere.

There are many benefits to a more connected economy, but with inflation in both the UK and USA increasing to around nine per cent, the cost of living in Dubai and Abu Dhabi is becoming uncomfortable for many professionals.

As salaries have remained stable but food prices are up 8.8 per cent year-on-year and the cost of petrol has increased by 56 per cent since the start of the 2022, consumers are facing a crunch, which is likely to leave many looking for new roles with higher salaries.

While movement between roles is common in the UAE, the recruitment market has been difficult since the pandemic when many expats returned to their home countries. Since then, there has been a shortage of talent for available roles – and the situation looks set to continue well into 2023.

More than half (52%) of employees have noticed an increase in colleagues leaving the business, and this is unlikely to slow down as 46 per cent of employees are considering a change in 2023, which means business leaders should work hard to retain existing workers to avoid issues down the line.

It may not be a business’ responsibility to help employees with the rising cost of living, but according to our 2023 Salary Guide, many are taking action to make their remuneration packages work harder for their teams – and that will be remembered by employees, making them more likely to remain in their current roles.

How are businesses adjusting to help employees?

Each business is different, and each is taking a different approach to amending their remuneration packages – but overall, 84 per cent of UAE employees say their company is adapting to help them with the cost of living, in one way or another.

Some businesses are paying extra bonuses or one-off stipends, designed to ease the immediate burdens faced by employees, which also enhance employee loyalty and encourage them to stay within the business, at least in the short-term.

Others are making longer term adjustments to allowances for healthcare and housing – costs that are, and will likely continue to be, increasing and putting strain on employees’ personal finances. Three in 10 (31%) employees say that their employer has already increased regular allowances.

To make it possible to offer these increases to employees, business leaders are having to make cuts elsewhere. Many are looking to reduce overheads, and family allowances are one of the casualties. More organisations are offering single status benefits rather than family benefits, which reduces the costs associated with education and healthcare. However, this approach does limit the talent pool and many families will opt not to relocate on these terms.

Empowering employees to make their own decisions

Allowances, benefits and salary increases are not the only way businesses are looking to support their employees. Many are seeking to empower the workforce, allowing them to make their own decisions, and make changes based on what they need to feel comfortable.

More than a quarter (27%) of employees say that their business has introduced schemes that allow them to sell back annual leave days, while others are introducing new salary sacrifice schemes that provide additional support elsewhere.

While many employers are unwilling and unable to increase salaries and benefits, business leaders are keen to make sure that their teams have the skills they need to manage their money effectively. One in five (18%) employees say that their organisation has arranged personal finance training for them, which will help them to cope with the pressures the rising cost of living is placing on their shoulders.

The long-term impacts of the rising cost of living

Businesses are also faced with rising costs, particularly with the impeding introduction of the UAE’s first corporation tax, so they cannot continue to increase salaries, bonuses and allowances without impacting the stability of the company and putting roles at risk.

With more than half (52%) of employees already saying it us becoming harder to afford their monthly costs, the situation could reach breaking point if high rates of inflation continue. 47 per cent of expats currently living in the UAE say they would seriously consider moving back to their home country due to the rising cost of living.

Where previously, the low-tax environment and high salaries in comparison with the cost of living made the UAE an attractive place to live for many expats, the region is losing its competitive edge. Considering the astonishing increases in salaries we are witnessing in the UK and USA, UAE business leaders should do what they can to retain their workers.

It goes without saying that if more expats were to return home, it would put strain on businesses and on the employees who were left to pick up their workloads, which in turn is likely to create more movement. Improving work/life balance and increasing salaries will be the primary drivers for job candidates, and businesses may need to adjust their expectations accordingly.

With exciting growth in the tech sector, strength of the oil sector in the region and the 2022 World Cup in Qatar bringing fresh tourism to the region, 2023 has the potential to be a great year for the flourishing UAE economy. However, businesses should keep an eye on the recruitment market, as the impact of other pressures could seriously hold back businesses from achieving their goals.


To find out more about the latest benefits and salary trends affecting businesses and employees in the UAE, as well as average starting salaries for professional services roles across the finance and accounting, financial services, technology, HR and legal sectors, check out our 2023 Salary Guide now.

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