Obviously, in the region, we are all aware of these differences, even if we rarely mention them.
According to the annual Gulf Business salary survey,
In the UAE, a Western expat makes 12.6 per cent more than an Arab expat and 40.5 per cent more than an Asian expat, while an Arab expat gets paid 24.7 per cent more than an Asian expat. (…) The starkest salary differential between an Asian and Western expat (which translates into the highest to lowest range) is in the UAE (40.5 per cent) and then Saudi Arabia (36.2 per cent).
Talk about an elephant in the room !
Meanwhile, Hay also performed their annual compensation survey. It covers almost 237,000 employees in the UAE, mainly working in the private sector (532 companies, 16 industries). Their report
finds that UAE nationals are paid an average 44% premium above the market (…but…) expatriates from emerging markets like China, Korea and India are starting to demand higher packages, particularly for skilled and technical roles. With close to 10% pay increases in their home markets in 2011, and again in 2012, they are weighing up the benefits of staying or going.
And the situation of stark salary differences by nationality is very similar in the other GCC countries.
Now, why am I mentioning this ?
Many years ago, in my first expat position, I was asked to revise salary ranges in our SEMEA region. At the time (1999), the Middle East HR manager gave me the salary structure for the Dubai office. He sent me 3 sets of quite differentiated salary ranges, and I remember thinking : “How nice of him to show me how salary structures have evolved over the past few years !”.
Then, I looked closer, and much to my dismay, found out that these ranges were all actually the current ones, just different : Westerners with the highest one, then Arabs, then Asians. Salary or other discrimination based on ethnicity is simply illegal in France so this was beyond my comprehension. I was in shock.
One of my first actions as the newly appointed C&B Manager, was therefore to let go of these structures and replace them by a single one. My international company would not accept such blatant differentiation !
Now, let’s put this back in context. In 1999, even though it was starting to fade away, it was not uncommon for companies, especially local and regional ones, to have multiple salary ranges based on “nationality” (understood as a broad region of origin).
Nowadays,the practice has almost disappeared : salary ranges are not based on nationality any longer. Yet statistics prove that in reality, we continue to pay much different salaries to our employees and new hires, based in part on their origins. It may not be a conscious decision, but it still happens, for a variety of reasons :
- lower or higher current salary of the expat candidate in their home country or in their current role in the GCC – meaning that the offer, even if increased by a nice percentage compared to current salary, will still reflect origins (I have yet to hear of a company having a policy of offering “maximum 10% more to a Westerner, 15% to an Arab and 20% to an Asian candidate for the same role”)
- possibility to indicate desired nationality in the job advertisement, which means candidates will come with relatively similar salary expectations, and the company has a better grasp of how much to budget for the role
- at times, existence of clusters of nationalities for certain types of jobs in a company. For example, the accountants may be mostly Levant Arabs, Indians or Philippinos.
Once he/she has entered the company with a certain package, given the way salary increases are handled, it will take a very long time for an employee to catch up compared to peers in similar roles coming from a more “expensive” region.
And so, the differences, even though they may be reducing a little over time, remain largely unchanged. Same as for the pay gap between men and women in similar roles in the western world !… Or, as it turns out, for the tension between local Nationals in some African countries and the Chinese expats that are settling there more and more….
So my question is : as HR and Compensation professionals, what are we going to do about it ? Do we want to do something about it ?
Or do we believe that, to some extent, it is normal that nationality could influence packages in a labour market mostly driven by short-to-mid term expats ? That, to some extent, even if packages may be lower for certain nationalities, they still earn significantly more in the GCC than they would back home, and are therefore able to save a good portion of their income and support themselves and their relatives in their home country ?
At the same time, it does not make sense financially to offer a huge salary increase to an employee or a candidate simply based on their nationality (for example, offering XX Dirhams for the job may mean doubling the salary of an Asian candidate vs offering “only” 10% more than their current pay for a Westerner – and it is a useless spending of money for the company in the former case, as the Asian candidate would surely be happy with a lower pay). An increase based on percentage keeps everyone happy (relatively) and helps control costs in case the candidate comes from a lower cost region.
In my opinion, there is no clear-cut answer to that question.
One thing we can do is perform statistical analyses to spot potential internal equity issues in our company, and trying to identify the main reasons for these through regression analyses. If nationality plays a significant role, then, at the individual level, for your highest performers, you can do special salary increases or adjustments in order to absorb as much of the inequity as possible and retain these high-value employees, no matter their passport.
To my fellow GCC HR pros : are there specific tactics that you use to tackle this situation ? Do you try to tackle it at all, or do you think this is a non-problem ?
Related posts :
- Remuneration, engagement and the GCC employee
- Why the big pay gap between managers on the same grade ?
- An interpretation of Seth Godin’s “The End of Should”
- Understanding R-square value in compensation analysis
- The challenges of emiratisation in the private vs semi-government sectors