EMIRITIZATION AND IMPACT ON COMPENSATION IN ABU DHABI PRIVATE SECTOR

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Pay or compensation is a very sensitive issue in organizational management. The manner in which employees are rewarded according to rank, roles and responsibilities, qualifications and other considerations determine how an organization is perceived by the public and stakeholders while this also impacts on the overall organizational performance. Some organizations are accused of underpaying some of their top executives while others are alleged to over pay them judging from the profit margins of some companies (Compensation standards, 2009).

Compensation is one of the strategies which going to be implemented by the Human Resource Management for efficient and effective result from an individual for organization benefits. Whereas the impact of compensation on the Emiratisation in private sector, is showing lot of changes in individual working styles, where it is a encouragement for the employee of the national where both employee and organization get benefits by the proper implementing and utilizing the compensation on the workforce management.( www.mopw.gov.ae)

Emiratisation

Emiratisation is a process which has been pursuing by Abu Dhabi of Ministry of Labour and Social Affairs is success in recent years of telecommunication and banking sectors. An agreement in April 1999 giving priority to graduates of the Higher Colleges of Technology in recruitment for jobs in both private and public sectors was signed between HCT and Ministry of Labour and Social Affairs. The ministry is in favor of simultaneous development of the economy and human resources mainly alienating the private sector by forcing a quota of employment of nationals. Nearly thousand members registered with ministry in 1998, most of them are women while that time. It is a difficult task to show the suitable employment for the job seekers (www.mopw.gov.ae)

Further Emiratisation could be said as an interventionist approach taken by the government of the region, it is a policy aims to reduce the country's reliance expatriate labour and increase participation of national in labour marker. Emiratization is affirmative quota driven by the employment policy of UAE. In order government has selected some industries which is suitable for the men and women of nationals. Emiratisationc concept is nationalization of the labour market programmed and a policy of 'positive discrimination', which can increase the presence of nationals in organization. Where in the UAE federal government authority objectives are

Creating job opportunities for the UAE national workforce

Reduce the unemployment ratio

Enhance the skills and productivity of national workforce

Recommend relevant policies to the UAE Federal Government (Neelofer Mashood, Helen Verhoeven and Bal Chansarkar, 2007)

Emiratiation Policy

Emiratization is an employment policy that ensures UAE national are given opportunity of employment in private sector. The policy is a UAE decree which imposes employment quotas on various business sectors with penalties for non compliance. The Abu Dhabi state generated enormous publicity concerning the placement of young Emiratis into private sector. Due to emiratisation there is lot of growth in employment for the nationals of the country, so UAE government started implementing the emiratization in all the states with positive growth. After UAE implemented the Emiratization in Ministry of Labor, government requested the private sectors to help them through reducing the unemployment by utilizing this policy (Godwin, 2006).

Compensation

Abu Dhabi's Emiratisation imposed the quota (a limited percentage) on private companies where in the government offers subsidies to those companies to encourage them to hire and keep Emirati Staff. The Abu Dhabi Government intends that when more emirates get educated and government going to start immediately these subsidies for the employees and the funds could match the salaries which are offered by public sectors (www.emiratisation.org).

The traditional western expatriates into the region are typically paid on a home- or headquarters-based balanced sheet approach the main variables within the regions are housing and hardship payments. In Abu Dhabi, rents have escalated and there is limited ability of traditional expatriates at an affordable level. Apart from this compensation of employee is also changing in day to day life of the individual.

Statement Of Problem

Compensation is very sensitive issue for management to deal with workers, where as government want to encourage the local youth (Emiratization) for the betterment of the economy and to reduce the unemployment of the nation, where as companies are not able to find the skilled and talented workers in the region for giving job to utilize other benefits which government is giving in the form subsidies.

The private sector is facing stiff competition in employee compensation issues in consideration with locals and non locals. Thus, this paper tries to analyze the possible difficulties arising in such situations, especially focusing on compensation related issues in regards to programs such as emiritization and next Emiritization and its impact on employee compensation in Private sectors in the state of Abu-Dhabi and then give the findings and make conclusions.

