Is this the biggest HR challenge in the GCC?

Is this the biggest HR challenge in the GCC

One of my recent subscribers wrote to me :

“I think the biggest challenge for any one handling HR in the GCC would be Total Rewards equity. Convincing people that they are paid fairly and equitably by any company seems to be an impossible task to achieve. Nationals keep wanting to be promoted despite their qualifications, or lack of it. Expats coming from lower paying markets want to be paid the same as those coming from higher paying markets. Add to the lot, everyone who is paid highly in their home country come to the GCC expecting to be paid a lot more than they would anywhere else regardless of cost of living, etc….”

I agree. This different treatment regarding total pay based not just on the job level and jobholder’s skills is one of the most fundamental challenges in the GCC. I actually wrote a post dedicated to this question of how to pay expats : purely based on the job, or also taking into account where they come from ? (Here it is if you are interested).

All expats around the world are motivated by the hope of earning more than in their home country. It is actually the main motivation for most of the people who decide to leave their country, family and friends.

If income-related hope wasn’t there, we’d only see a very small expat population : those seeking the thrill of a new culture or challenge (so essentially very young people, or those towards the end of their career), and those trying to escape horrendous conditions at home such as war, famine or severe economic depression (so generally lower skilled people as these are often the first victims in those desperate conditions).

“More money than back home” is a reward for the risk-taking and the impact of separation from loved ones and a familiar environment.

Now, in all fairness, maybe the dream of expats from lower paying markets is to be paid the same as those coming from higher paying markets, but in all my years of C&B in the Middle East and Africa region, not once have I heard anyone ask for an increase or trying to negotiate a better package upon hire, using this argument. Probably because everyone knows that salary negotiation is based on the individual and his/her ability to perform and add value to the company, not on some generic macro-economic request.

And to be honest, on a personal level, despite having grand principles of pay being based on merit and not on country of origin, I also don’t believe that it makes any sense to pay someone a salary that allows them to send back home 10 times a local (home country) manager’s pay every month, which is what would happen if we paid the people from lower-pay home countries the same levels as we pay for higher-pay countries. That would not be equitable either, would it ?

Also, let’s consider macro-economics. The economies of the GCC countries could not be competitive and sustain to pay everyone on the same high level. It would dramatically increase cost of production. With so many multinational organisations having moved here because of a cost advantage compared to their home economies, it would make a lot less sense for them to stay in the region if their cost of production surged to similar levels as back home. And then, if they decide it doesn’t make sense for them to be here, then where would all the job opportunities for expats go ? GCC countries would still be natural-resources rich, but their real-life economy would not grow that much and require us all and in the end this would result in lost opportunities for expats at all levels.

Finally, regarding Nationals. Yes, it is true that oftentimes they (especially the younger ones) want promotions very quickly, and they don’t always seem to appreciate that promotion = bigger job = more responsibilities = more skills needed.

However, when an organisation is dedicated to talent management, and focuses on educating its employees on the concepts of performance and contribution, of equity, of transparent feedback and of “real” growth through the acquisition of skills and experience, then this pressure comes down. It is also mostly felt, I think, in semi-government organisations, where there are large amounts of Nationals and some HR practices that are more aligned to the private sector than the pure government organisations. With an official rate of less than 2% Nationals in the private sector in the UAE, I am pretty sure that private organisations can manage these individual situations relatively easily :-).

All in all, the GCC countries are in a very unique position of having such a prominent portion of their residents being non-citizens. It’s a challenge frustrating at times, but also what makes our lives as HR and Compensation pros so stimulating in the region 🙂

So, what do you think is the biggest HR challenge in the GCC ? Please share your views in the comments section !

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Comments

  1. Abdullah Ahmed says:

    Ma’am, thanks for addressing this !
    This indeed is the biggest problem. Making the expats at different levels feel that they are paid fairly.
    There’s another problem, as is the case of employees. There are also 2 categories of employers, 1 is the huge MNCs and O&G companies which pay great salaries and then there is the majority, the mid sized Organizations run by expats (mostly) which pay much less. I think this adds to the imbalance and to the trend in the region.
    Like you say, with the expat population being so high, it will be an ongoing issue and at a micro level has to be dealt with carefully by companies.

    1 other problem I feel is the availability of talented people in the region. Problem becomes bigger with visa allocations and restrictions.

