Justin Hampton:
Well, thank you so much, everybody. I am really excited as we are kicking off Warren and my compensation around the world tour. And we are incredibly fortunate to be honoring our first guest, who is Sandrine Bardot, who is a compensation consultant and expert around all things compensation in the Gulf states and the United Arab Emirates in Dubai. So we’re really looking forward to kicking this off. I’ll let everyone else do their introductions. My name is Justin Hampton. I’m the founder of the Compensation Tool, a market pricing and salary survey management tool. And I’m joined by Warren, who I will let introduce himself.
Warren Heaps:
Hi everyone. I’m Warren Heaps. I’m a partner with Birches Group in New York. Currently sitting in my son’s bedroom in New Jersey. We’re an HR consultancy, we conduct salary surveys in about 160 countries in the developing world. And we also have a community platform for job evaluation, skills assessment and performance management. I’m really excited to be working with Justin on this series. And extremely grateful to Sandrine Bardot, who is the principal of the Bardot Group, who is going to introduce herself and take us through the next 40 minutes or so. We will have time at the end for questions. In the meantime, if questions come up, you can put them in the chat. Also, as I mentioned earlier, we are recording this session, so in case you need to leave early, you’ll be able to catch the rest of it on recording. Over to you, Sandrine.
Sandrine Bardot:
Okay. Well, thank you so much Warren and Justin, for having me, and I’m really delighted to be your first guest. So my name is Sandrine Bardot, I’m French. I live in Dubai since 2007. I think like most expats in this part of the world, I intended to stay for a few years, and those years have ballooned to over a decade. And then now I don’t want to leave that part of the world and I’m delighted to be here. I had a career in the corporate world for 20 years with the big corporations, and then I set up my company, which is doing consulting and training, design and delivery on topics related to performance and reward.
Sandrine Bardot:
So today I’m going to be talking to you about compensation and benefits, some of the major things that you need to know about how [inaudible 00:02:46] is dealt with in the GCC and specifically in Dubai in the UAE. So the GCC is the Gulf Corporation Council. It’s a political and economic alliance of countries, Saudi Arabia, UAE, Qatar, Oman, Kuwait, and Bahrain, and who share similar approaches to how packages are structured and how the population is based in their countries. So I’ll give you a bit of background and then we’ll talk about allowances, salaries, benefits and the impact of COVID on the region.
Sandrine Bardot:
So in terms of background, I think one of the things that a lot of people don’t really realize is that just those six small countries hosts 10% of the global migrant population. So Saudi Arabia is a third on a global level. UAE is number six, which is a very, very interesting if you think that the overall population is a bit less than 10 million, and there’s about one million of the Emiratis in the whole population. So the nationals except in Saudi Arabia, tend to be the minority in their own country. And the vast majority of people in the GCC countries come from the Indian sub-continent. So India, Pakistan, Bangladesh, Nepal, Sri Lanka. And then we have a relatively large representation of people from the Philippines and then nearer Arab countries, such as Egypt, makeup a bigger portion of the population.
Sandrine Bardot:
So diversity, it’s not even a concept here because the diversity is everywhere. We don’t even need to think about it, we see it all the time. And that has a huge impact on many things in the country. So, first of all, the main concept is that people need to understand when we talk of an expat, an expat is not what most companies use as a vocabulary to talk about their international assignees, people that they willingly send from one country to another for a period of two to five years. An expat is any person who is not a national of the country in the GCC. So any person who’s not Emirati in the UAE, not Saudi in Saudi Arabia and so on.
Sandrine Bardot:
So it’s not linked to the type of contract because the vast, vast majority of expats are on a local contract, they’re not on a secondment contract or detachment with the social security back in their home country, they’re hired locally and they have a local contract. So what we see is that because those are Islamic countries, we have a number of restrictions. The whole system is based on a sponsoring. You need to be sponsored typically either by an employer or by a family member to be able to stay in the country. And because those are Islamic countries, there are a number of things which are not allowed. Like if you’re not married, you cannot bring your girlfriend with you and you have to have-
Warren Heaps:
Sandrine.
Sandrine Bardot:
Yes.
Warren Heaps:
I think we’re having a sound problem with some folks.
Sandrine Bardot:
Okay.
Warren Heaps:
If you could just pause for one second.
Sandrine Bardot:
Yes. Sure.
Warren Heaps:
Okay. It seems that some people can hear it and some people can’t. Can everybody hear… If you’re still having trouble with the sound, can you put something in the chat?
Sandrine Bardot:
Yes. I’m going to just say a few words for people to test.
