Emiritization and Impact on Compensation in Abu Dhabi Private Sector Essay Example

in the job market. Emiratization is a quota-driven policy implemented by UAE's employment policy. The government has selected specific industries suitable for male and female citizens.

Emiratisation is a nationalization program and employment policy in the UAE that aims to increase the presence of UAE nationals in organizations. It involves a policy of 'positive favoritism' and imposes employment quotas on various sectors of the private sector. Non-compliance with these quotas can result in punishments. The Abu Dhabi province has made significant efforts to promote the inclusion of young Emiratis in the private sector.

Due to the implementation of emiratisation, employment opportunities for citizens of the state have been growing rapidly. The UAE authorities have been introducing emiratisation policies in all provinces, resulting in positive growth. After implementing emiratisation in the Ministry of Labor, authorities have requested private sectors to assist in reducing unemployment by implementing this policy (Godwin, 2006).

Compensation

Abu Dhabi's emiratisation policy has imposed a quota (a limited percentage) on private companies. In return, the government offers subsidies to these companies to encourage them to hire and retain Emirati staff. The Abu Dhabi Government plans to extend these subsidies to more emirates as citizens become more educated. Eventually, these subsidies will be able to match the salaries offered by public sectors (www.emiratisation.org). Western expatriates in the region typically receive compensation based on a home or headquarters-based balanced sheet approach. The main factors considered are accommodations and hardship payments. However, in Abu Dhabi, rents have increased and traditional expatriates are facing challenges in finding affordable housing.

Compensation of employees is also changing in the daily life of individuals.

Problem Statement

The delicate issue of compensation for workers poses a challenge

for management, while the government aims to improve the economy and reduce unemployment through the promotion of local youth (Emiratization). Despite government subsidies, companies in the region are struggling to find skilled and talented workers. The private sector faces tough competition between locals and non-locals in terms of employee compensation. This paper aims to analyze the potential difficulties that arise from such situations, specifically focusing on compensation-related issues related to programs like Emiratization and subsequent Emiratization, as well as their impact on employee compensation within Abu Dhabi's private sectors. The findings and conclusions of this research study will provide insights into the various issues associated with the introduction of Emiratization, particularly within private sector organizations. Furthermore, this study sheds light on fluctuations in compensation between locals and non-locals within Abu Dhabi's private sector organizations.

The main focus of this paper is to present the perspectives and opinions of expatriate and local employees, as well as HR directors from selected private sectors. These viewpoints will provide readers with a clear understanding of the research survey being conducted.

LITERATURE REVIEW

"Government policies that offer incentives can have a significant impact on the recruitment of Emiratis, depending on the type and extent of these incentives. However, the effectiveness of these incentives is relative to the opportunities and job offers Emiratis receive elsewhere, based on their education and experience. It is in the best interest of companies that initially hired Emiratis to retain them because they have a vested interest in developing these employees. The longer Emiratis stay at these companies, the more company-related skills and knowledge they will acquire."

Bob Nelson (2010) states that the cost of replacing employees can be up

to 1.5 times their annual compensation, depending on their level. Incentives provided by companies to retain employees have not been successful in any government observed. Nelson suggests that companies should focus internally and address the specific reasons employees leave, striving to create a stronger organizational culture that values each individual employee.

Emiratization And UAE

Emiratization is a beneficial decision made by the UAE government aimed at benefiting both private and public sector working citizens, reducing unemployment rates, and increasing the overall workforce of the country.

Emiratisation is the process of giving importance to local people in working countries. This helps benefit the local people, while also allowing organizations to acquire skilled labor from within instead of importing it from other countries (Randeree, 2009). Compensation is a crucial concept that must be designed by Human Resource Management, and it is challenging for managers to determine the appropriate compensation for individuals. The impact of compensation on Emiratisation has led to changes in employee behavior within organizations. Compensation is a key strategy of Human Resource Management that determines the future performance of an organization. It should be designed based on work accomplishments that are beneficial for the organization. Both public and private sectors offer compensation to employees, and many workers are choosing private organizations for career advancement (Godwin, 2006).

According to the recent survey "Attitude to private sector," 96.5% of students at Abu Dhabi, women of Higher Colleges of Technology, express a desire to work after graduation. However, jobseekers can access the ministry's website to find job vacancies advertised by registered companies. This service is provided at no cost for both jobseekers and companies. Additionally, if any private or public sector hires

qualified candidates through the website's database, there is no fee. Besides the recruitment service, the website also offers information on UAE labor laws (www.mopw.gov.ae). According to Randeree (2009), Abu Dhabi is often seen as having limited competitiveness in the global economy due to various challenges including demographics, employment of its national workforce, and the Emiratisation process.