    • I agree Abdullah, industry also plays a big role with massive pay differentials between the O&G and Financial Services industries that pay high-end salaries for example, and other industries such as manufacturing or hospitality, which are much more frugal in terms of pay.
      This difference based on industry exists everywhere in the world, but it is probably made bigger in the GCC, where there are more immigrants (as % of the total population) than in other places in the world – and therefore the pay differentials become even more visible.
      Thanks for commenting !
      Sandrine

  2. Aya Farah says:

    Well said. When I’ve decided to go back to school many people have told me that I was a local and didn’t need to give myself a headache since my promotion was granted any ways. I didn’t listen, I’ve changed my life’s routine, prepared my self emotionally, and finally took the bull by the horns. I don’t like to ask, I have to deserve, earn, and celebrate my success with my beloved ones. One day I will be speaking out to other nationals, telling them about my own experience, I’m going to make a change.

  3. I just read an article from Mercer that more and more organizations began to use “local plus” to compensate expats on top of salary similar to that of local talents, ranging from extra medical benefits, spouse education, housing, transportation, tax service, etc.

    I think this makes sense. For one thing, a similar level of salary to local talents’ could help maintain expat’s standard of living in that country (relatively, of course). While those “pluses” could compensate for their extra efforts and risk taking to some extend. Besides, I also believe that being sent to another country to work on a project or support the organization’s expansion is a reward itself: it usually can develop one’s skill in a faster and more effective way. Usually those expats are considered high-pos and the expat experience will help them move to the next level of career development.

    So, I think it’s a good deal for those expats. However, the length of the “plus” is also a very important factor to be considered, as it also brings extra costs to the organization. That should be carefully considered by HR and clearly communicated with the expats.

    I only consider temporary expats. For those who are permanent transfer, I don’t know how to deal with this situation appropriately. Perhaps, for those coming from high pay level market, organizations could give some stocks or long-term incentives on top of salary? So far I’m not sure :-D.

    These ideas are purely based on what I have learned from the classroom and the reading I did. I don’t much working experience in compensation and benefits, though I am currently actively searching for such a career opportunity. If anything is too one-sided or does not make sense, feel free to correct me and share your idea with me!

    • Hi Ellie,
      Yes it is true that more and more companies are offering “local +” types of contracts to their international assignees, especially in the case of employees who ask for international mobility, and for Nationals returning back to their home country after working for many years in higer pay countries. This saves a lot of cost compared to traditional secondment appraoches with tax equalisation.
      In the GCC, the situation is different, with the vast majority of workers technically being on Local + : employment contract in the local country, with basic pay + allowances. Even the local Nationals are paid in this system ! This is because, except for citizens of countries with global income tax regime (mainly US citizens and green card holders), there is no income tax in the Gulf countries, and very limited, if any, social contributions – gross pay more or less equals net pay.
      The challenge mostly lies in the fact that society is largely organised in stratas that are loosely arranged around certain types of jobs being mostly occupied by people of certain geographic origins (for instance, blue collars mostly coming from the indian sub-continent, service workers such as in retail or F&B coming from the Philippines or (now emerging) some African countries, and senior roles largely being occupied by local Nationals and western expats). And even when they are doing the same jobs, depending on their country of origin, employees will often see marked pay differentials – hence the comment from my reader.
      Thanks for commenting Ellie and all the best for your job search !
      Sandrine

      • Thank you so much for sharing this background with me. It really is a different situation in GCC that I did not realize earlier. 🙂 I’m glad to learn something new!

  4. Hi Sandrine,

    Hope you are doing well! Great article indeed.

    I am completely in agreement with you that the beauty of our job is to get everyone together and try to make sense of what we do and how we do. I say everyone that “Middle east, specifically UAE is the place where the world intersects, with this intersection there comes additional challenge to manage compensation between different nationalities and ensure it is cost effective.”

    Firstly, even compring compensation practices to other part of the world with less expats is unfair and unrealistic to the business. Yes in other part of the world we do think of internal parity but here it isn’t as easy as we have maximum polpulation as expats. More than saying it is C&B problem, i would call this the requirement of the country. Even Tendering process for major projects here includes specification from which part of world they need people from.

    I think rather than solving it, at this time of the hour, we need to accept this difference along with the usual industry and skill differences we already have. That is why we become special compared to all around the world.

    Although we do not create different salary ranges for different nationalisties but recruiting and hiring people from different countries set different expectation. The way i have witnessed it happening is through where the new recruiters will be placed within the range. We can also witness through the demographic of senior management team.

