Middle East & the global economy
Despite the downturn in global economic growth, the Middle East is proving resilient. The ICAEW anticipates that the Middle East (led by the Gulf Corporation Council countries: United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar & Kuwait) will continue outperforming the global economy up to 2015, with GDP growth forecast at 3.5% for this year. So how does this influence the HR agenda?
In 2012, many companies in Gulf Corporation Council countries rationalised their rewards offering for new hires, training and talent management programmes. We believe the main talent and rewards themes for companies operating in the GCC in 2013 are as follows.
Cash comes into focus
Continued growth in the region will fuel demand for skills and trigger a new wave of first-time hires from across the world.
Pay levels, tax and expat allowances will continue to be significant in attracting employees to the region. Rising living costs will reawaken cash-related topics that have been low on HR’s agenda in the past 2-3 years. What is the appropriate level of housing allowance?
How will school allowance policies change? Are single employees treated fairly compared to their married peers? Multinationals new to the region will continue to struggle to justify the regional practices of differentiated pay by origin. Is it discriminatory or a fair premium set by the market that individuals from lower paying countries are paid less than peers from high paying countries?
Value beyond salary
Total rewards and its optimization will gain momentum especially with well established organizations and employees who have worked in the GCC for over five years. Employers increasingly recognize that effective engagement and retention is not solely dependent on salary.
The concept of total rewards will play an increasingly significant role in the employee value proposition and will be critical in increasing foreign employees’ tenure. Workers will begin to look beyond ‘cashing in’ to building a long-term career in the region and internationally.
Our research* shows that companies with a strategic approach to the employee value proposition and total rewards face fewer challenges attracting and retaining key employees, have higher levels of staff engagement, and are more likely to achieve superior financial performance.
Recruiting national talent
Dedicated programs for local nationals will increase in priority as governments look to implement new legislation to reduce local unemployment.
Fulfilling employment quotas, building the right image and PR, and workforce sustainability will continue to be the main drivers behind such programs. The most important initiatives will include leadership development programs, succession planning schemes and tailored attraction/retention ‘allowances’. Companies that already conduct such programs will question more rigorously what added value these bring and how to develop and retain future leaders.
Workforce planning & scrutinised recruitment
Large and/or expanding organizations will become more sophisticated in workforce planning and developing strategies to address skills shortages.
This will also address regional labor market imbalances including the anticipated construction boom in Qatar, or foreign labor restrictions in the Kingdom of Saudi Arabia (KSA). Sharp salary increases from 2005-2008 has taught organizations to expand their recruitment campaigns beyond the GCC to include Asia and Europe. This trend will continue in 2013 but more vigor will be exercised to ensure that levels of pay match candidates’ skills and abilities.
Performance & retention incentives
Organizations will again attempt to implement pay for performance programs, especially for revenue generating roles where the link between performance and rewards is clearer and easier to measure. For non-commercial and support roles, most companies will continue to struggle with cultural barriers to implementing an effective performance management system, which in turn will affect employees’ perception of the link between performance and pay.
Businesses with ambitious growth plans will implement long-term programs to promote pay for performance and to ensure they retain their most critical staff in the next three to five years. Depending on the country and type of organization, these themes will play a more or less prominent role. Other likely topics include: HR organization design, HR service delivery, workforce nationalization, increasing the number of women and on company boards, and international pension plans for tenured expats in the region. Emerging from the economic challenges of recent years and looking towards a stronger growth period, it’s only natural for businesses to take a fresh look at how their resources are used, including their most valuable asset – people.
The year 2013 promises to be a great one for the HR function in the GCC, where the prospect of growth will provide an increased opportunity for HR to become an ever more important business partner.
*Towers Watson 2012 Global Talent Management & Reward Study