Warren Heaps:
Okay. I think most people are saying they can, a few are saying they can’t. I’m not sure how to help the people who can’t.
Sandrine Bardot:
No. Me neither. I can speak louder but that’s probably not going to help.
Warren Heaps:
Okay. Sorry to interrupt. I guess-
Sandrine Bardot:
No worries. No worries.
Warren Heaps:
I guess it’s probably a local problem for those participants. So I’m sorry, you can’t hear, but if worse comes to worst, you can listen to the recording after.
Sandrine Bardot:
Okay. So basically the nationals represent a small portion of the total workforce, and most of them, the vast majority of them, work for the government either directly in the government or in semi-government entities, which are companies that are financed by public money, but behave like a private organizations. In the private sector, in the UAE, you have less than 1% of the workforce, which is made of nationals and the targets of the country is 6%, which we are far from getting here for a whole host of reasons. There is tradition, there is a perception that government jobs are better. There is the fact that for a long time, pensions in the private sector for the nationals were lower than those of the government. The salaries were higher in the government as well. So it’s going to take time to get the nationals to work in the private sector.
Sandrine Bardot:
So generally speaking, it’s a system where there is very little of everything. So there’s no social security, there’s no income tax except for U.S. citizens who are taxed on their global income, but that’s a U.S. rule, it’s not a GCC rule. There are no trade unions. There’s a little bit of negotiation allowed in Kuwait, but that’s an exception to the rule. And the income levels are very often influenced by the nationality of the incumbents. So for the same type of job, a Westerner would be paid more than a regional Arab person, who would be paid more than a person of Asian origins, typically, not always, but in most cases. For the last few years, we’ve had VAT and it’s been set at 5% except for Saudi, which moved to 15% in a very rapid move in 2020.
Sandrine Bardot:
And at the moment in the UAE, there’s a debate to extend the age of retirement from 60 to 65, so that they can continue to attract qualified executives to train the young generations. One of the characteristics of the demographics in this part of the world is that the population overall is very young. The locals typically are around 65% of the local population below the age of 25 years old. And in the ex-pat population, most people are below the age of 44, which would technically put me in the ancient population in the UAE. So it’s a very young population, very much in need often of mentoring and development.
Justin Hampton:
Sandrine, a question for you.
Sandrine Bardot:
Sure. Sure.
Justin Hampton:
So you’ve mentioned that the pay may vary based on someone’s nationality or where they come from.
Sandrine Bardot:
Yes.
Justin Hampton:
Is that a cultural thing, or is that typically… Is that a really common practice that we see is based on market competitiveness?
Sandrine Bardot:
I think it’s a mix of the historic… How do you call it? Something which stays from the past. Historically, you have some populations that were coming that were more doing certain types of jobs. So you tend to have certain types of positions, like for example, in the retail, you see a lot of Filipinos, for example. You would see lots of people from the Asian continent such as from Nepal and Bangladesh and Pakistan going into labor positions. And you tend to find the Westerners more in the managerial or highly skilled types of positions. So it kind of reflected from a historical point of view. And I think there’s an element of then habit and culture that came into that.
Sandrine Bardot:
So there’s not a law, and a lot of companies have gotten away from what was happening when I first started working on this region, which a lot of companies had three separate salary structures. One for Westerners, one for Arabs, and one for Asians or others, as they called it. And from the same grade, depending on your, what we call nationality in respect of the [inaudible 00:11:52] so more like region of origin, there would be a different pay structure. Nowadays, this has completely disappeared. There’s only a single pay structure for the whole organization, but because you tend to find people cluster into certain types of jobs by certain types of nationalities, that kind of still is difficult to change that differential in pay.
Justin Hampton:
That’s fascinating. Thank you.
Sandrine Bardot:
Yes. So if you look… Sorry. I just wanted to make a small point. So if you look at the map here, you can see the UAE, this small country here, the orange one, it packs quite a bit of a punch, but when you look at the position and you can understand maybe some of the geopolitics, I’m not going to get into too much, but you see it’s kind of sandwiched between Saudi and Iran. So a lot of decisions are driven by geopolitical considerations in this part of the work. I’m just not going to expand too much on that. Otherwise, we’re going to be there to the end of time.
Sandrine Bardot:
So here in this graph, you have a representation of packages. The graph is a bit old, but overall, it has not really changed. What you see is that the two main components of pay, irrespective of the level, so here, the first column is for clerical people. Then you have the professionals, management and executives. You see that there are two main components of pay, and those are basic pay and allowances. So everybody in the UAE is getting a pay package, which is made of a basic pay plus housing or accommodation, and then potentially some other allowances as well, such as transportation, furniture, mobile phone, and so on.