    But this is very complex to explain it to employees who do realise and queries HR. And to difficult to accept it as C&B representatives.

    Thank you!
    Pavithra

    • Very good points Pavithra ! The way you describe the situation by placing it in the context of country-specific requirements, can help us to manage on a day-to-day basis, even if, as you say it may be “difficult to accept as C&B representatives”.
      Thanks a lot for your contribution !
      Sandrine

  5. Omar Sabah says:

    Hi Sandrine,
    Like most of your readers, I do really value your practical insights into compensation related topics. This particular article was written a quite some time back, however, I thought it still makes sense to comment. The below quote from the subject article, sounds very discriminatory, although it may not have been intentional.
    “And to be honest, on a personal level, despite having grand principles of pay being based on merit and not on country of origin, I also don’t believe that it makes any sense to pay someone a salary that allows them to send back home 10 times a local (home country) manager’s pay every month, which is what would happen if we paid the people from lower-pay home countries the same levels as we pay for higher-pay countries. That would not be equitable either, would it ?”
    To me the above outlook is in strict contrast with “pay for merit”, “pay for performance”, “pay for competences” philosophy. I think as compensation professionals, it is important to ignore domicile biases and pay should be based on the “value” the job adds to the organization. Why should two individuals on the same job, with exact same deliverables, and assessed as 100% fit/competent for the job be paid differently, just because they come from two different regions? I am not posing a blind eye to the Middle East reality, but I believe C&B professionals have the responsibility to drive this message to the board.

    I apologise my first post had to be a bit negative, but I really do appreciate your blogs and they definitely add a lot of value. Thanks

    Omar

    • Dear Omar,

      I do see your point, and as you can see from this article as well as the other one I dedicated to pay and nationality, it is one that I personally struggle with – and a lot of my clients too. It did not write anything with a view to offend anyone.

      I do agree that pay should be based on performance and merit. But the reality is that “previous pay” also has a role to play. It is very rare for anyone to be hired in a role similar to their previous one (though hopefully now at a more senior level), without the previous pay level to be taken into consideration. When someone is coming from a Western country, their home pay level is taken into account when offering them a package to move to the GCC.

      You will surely admit that there wouldn’t be much of an economic incentive for someone to quit their current job, leave their home country, family and friends, take the risk of not fitting into the new country culture or company, all to be paid less than what they were making back home, right ?

      When immigration started on a grand scale in the GCC, the world was a simpler place. Companies would hire almost exclusively westerners or western-educated Arabs or Asians for managerial roles. Production roles would mostly fall to lower educated, asian sub-continent individuals. Although things are less clear-cut nowadays, in the GCC, we still see some broad division of labour based on region of origin.

      What is happening nowadays is that managerial roles are less exclusively reserved to westerners or western-educated Arabs and Asians. These are now seen as “expensive”, and companies are sometimes starting to replace them with candidates that are not necessarily western-educated nor have already worked in Europe/US. By hiring, say, and Egyptian or a Jordanian to replace a British or a French, they can pay that person less than the westerner, while still making them very happy and able to sustain savings and their family back home.

      It wouldn’t make sense for the company to pay the Egyptian or Jordanian the same as they used to pay the European, because their home country salary vastly differs from that of a European. If that was a company-driven international relocation as per the company global mobility policy, no-one would even blink about that principle when the home-to-host country calculations are done and come up with a much lower package for the Egyptian or Jordanian international assignee compared to the French or British…

      As I said, as a C&B professional, I do believe in the principle of pay for performance. But this principle was developed in economies where the vast majority of employees are locals/natives. It was not developed in countries where people come from vastly different cultures, education levels, organisational and managerial ways of working.

      As a C&B professional, I also believe in supporting the business in making pay offers that are sustainable to the company while being fair to the employees. As long as immigration also plays a role, home country will play an additional role in the pay level in the host country and we will continue to see a transition period where senior roles are more open to a more diversified candidate pool – with the related diversified pay levels too.

      As the economic redistribution continues, pay levels for senior roles will probably fall down a little (adapting to the new majority of candidates coming from non-western countries) and at the same time become more unified as the westerners will become more and more rare in the workforce. At that point, pure pay-for-performance may become the main/only driver to set pay levels. But who knows ? Maybe at that time companies will look for cheaper executives and will start to bring in candidates from, say, Africa or South Asia for these roles… and the debate will start again : why not pay the Vietnamese executive the same level as the Jordanian one ? 🙂

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