The government of Abu Dhabi began implementing subsidies for workers and organizations in order to attract more local individuals to work in the private sector. Higher officials often requested private organizations to prioritize hiring local youth. However, many private organizations find it difficult to find suitable candidates for jobs, and these employees often have unrealistic expectations regarding salary and promotions. The government aims to reduce the disparity in wages between the public and private sectors.The UAE sought high-quality administration and fair compensation. To achieve this, a quota system was implemented, requiring certain sectors to employ a percentage of Emiratis. Government officials also encouraged companies to attract Emirati employees. Many educated young individuals showed interest in working in the public sector rather than the private sector. In response, the government created a website called emiratisation.org, which provided information on careers and job vacancies in the private sector. This initiative aims to replace foreign workers with local nationals, creating numerous job opportunities. Recently, there has been significant female participation in private sector companies in Abu Dhabi. According to Godwin (2006), Abu Dhabi residents prefer working in the government sector for better living conditions and higher wages. Consequently, there is a low percentage of individuals accepting employment in the private sector.

According to Figliolini, Hofmann and Kanjirath (2008), talent management is crucial for companies

operating in Abu Dhabi due to the significant opportunities and challenges they face. In order to attract and retain skilled and affordable talent in the region, employers must establish a strong reputation for talent management.

Compensation in Private Sectors

Developing and implementing compensation plans pose unique challenges for HR professionals in Abu Dhabi. The rapidly changing economy of Abu Dhabi creates pressures on wages, including inflation, competition for talent, public sector wage increases, and additional benefits compared to locals and expatriates. Furthermore, the complexity of compensating expatriates and the growing demand for long-term incentives and non-cash benefits add further challenges. Low-wage workers in the region are interested in working in both private and public sectors (Figliolini, Hofmann and Kanjirath, 2008).

J.P. Morgan, an American investor with investments worldwide, argues that he cannot invest in an organization where the CEO earns more than 50% above the immediate executives (Compensation standards, 2009). This boundary primarily concerns internal matters, while external matters typically involve wage levels offered by competitors or prevailing economic conditions in a specific country or region. In many cases, external and internal wage equity determinants clash, making it challenging for organizations to establish fair and acceptable wages, rewards, and compensation levels for their employees (Compensation standards, 2009).

The demand for expatriates in the region is driven by economic development and a lack of locally available talent. The main challenge for companies is to create an attractive package to attract employees, as wage structures vary between local and non-local workers in many countries. However, in the Middle East, the wage structure is the same for both nationals. The government in Abu Dhabi has recently implemented policies to increase employment opportunities

for local youth and to encourage both the private and public sectors to hire more locals in different job areas (Latta and Cummins, 2007).
Hofmann et. al. (2008) discuss in their paper that Abu Dhabi has experienced economic growth due to high oil prices and capital influx. This growth has attracted a large population to the region. However, HR professionals face challenges in developing and implementing compensation programs due to changing market conditions caused by economic growth and other factors.

According to further research (Figliolini, Hofmann and Kanjirath, 2008), it is crucial to examine and comprehend the factors that contribute to wage increases, inflation, talent competition, and public sector salary hikes. This study also addresses the complexities of accommodating expatriates in the region and the growing demand for long-term incentives and non-monetary perks. As a result, it emphasizes the significance of government transparency in reducing expatriate hiring.

Analysis AND INTERPRETATION OF RESULTS

Semi-structured interviews were conducted with Mr. Saad Hassan, Senior HR Officer, and Mr. Managing Director.

Nabeel Al Afifi from Securigaurd Middle East has provided many facts about the Emiritization plan and highlighted the major challenges faced by the private sector due to this plan. When asked about the main issues they face, Mr. Saad explained that the plan benefits UAE nationals as it enables them to acquire relevant qualifications, reducing the need to hire expatriates. Hiring expatriates involves providing them with additional facilities and other compensation and benefits, making it a beneficial arrangement for most companies. When asked if they are able to find suitable candidates for specific jobs, and if not, what alternatives they are considering, Mr. Saad stated that in many cases, particularly for higher positions,

the private sector struggles to find qualified Emiratis to hire. In response to this concern, Mr. Nabeel (MD) added that they are compelled to hire UAE nationals mainly for some administrative positions where experienced local candidates are not readily available.