Sandrine Bardot:
In most cases, the split under the addition of both makes the mostly guaranteed cash. And the mostly guaranteed cash is typically split 60/40 between the basic pay and the allowances, sometimes 50/50, sometimes 40/60. But if an employee is going to challenge that distribution at the time of leaving the company, the courts would probably give them a 50/50 distribution for calculation of their end of service benefit and so on. So those are the two main components of pay.
Sandrine Bardot:
And then we have a small portion which is variable pay. You have, that’s the purple, then at the top, you see those other benefits. So the benefits are not a big part. And then you see a little bit of executive or longer term incentives are very, very rare. LTIs are not very prevalent in the region. They tend to be like only about 30% of publicly listed companies in the GCC offer a long-term incentive plan. So by comparison is about 40% in Europe and the U.S., and most of those offer a cash-based long-term incentive plans, not equity-based long-term incentive plans. They tend to be like three-year plans and typically with cliff vesting, so where they pay everything at the end of the period. And they’re also less aggressive in terms of target value compared to the compensation package and to the maximum as well.
Sandrine Bardot:
A number of reasons for that, in the past, there were laws that prevented any expat, any non-national, to own a stock in company. So obviously that did not help to have equity-based compensation. The other aspect is that for the non-public companies, the model in this part of the world tends to be a family-owned organizations that are in the second or third generation because those countries were formed in the early ’70s. So some entrepreneurial people created companies, and then their second generation inherited it. And now we’re in the third generation or about to get into the third generation. And they didn’t really want to give equity to executives, because they didn’t want to dilute their decision making ability by giving them the power to vote and so on. So that explains why LTIs are not really that frequent in the GCC. A lot of the organizations that offer LTI are the multinationals who have global plans like the big corporations, like General Electric or Microsoft, for example. But the locally-based organizations are much more rare to offer equity-based long-term incentives.
Warren Heaps:
Sandrine.
Sandrine Bardot:
Yes.
Warren Heaps:
A question from [Corolla 00:17:01] but also, I think it’s a question that Justin had yesterday during our rehearsal, is the fact that the base pay proportion of the package on a percentage basis seems to increase rather than decrease as the level goes up. Do you find that unusual?
Sandrine Bardot:
No, it’s not really that, is that the thinking, I think, behind it was that is the proportion of your guaranteed monthly pay, which is less focused on the basic pay and more on the allowances for the lower levels of employees, because the end of service benefit, which is supposed to be the equivalent of the pension scheme for expat is calculated by law on basic pay. So companies who would pay let’s say 10,000 dirhams per month would rather pay 4,000 and a half as basic pay, and 5,000 and a half as allowances because they wouldn’t have to calculate the end of service on the 5,000 and a half of allowances. So for the same but for an executive, because they want to give a better end of service. So there is more on the basic pay and less on the allowances. So it’s more of a rebalancing within the monthly guaranteed package, than an overall decision to give. It’s not based on market or anything like that. It’s really based on the statutes of the employee and the impact on their end of service benefit. I don’t know if that was clear?
Warren Heaps:
Yes, very clear. Thank you. And I want to mention one more thing. I see there are others who have posted some questions in the chat and we will try to get to as many of the questions as we can at the end.
Sandrine Bardot:
Okay. Okay, good. So in 2020, what we saw, the impact of COVID, we saw that a lot of employers were concerned about talent retention. There was a number of… The reaction to the crisis was very different from that of 2008/2009, I would say. I went through both based here in the UAE. So in 2008 financial crisis was actually the first crisis ever that actually hit the GCC countries, because I think that before, they were less woven into the global economy. So they had been kind of isolated from, let’s say the 2000 bubble and so on.
Sandrine Bardot:
And so in 2008, when the economy crisis happened, a lot of organizations, all of a sudden went straight and cut into their head count on a massive level. Many of them did not pay the end of service to their employees because they hadn’t put the money aside and so on. And the people were left stranded because at the time, there were regulations that if you didn’t have a new job within 30 days of not working for your current employer, you have to leave the country and go back to your home country or wherever you wanted in the world, but you had to leave the country. So it was very brutal.
Sandrine Bardot:
And I think companies and governments learned about it and learned lessons. And so in 2020 when COVID arrived, a lot of companies tried to put in place solutions before doing some layoffs for those who were badly affected. So they tried to say, “Okay, you’re going to have to take all your vacation, and we’re going to put you on reduced hours, or we’re going to try to cut on your salary before we go into layoffs.”
