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The MHC Blog

Powerful Business Insights for Succesful Leaders

Can’t afford to give a pay rise?

As we were busy welcoming in January 1st 2018, businesses were, overnight, increasing their price points on everything (food, drink, clothes, services) by 5% to fall into compliance with the new VAT regulations.  This increase excludes any new year increases which were also applied.  The UAE is now 5%+ more expensive to live and work in. 

So, did salaries increase in line with these cost of living uplifts? The simple answer for many small and medium businesses is no, they just cannot afford to keep up with the increases in cost of living.  The VAT Companies are now charging on invoices raised and are paid back to the Government quarterly, making cash flow management a top priority, but Companies are not 5% richer, a point missed potentially by their workforce.

A recent Daily Mail article showed that in the UK, 2 in 3 workers are planning on quitting their job in 2018, with 67% of a Companies workforce busy devising an exit route this year.  68% of the 5,000 people polled in the article had not received a pay rise or promotion in the past 12 months, and 63% admit to spending many hours moaning to family and friends about their jobs.  Overall a very unhappy workforce.

I don’t doubt that the figures are fairly similar here in the UAE, with the main difference being that in the UK, people are looking to change jobs, here in the UAE, where a significant % of the workforce are expats (approximately 90% of those working in the UAE based roles are non-UAE nationals) looking to return back to their home countries as the UAE is perhaps no longer a place to earn good money to send home.  As the cost of returning an employee to their home country falls on the last employer, this is an additional cost factor in the final settlement calculation.

So how do you retain your workforce, keeping them happy whilst at the same time trying to do business in a difficult economic environment that restricts your ability to increase salaries?

Here are 5 ideas that may help you with your employee retention:

  1. Formal performance appraisal process. Many small Companies have an ad hoc approach to appraisals and salary reviews, working on the premise “if they don’t ask then they don’t need”.  Increasing salaries when asked causes issues with your Company P&L as these increases will be unbudgeted, and it leads to the employee to assume that each time they ask you, the Company will increase their salary regardless.

    A formal performance review process at a set period within the year will allow you to budget for pay reviews and ensure that you reward based on employee performance.  It would be a fantastic position to be in to give a blanket cost of living pay review as well as a performance review, however many Companies do not find themselves in a position to be able to do both.  In these situations, they need to reward the best performers.

    The final advantage of having a formal performance review process is that it sets a timeline in employees’ minds when their performance will be reviewed and a potential increase will occur, keeping their minds focused on their work rather than how to approach you and ask for a salary increase.
  2. Retention of A players. A-Player employees are your top performers, they perform at more than twice the rate of a non-performer and need to be retained at all costs.  To do this, you need to grasp the thorny subject of finally dealing with the non-performers within your Company, ultimately removing the C players and potentially saving their salary costs, dividing this amongst the rest of the workforce. 

    This sounds like a mercenary approach, however given that most A-Players leave a Company (usually to work for your competitor) due to the amount of time management spend coaching those that are not up to the role, then the best strategy would be to take action urgently and maintain a smaller workforce that is performing.  Reducing headcount saves money all round, not just on monthly salary payments.
  3. Job enrichment. If you are recruiting for a vacancy at the moment, you will be inundated with CVs.  Many applications will be from candidates without jobs, however a high percentage will be looking for a new challenge as they feel they have reached their limits of their development with their current employer.  The cost of losing an employee through their resignation is significant, the best option would be to retain and develop your current high performing team. 

    Discuss the employee development needs at their performance appraisal meeting, look at providing training (many on lines courses are now available which save costs and make training much more flexible) to support their development needs and use their new skills to help you grow your Company. 


  1. Reduce costs within your Company. There are many ways you are overspending in your Company currently, you may not be able to see them but those around you probably can.  Ask your employees to come up with cost cutting ideas, ploughing the money saved back rewarding your team.  Then ensure these costs do not creep back into your business.


  1. Reward in different ways. Look at other ideas to reward your workforce that does not increase the monthly salary. The introduce a quarterly commission scheme where the entire Company can benefit with a one-off payment on overachievement of the quarterly target has the added benefit of the entire Company working towards the over achievement of the Company targets. 

2018 looks to be another year of economic uncertainty, so Company owners need to be alive to the threat of losing their best talent.  Financial pressures may make considerable and pay rises and promotions difficult to implement, but employers need to consider other ways that they can keep their workforce happy.

Recruitment is a real cost to any business, so businesses should do all they realistically can to maximise staff retention.



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Claire Donnelly

Written by Claire Donnelly

A Business Growth and HR Strategist helping medium size companies to Scale Up using proven systems. Claire is an MCIPD qualified Human Resource professional, with 25+ years’ experience working within various industries and 10 + years’ experience of HR practices throughout the Middle East. As a HR Generalist she has held a number of senior and Board level HR positions. She is experienced in working at both strategic and tactical levels.

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