Six Rules of Expat Pay Packages in the Middle East

After eliminating guaranteed bonuses and generous living allowances for expats in the Middle East a few years ago, banks in the region are becoming more generous.

Getting these new perks, however, takes some strategy.  It’s best, for instance, to make sure you negotiate the highest salary upfront that you can as well as ensure that any performance targets are realistic.  Also keep in mind all the little costs, such as higher electricity bills.

While the likes of luxury company cars, guaranteed bonuses and multiple flights home are off the table, employees still have negotiating room and should expect a salary increase of as much as 30% to take a job in the region. Here, according to headhunters and compensation consultants in the region, are what you should be asking for.

1. Focus on securing the best base salary from the outset

Salaries are still heading up for bankers in the Middle East, particularly in the UAE, but usually by single percentages. This, combined with a lack of appetite to shell out on bonuses, means that you should push for the best salary from the outset.

“The cash benefits on offer are changing, and there’s more of a bias towards salary over bonuses,” says Vijay Gandhi, director of reward information services, Middle East at Hay Group. “Now, it’s more likely that 60% of total packages will be base salary, and few firms are willing to offer guarantees of bonuses down the line.”

2. Negotiate realistic performance targets

Bonuses are no longer guaranteed, but there’s still a willingness among employers to award variable pay based on performance. Gandhi says such bonuses are typically “two to six months of basic salary and entirely dependent on performance, which wasn’t the case two years’ ago.”  In the current depressed market, it’s important to negotiate achievable targets.

3. Play hardball on hardship postings

Ten years ago, employers in Dubai or Abu Dhabi would have recognised expats from Western nations required a generous ‘hardship’ allowance. Such payments are now history, but financial services professionals still have some leverage in Saudi Arabia or Bahrain. The latter is still in the midst of troubles that kicked off in early 2011, while Saudi’s aggressive localisation push means any expats’ long-term career prospects are shaky.

“Expats are generally asking for a 20-30% salary uplift in order to take a position in Saudi Arabia or Bahrain,” says Peter Greaves, managing director of IES HR Consultants in Dubai. Such pay isn’t automatically offered by employers,  however, so recruits need to state their salary demands and stick to them, he says.

4. Ensure your housing allowance can beat inflation

If you want a plush residence in the popular areas of Dubai, you need to take into account that prices are spiralling again. Average prices in Downtown Dubai, Dubai Marina, the Greens, Jumeirah Beach Residence and Palm Jumeirah have increased by 24% in the past 12 months, according to new research from real estate consultancy CBRE.

Employers, however, are offering less generous housing allowances than during the height of the boom, largely because rental rates across the emirate slipped by 54% from the end of 2008 to the fourth quarter of 2011, according to CBRE.

“Increasingly, employers are offering a cash sum to cover housing allowances, rather than classifying it as a non-cash benefit,” says Gandhi.

“A typical family with two children can easily spend AED250k ($68k) annually on a prime location in Dubai, and this is rising,” says Nigel Sillitoe, chief executive of Dubai-based consultancy Insight Discovery. “Negotiating a generous housing allowance is one of the most fundamental aspects of any expat package.”

5. Use your employers’ leverage to secure a school place for your children

If you think finding a good school for your children in London or New York is a struggle, try securing a place at one of the ‘outstanding’ Dubai private schools recommended by the Knowledge and Human Development Authority.  Not only are they expensive – AED70-100k ($19-27k) a year for the more reputable institutions – but competition for places is tough. Your employer typically takes on 75% of school fees, but it can also help with securing a place.

“It’s not uncommon for banking executives to move to Dubai and initially leave their family back home because competition for school places is so tough,” says Sillitoe. “Financial professionals should expect comparatively generous school fees in their packages, but international banks often have some sway with the schools, so new employees should take advantage of this.”

6. Remember the little things

Every wonder why salaries in Middle Eastern financial centres are tax free? Aside from the accommodation expenses, costs can rack up in other areas.  Employers must provide healthcare coverage, but help with utilities bills (which come in at an average of $408 a month for a four-bedroom villa) and a furniture allowance are also items to ask for, recommends Sillitoe.