Sandrine Bardot:
So that was I think a big change compared to the previous crisis in 2008/2009. And of course, like the rest of the world, we saw that the reaction was very different based on the industry with, of course, the healthcare and the logistics and distribution going very strong because people were buying online and getting everything delivered to their home while obviously other industries like hospitality and tourism and retail were hit because of the stay-at-home workers and so on. So we saw a little bit of a shift in the most wanted benefits in 2021, because the remote working and the work-from-home policy was not at all one of the preferred benefits in the past. The childcare support has always been something which was highly valued.
Sandrine Bardot:
And another thing that people value a lot in this part of the world is getting support for training. And this comes… I think I’ve had managers when I was still in the corporate world in the UAE who told me, I’ve had a manager tell me, that he didn’t want to pay for any training for me to attend, because he said… He was an Emirati guy. He said to me, “We hire you because you have the skills. Why should I send you to any training? You’re supposed to have the skills already?” So that’s a kind of a bit of a short-sighted type of approach, but quite a common one.
Sandrine Bardot:
And I would say that a number of organizations have easily slashed into their training budgets because that’s an easy budget to catch when you’re having financial difficulties. So people tend to value that more at the moment, and of course, childcare support because situation was here the same as everywhere else in the world. Kids at home, parents having to work from home. And how do you handle all of that? So those were some of the changes that we saw were [inaudible 00:23:20] the impact of the COVID on what people want.
Sandrine Bardot:
Now in 2020, we saw a number of things that happened in the UAE, and I think that are worth mentioning. So in 2019 in September, there was the first Emirati in space and the first Arab man in space. And in 2021, there was a mission that was launched from the UAE and that reached Mars to study the weather. And especially the study, the dust storms, which is good in terms of cultural alignment with what’s happening in this part of the world. And I want to highlight that because I think a lot of times we tend to think of the GCC as being fully focused on the oil and gas industry, but actually there’s a major shift and especially in the UAE, to move away from that industry and diversify the economy. So we see a major push in tech.
Sandrine Bardot:
We saw also a move away from oil with the first nuclear energy power plant, which launched in August last year and also the largest solar farm in the world started to produce two gigawatts in July last year. And then already there are two mega solar parks in the UAE. We see also a cultural change with the signing of the Abraham Accords for peace with Israel in September 2020. Now, living in the UAE for a while, it was an open secret that there were interactions with Israel for many years. There were economic and I think other agreements or discussions that were taking place, but the fact that the Pope was invited to the UAE and visited the UAE back in 2000… I think it was ’18 or ’19.
Sandrine Bardot:
And in Abu Dhabi, they’re creating this new space, which will have a mosque, a church, and a synagogue on the same mass space. So just to show that at least the UAE has a typically a very pragmatic point of view and their approach to things and that they understand for example, from a technology point of view and so on that collaboration between the two countries is going to hopefully bring some good advances in terms of health tech, in terms of education tech, in terms of agriculture tech and so on. so I think that has to prevent some of those. And we have also seen a change with the introduction of the first defined contribution scheme for expats in the GCC which was introduced in the Dubai International Financial Center, which is an area of Dubai where they moved away from end of service benefit.
Sandrine Bardot:
I didn’t explain, but the end of service benefits is a defined benefit, it’s calculated on the final salary of the employee and anybody who has more than one year of service is eligible to it. And it’s 21 days of basic pay per a year of tenure for the first five years, and then 30 days from the fifth year onwards. So up to a maximum of two years of salary. So this has been changed and replaced by what they called an employee workplace savings plan, which is a defined contribution scheme where people can do additional voluntary contributions that were for the first time. The money is put in a separate account, in a fund by the employer. The big difference is that the end of service benefits as it is today, even though IAS 19 accounting standards were introduced back in 2016, I think, or ’18, ’16, most organizations do not follow those, which means that they don’t set aside the money to pay the end of service benefit to employees, and they use it as working capital.
Sandrine Bardot:
So in many cases, when companies go bankrupt in case of crisis, like 2009 crisis, or last year, many organizations did not have the money to pay the end of service to their employees. So the introduction of the workspace savings plan is an opportunity to at least ensure that the payments are segregated and hopefully that they’re invested and they grow and bring more value to the employees. And there are also some talks of putting in place, some regulations that a certain percentage of those funds need to be invested in the country, which would help also for the infrastructure and so on of the UAE. So that’s also one of the changes that took place in 2020.