In some cases, the company is able to hire qualified UAE nationals for certain positions, but they may not have sufficient experience. In these instances, the company hires UAE nationals for these positions and assigns them to other job profiles. Meanwhile, the company hires experienced expatriates for lower-level positions and assigns them the higher-level job profiles. Mr. Nabeel explained that although this goes against the Emiritization law, the company is in need of experienced workers and thus follows this approach. He also mentioned that most private sectors are required to follow similar procedures due to government regulations. Furthermore, Mr. Saad stated that according to the regulations, only administrative positions are designated for UAE nationals while others are open to expatriates. This results in a difference in the types of employees, with nationals mainly occupying low-profile and outward-facing roles such as security guards, supervisors, and attendants.

occupations are to be done exclusively by exiles and UAE subjects are not willing to take up such occupations even though they are less educated. After discussing the salary differences between UAE subjects and expatriates, Mr. Saad explained that according to the law, there is a minimum fixed wage scale for UAE subjects, but not for the expatriates. Therefore, the company is required to pay the salary according to the law for UAE subjects, but not for the expatriates. Mr. Saad also mentioned that most expatriates feel that they are paid less

compared to locals, which can sometimes affect their performance. As a result, the management is taking steps to compensate the expatriates in other ways, such as providing additional allowances for transportation, accommodation, bonuses, promotions, etc. Additionally, Mr. Nabeel and Mr. Saad discussed the government regulations and expressed that the government needs to make changes in the law as many companies are facing difficulties in finding experienced UAE subjects for their projects. This lack of experienced personnel can lead to significant losses for the companies.

Consequences of Discussion with Employees

The discussion with employees revealed that there is a significant disparity in compensation levels between nationals and non-nationals. Non-nationals, who make up the majority of the exiles, are paid less than locals, despite being less educated and less experienced. However, they do receive certain benefits such as free transit, lodging, wages, and other allowances that locals do not receive. In addition, immigrant workers often have to work unfavorable hours without receiving any additional compensation. This makes it challenging for them to pursue other opportunities such as vocational training.

Discussing the disparity in rewards between UAE nationals and expatriates, the majority of expatriates believe that UAE nationals are paid significantly higher simply because they are citizens of the country. They argue that they have more experience and therefore should receive greater benefits and compensation compared to local nationals. It is necessary for organizations and authorities to take steps towards improving compensation levels for expatriates. Through interviews with local UAE staff, various perspectives have come to light, one of the most intriguing being that UAE nationals acknowledge the impact of globalization and must be vigilant in

protecting their country and national interests. They believe that allowing excessive influx of expatriate workers from other countries would not only result in unemployment for locals with higher qualifications from local and international institutions, but also be a waste of investment.

In summary, the concern in UAE regarding the potential neglect of the education system due to the hiring of inexpensive foreign employees has led the government to impose work limitations on private sector organizations. This action is viewed positively by local staff as it helps regulate the job market. The findings and conclusions indicate that establishing a fair wage system is a complex process that requires significant effort to achieve wage equity and attract new employees while retaining current ones. Additionally, organizations are increasingly relying on imported labor from underdeveloped countries to take advantage of their desperate economic situations.

This thought is both positive and negative depending on the perspective. On one hand, importing skilled labor from developing countries creates a demand for their education system's products. Consequently, when employed, these individuals reinvest in their home country, thereby promoting economic growth. However, from another viewpoint, importing skilled labor from these countries deprives them of the skill and expertise needed for their own development.

Many states in Africa and Asia that have high rates of exporting labor experience deficits in various fields. However, would these governments have been able to utilize the skilled labor that is exported and provide the same level of wages as other states and organizations? Immigrant workers believe that by working in foreign lands, they are offered better paying opportunities that are not available in their home countries. Standard of living in many of

the labor exporting countries is low and their economies cannot fully absorb the output from their education and training systems. Therefore, exporting labor helps to maintain a balance and serves as a lifeline for the education system in those countries.

It also instills hope in young people and encourages them to pursue education in order to improve their chances of getting a job. However, once they start working in a foreign country, many expat employees in the private sector feel that they are being paid less than their local colleagues who have the same qualifications and job descriptions. This perception of unfair pay leads to low motivation and often poor performance.

Recommendation

After analyzing the data, this research study proposes the following recommendations: UAE citizens should receive proper training on the necessary job profiles before entering the workforce, either through universities or government programs. UAE citizens should gain experience by working at different levels, regardless of their job profiles, as this will help them acquire valuable work experience and knowledge. The government needs to make changes to the UAE labor law and provide incentives to the private sector, especially for higher administrative positions, to hire expat employees. Currently, these organizations struggle to hire qualified locals with the necessary qualifications and experience.

Despite being a significant task, the private sector HR should also focus on developing Emirati nationals and placing them in suitable positions. Additionally, they should provide continuous guidance and support until these individuals gain experience. This approach will help reduce the expenses associated with hiring foreigners from different countries. Moreover, the government should encourage Emirati nationals to work in various job roles. This not only enhances their learning

and performance but also contributes to effective organizational outcomes.