Sandrine Bardot:
So COVID-wise, as of two weeks ago, we had about 1,500 new cases per day. The country is one of the most highly vaccinated spread percentage of population, there’s over 60% of the overall population that has received the vaccine. Over 50% are fully vaccinated, I’m one of them. But we’re vaccinated with a Chinese vaccine called Sinopharm where the UAE was actually one of the countries that participated in the trials for the phase three of that vaccine. So again, that’s another sign of the push on the health side from the UAE as a country.
Sandrine Bardot:
As I was saying, there was a lot of innovation that was induced by the pandemic. There was a laser technology that was developed to detect COVID. They developed a stem cell therapy. And the Sinopharm vaccine, the Chinese vaccine that the UAE participated in the clinical trials, they now have a commercial agreement, and they recently started commercial production of the vaccine in the UAE. And the contact tracing app is also now like a vaccine registry, the kind of passport which you need to have in order to prove that you have the vaccine, if you want to travel and so on. So I don’t know how that will integrate on a global basis because I think nobody’s there yet, but the tech has been developed very quickly and I have to say, works pretty well.
Sandrine Bardot:
So nevertheless, COVID had a big impact on the economy last year, and there was a number of things that compounded. So there was the pandemic obviously, but there was also the reduction in the price of oil, which has been going on now for a few years, and also regional conflicts, obviously Yemen and other areas. So the economy went down quite strongly, -6.6%, it’s projected to rebound to +1.5, 1.3% in 2021, and with a stronger growth in the non-oil part of the economy, hopefully in 2021. So we’ll see how that goes. But that’s what it’s a plan.
Sandrine Bardot:
And one of the things which is very different in the GCC countries compared to the more mature markets, let’s say like the West, is that for example, the price of rent shoots through the roof, or completely crashes depending on the economy. And those are like, for example, I’m French, as I was saying, in France, the price of rent tends to move a little bit, but the movements that we see in the GCC are much bigger. So like in the UAE, for example, we’ve seen a reduction in the price of rent of 15 to 20% compared to the previous year. So when I first arrived in 2007, I had to pay my full year of rent by one check in advance before I could move into the apartment, so it was a huge amount. And as we could see that the market was softening in terms of rental, they started to say, okay, two checks per year, and then it was like three checks per year. Now you can pay one check every two months, or even sometimes you can pay 12 checks. It’s done in checks because until recently there was a law, which said that if you, if a check was bounced, the person could go to jail. So that was a way for the landlords to ensure that they would really get paid.
Sandrine Bardot:
And what we see as well is that some landlords are offering to say, “Okay, I’m not going to reduce the price of my rent by more than 15%, but I’m letting you stay an extra two months free.” So their hope is that when you renew, you’re going to pay the full price for 12 months. And I did mention that we have allowances in the packages, and the most important allowance is the housing allowance. So in the past housing allowance and the cost of rent were very, very strongly correlated, and even 15 years ago, very often, you would receive the housing allowance, and as an employee you have to prove that you have spent that amount of money on rent in order to receive the money from the company so that you could make your first check.
Sandrine Bardot:
Now, companies have shifted, I don’t think it’s been a really conscious, philosophical decision and so on, but a lot of companies have shifted towards a model where they say, the price of labor is let’s say, 10,000 a month of which I need to pay let’s say 4,000 as a housing allowance per month. And so the movement of the housing allowance is not as strongly correlated to the movement of rent, as it used to be in the past. There has been also some movement over the past few years, some companies attempted to eliminate some allowances or create a single allowances that they called cost of living or something like that allowance, where they said, “No, we don’t want to be strongly correlated to housing costs, and then to the cost of transport or anything like that, we’re just doing one, and that’s how we are going to calculate.” But in reality, that didn’t quite work very well. So very few companies, less than 15% have a single allowance nowadays, and most companies still have separate allowances, but the movement is not as strong as it used to be a part down.
Sandrine Bardot:
Another thing that I’d like to also highlight is the education allowance. So in the past a lot of middle management and senior individual contributor positions were eligible to an education allowance, which was to pay to enroll the children below the age of 18 into the schools. Expats are not allowed to put their children in the national school system. And to be honest, I don’t think that anybody would want to put their kids because it’s not the best education system. So the Emiratis who earn enough money tend to put their kids into the private system as well. And the cost of education is very, very high, it’s a median $11,500 per child per year. It can be a lot more depending where the kids are and their age. And what we saw is because so many people lost their jobs and left, we saw that the number of re-enrollment dropped by 10 to 15% which also reflects the changing composition of the population, with so many people who left who left the UAE and the GCC in the last 12 months.
Sandrine Bardot:
Now, the education allowance, even though it’s called an allowance should never be considered as a cash element. It is a benefit because it’s typically a reimbursement upon proof that you have paid the school. It has a cap, it’s limited to three children in general, sometimes four, but most companies, three kids, and depends also on your grade, so the more senior you are, the higher education allowance tends to be. But even though it’s called allowance, it’s a benefit, it’s not a cash allowance. So it’s never counted if you participate to a salary survey. In the total monthly guaranteed package or guaranteed cash, whatever the survey calls it, the education allowance is never included. You will have the housing, the transportation, the furniture, the mobile phone, other allowances, but education is separate.
Sandrine Bardot:
Flight tickets are also typically separate because initially companies were providing actually one flight ticket by law. It’s one return ticket every two years, that’s what happens for most labor and lower skilled type of employees. For whites colors, it tends to be an annual payment of an allowance, which was loosely calculated on IATA rates in the past, and it’s just even in cash to people for them to use however they want, and still called a ticket, even though it’s not really a ticket.
Sandrine Bardot:
One of the other things that we saw is a massive transition to smart payments. So as much as the UAE is technologically driven, until last year there was online delivery, you could buy for example, on Amazon and so on, but the most common way of paying was cash on delivery. And it has almost completely disappeared. People have moved directly into having the app on the phone to make the payment directly. So like I’ve almost not used my debit card in the last year, it’s all paid directly with the Samsung Pay on the phone. So there was a massive, massive change of approach to that. And I think that what we see is that a number of things I’m going to see as well from a compensation point of view, because I’ve seen new technology being proposed like instant payments, for example, if you’re in day 10 of the month you can receive up to 10/30 years of your monthly salary with an instant payment app or things like that. So we see that this is going to come. I think it comes also from this kind of change of mentality towards online payments. And as I was saying, we’re moving more and more towards the knowledge economy in the region.
Warren Heaps:
Sandrine, I just want to let you know, we have about five more minutes before we’re going to open it up for questions.
Sandrine Bardot:
Yes. Okay. Good. No problem. So what we did have, as I was saying, in the labor market government has learned, and employees and companies have learned as well from the previous crisis, so there was a process which was put in place. Before companies were able to lay off employees, they had to put people on unpaid leave, they had to offer salary cuts for a period of three months, they had to put furloughs, which was like, you’re still an employee, but we don’t pay you anymore. They had to ensure that accommodation was still provided to people, and also visa extension. So government said, if you have lost your job, we know that, especially when the borders were closed, that 30 day rule has not disappeared until the end of 2020, you can stay in the country and look for a job, and you will not be paying the fines because there was a daily fine if you were overstaying your visa.
Sandrine Bardot:
Culturally, I think for the first time, what we’ve seen is that the GCC have had to deal with its own internal labor market. And that’s really the first time, having to hire from the talent pool which is available here, which is completely different from the traditional approach to talent in this part of the world, which is based on a constant influx of people coming from abroad. And then all of a sudden, nobody is flying and we have to deal with the people who are inside the country. And so I’ve had an impression, it’s anecdotal so I cannot say that it’s scientifically correct, but I’ve seen, for example, some contradiction between what the employees were wanting to have, like those super great highly skilled profiles, but I want to pay a low salary and having the certain talent profiles that were available in the market. So it was, I think an interesting learning curve for some for some populations.
Sandrine Bardot:
And I think what we’re seeing as well is that in the midterm, we will see even more push to have better protection of employees through the end of service and the pensions approach because obviously as companies, again, we’re not able to pay the end of service, the idea of having the defined contribution, which is invested and unsegregated from the company bank accounts is making its way in the population and in the thinking. So we’ll see how the pilot in the DIFC is working, but I think that we’re going to see more an extension of that in the coming years.
Sandrine Bardot:
And I think just to let you know, we’ve lost 8% of the population just in Dubai, and you can really see it in the streets. So people decided to stay or leave. The first wave was the low-income workers who lost their jobs, the domestic help and so on. And what we see now is the white colors that are leaving. Why? Because the health insurance is typically linked to having a job. Education is very, very expensive and people don’t always have lots of savings, so they might decide to go back to their home country. So that’s why I think we seen an expat reduce as well of white colors, which is a bit unusual compared to other types of populations that might be more coming and going as in the past.
Sandrine Bardot:
So I just want to let you know that in the slides, as you can see, I’m in slide 21, there’s 51 slides. So there’s lots of documentation in the appendix for you to go through with more details on specific allowances, salary trends in the region, end of service and so on. So you can get some technical details there if you want. So I think I’m just going to leave it there and I’m ready to take questions.
Warren Heaps:
Thank you very much, Sandrine. I’ve been compiling the questions that were posted in the chat and feel free to keep asking questions in the chat and we’ll get to as many of them as we have time for. A couple of people were asking about the distinction between salaries and nationality. [Carla 00:45:08] asked if the tax level depends on the employee’s nationality or is it already included in the calculation [inaudible 00:45:15] there’s any tax.?
Sandrine Bardot:
There’s no tax. So that’s very simple, the tax level is not included [inaudible 00:45:25] because there’s no tax.
Warren Heaps:
[Kareem 00:53:13] asked, do you find you have to offer UAE nationals more than Westerners to attract them to private industry, middle management jobs, if you can find candidates?
Sandrine Bardot:
Yes. So the first thing is to find the candidates. I personally think that a vastly under our used pool is the female Emiratis who are more educated than the males and who are a lot. There’s a huge generational shift. This generation of the ladies in their 30s are having two kids, maybe three kids, their mothers were having six to eight kids. So it’s a massive, massive generational change in terms of demographics. They are much more focused on the education, on having a job and so on. But the challenge is that local government tends to pay more than the private sector and especially for the younger Emiratis, so the young graduates, and so obviously that makes it almost impossible to attract young Emiratis in the private sector.
Sandrine Bardot:
So I was very lucky that last year, one of my clients was a government think tank reporting to the prime minister office, specialized in the education to employment gaps. Okay. So basically looking at the gap of skills from the Emiratis versus what the labor market is expecting. And one of the discussions that we had, and I said, because I’ve met some younger Emiratis in previous government entities, and you could really see a big difference between the ones who had worked in the private sector before joining government and the ones who had only worked in the government semi-gov. The ones who had worked for companies like, I don’t know, BCG or whatever private company, international company had a completely different way of thinking and working.
Sandrine Bardot:
So we were creating this youth council, and the people, the volunteers who wanted to be on that council were asked to prepare a quick presentation, one minute to explain why we should put them on that council. And the only ones who had actually prepared something, were the ones coming with an experience from the private sector. All the other ones, we could clearly see that they were winging it when they were talking to us on the panel, I was part of the panel. And discussing with them, they all said that they believed, and I personally believe that, that before any Emirati could work in the government, the government should say, “You cannot work in government unless you have five years of private sector experience.” And those first few years shape how people think and how they react, and so that would probably create a huge cultural shift because some might decide that they like the private sector and to stay there. And it would take away some of the stigma that is attached to working in the private sector as well. Because as I was saying, there’s a cultural element as well. So yeah, it’s still difficult to attract the Emiratis in the private sector. And the experienced ones retire and then set up their own companies because why would they work for somebody else? So it’s very difficult to get them in the private sector.
Warren Heaps:
I have [Nish 00:49:10], sorry, if I’m mispronouncing the name, asked, “You mentioned that it’s no longer prevalent to have different salary ranges based on nationality, is it still a norm that for the same job, there would be significant differences in salaries based on home country?”
Sandrine Bardot:
Yeah. So I’ve not seen last year, but in the past few years. There’s a magazine which every year publishes like an overall value of, of market. And they find that there’s typically like a 30% pay gap for the same job between the Westerner and Asian, and it’s about 15% between a Westerner and the regional Arab. So I’m not talking of the Emiratis, I’m talking of the Egyptians, the Lebanese, the Jordanians, and so on.
Warren Heaps:
Okay.
Justin Hampton:
That’s leads me to a question that Natasha Milky had asked, I think it’s quite well aligned. So her question was, “Out of the components of total rewards that are less prevalent, such as LTI or a DC pension plan, what would you say are the ones that employees really value?” And I’m curious if those values change based on their nationality as well?
Sandrine Bardot:
Oh, wow. I honestly do not know based on nationality. What I do know is that you find that the higher the pay, the less the financial aspect is important for people and the more they value nonfinancial aspects such as recognition, flexible work and so on. But for the people who are maybe paid less, they tend to value cash components more. So when you do exit interviews of people, you tend to find that people, let’s say up to like an employee level and so on, will sometimes leave a company for just a few hundred Dirhams more per month, because they tend to send a significant portion of money back to their home country. I didn’t show, I have a slide on remittances, but huge, huge mass of what people earn come back to their home country, mostly for the non-Westerners. And so obviously they tend to be more cash-focused because there’s a whole like family system, which is dependent on how much cash they can send back home.
Sandrine Bardot:
But once you come to skill levels or pay levels that are more comfortable, I would say, people tend to focus more on the other elements of the package, rather than just the cash. Obviously everybody wants more cash, but I think that the other elements become more important once you reach a certain amount of pay. So I don’t think it’s necessarily correlated to nationality, just happens to be correlated to nationality, but I think it’s more related to pay levels. Because the pay levels can be like a $200 a month, 200 to easily $20,000 a month. The scaling is very, very high, and you have a lot of people who are paid towards the lower levels, so there’s a big gap.
Justin Hampton:
Thank you.
Warren Heaps:
There are a bunch of questions related to pensions. So I’m going to combine them in the interest of time, because I think this is probably the last set of questions we can get to. Rodrigo asks, “How are the pension schemes maintained? In home base country or host country?” Kareem asked if DEWS pilot is going to be extended beyond the financial sector, and does it apply outside of UAE? [Musa 00:53:24] asked if the savings funds are under the custody of the company.
Sandrine Bardot:
Okay. I’m trying to remember the first question. People [crosstalk 00:53:37]
Warren Heaps:
Home or host?
Sandrine Bardot:
Yes. So people are typically not maintained in their home country pension scheme, because everybody is on a local package, even though everybody has allowances, which from a distance might look like what you would give to an international assignee, somebody that you sent on the secondment to another country. People are not seconded except in some rare cases, but for the vast majority of people, they on local contracts. So they have only local elements. So that’s the first question.
Sandrine Bardot:
The pilot of the DIFC, the DEWS, I think they will continue to run it as a pile up because obviously it started in February 2020, so that’s probably not the best period of time to see how effective it is, obviously with the crisis. So I think that in a few years time we will probably see an extension of it first to the private sector, outside of the DIFC in Dubai, maybe then to the rest of the UAE and then potentially would be open to… so not the scheme itself, but the funds might be open to people outside the UAE, because that would be such a huge source of influx of cash coming to… especially there is like 10 or 15% of the funds that have to be invested in the local markets, so that means that you have money for government bonds, for infrastructure development and so on, and that would have a whole impact on the economy of the country. So I think that the longer-term plan, I’ve spoken to a few people in government, is going to extend that but it’s not going to happen overnight, but it is definitely coming, I think.
Warren Heaps:
Okay. [crosstalk 00:55:36]
Sandrine Bardot:
And there was another question, there’s one person I didn’t answer.
Warren Heaps:
The third one is the funds, are they in the custody of the company or the-
Sandrine Bardot:
No. So the funds are outside of company, which is why… so for the first time, this is the first time that the funds are actually outside. They’re invested in funds that are managed by professional, there are trustees, there are management companies, the funds are selected by this group so it’s completely outside of the company. Which is good for the employees, because for the first time it means that this, because it’s more or less 8% of basic pay, so it’s about one month of pay per year, is actually set aside and they will get a guarantee to get it back plus or minus the profits or the evolution that they get in their investment, but at least guaranteed from that point of view, because it’s not in the company cashflow anymore.
Warren Heaps:
All right. Well, thank you very much, Sandrine, you did a wonderful job.
Sandrine Bardot:
Thank you.
Warren Heaps:
You obviously are an expert in this part of the world which is why we invited you because neither Justin nor I have this much knowledge about the Gulf. And I want to thank everyone who joined us today. We hovered around 50 participants and most of you stayed on for the whole time, which is very unusual in webinars. So I think that actually says a lot about how valuable your content was today, Sandrine.
Sandrine Bardot:
Thank you.
Warren Heaps:
And just to remind everyone to watch for our notifications regarding future webinars in this series. We’re going to try to do one about once a month. Right, Justin?
Justin Hampton:
Yeah. That is the cadence we look at.
Warren Heaps:
And we haven’t decided yet on which countries or regions, but I’m sure you’ll find it interesting no matter what we decide.
Sandrine Bardot:
Yeah. I look forward to it actually, because it’s a nice way to travel, in a way.
Warren Heaps:
Yeah. It’ll sort of get us ready to be back on road eventually.
Sandrine Bardot:
Yeah.
Warren Heaps:
So on that note, again, thank you everyone, especially those of you who joined us in your evenings and we look forward to seeing you next time.
Sandrine Bardot:
Thank you.
Justin Hampton:
Thanks everybody.
Sandrine Bardot:
Thank you.
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