Significance Of The Study

This research study will help the readers to understand the various issues arising with the introduction of emiritization especially in private sectors. Next this study helps in understanding the compensation variations between locals and non locals in Abu Dhabi private sector organizations. This paper will primarily put forward the views and opinions of the expatriate and local employees and secondly the HR managers from the selected private sectors which help the readers to get a clear idea on the intended research study.

LITERATURE REVIEW

"Depending upon the type and extent of the incentives, such government policies could greatly impact the hiring of Emiratis. Those incentives, however, are relative to the options and employment offers that Emiratis receive elsewhere for their type and level of education and experience. Ideally, retaining Emiratis should already be in the best interests of those companies who hired Emiratis to begin with, especially given they will have a vested interest in training those employees and the longer they stay, the greater company-related skills and knowledge they will have. Depending upon the level of the employee, the cost of replacing him or her can range up to 1.5 times their annual compensation. I've never seen where a government has had success providing ongoing incentives to help companies retain their employees. Such focus needs best come from within the companies themselves as they address the specific reasons employees report leaving and strive to create a stronger organizational culture that values the individual employee."- (Bob Nelson, 2010)

Emiratization And UAE

Emiratisation is a most valuable decision taken by the government of UAE, for the welfare of the nationals those who are working in both private and public sector to reduce the unemployment and to grow the labour force of the nation. Simply to say Emiratisation is given importance to local people in working areas, where the local people will be benefited through this process and whereas organization also has been getting beneficiaries instead of importing the skilled and talent labour from other nations (Randeree, 2009). Here compensation is most important concept which should be designed by the Human Resource Management and it is very difficult to manage by the manager of the organization in issuing the compensation for an individual. Yes really the impact of compensation on Emiratisation going shows many changes in employee's behavior of an organization. Any way compensation is a main strategy of Human Resource Management of the organization, which going to decide the future of the organization (in other words performance), mean while compensation should be designed on the basis of work skills which is useful for the organization, public and private sectors both are offering compensation for the employees, where as many workers are moving towards private organization for betterment of their position (Godwin, 2006).

By the recent study "Attitude to private sector" which showed that 96.5 percentage of students at Abu Dhabi, women of Higher Colleges of Technology want to work after the graduation. However, jobseekers are able to access ministry's site for the job vacancies advertised on the site by registered companies. The service for both jobseekers and companies at free of cost and if any private or public sector recruit the specialized candidates through the data bank of the site. In addition to the recruitment service, the site will also provide information on UAE labour law. (www.mopw.gov.ae)

Randeree (2009) states that Abu Dhabi is largely perceived as having economies of limited competitiveness in a global context, as it faces many challenges including current and future demographic, employment of its national workforce, well designed nationalization process in UAE is known as the Emiratisation. Wherein it means increasing the role of local worker in all the basis of works in the organization instead of importing other national, mean while to increase the number of the emirates in Abu Dhabi, the government started implementing subsidies for the both workers and organization which could attract large number of locals towards work in the private sectors. Many times higher official requested the private organization that give the preference for the local youth (Randeree, 2009)

Emiratization In Private Sectors

In an article published on Emiratization (Rethink of Emirati workforce quotas) many private organization expressed that it is difficult to find suitable candidate for the job and that these employees often have unrealistic expectations in terms of pay and promotions. The government wants to close the wage gap between the public sectors and private sectors. The UAE was simply aiming for high quality governance that needed proper compensation, this quota system requires some business sectors to employ certain percentage of emiratis, the government officials also recommending companies try to attract emiratis, many of young educated people showing interest to work in public sectors instead of private sectors, so government started emiratisation website of employment information exchange that would make information on careers and job openings in the private sector easily available to nationals (www.emiratisation.org)

Replacing the foreign workers with local national workers is present challenge for government and creating a lot job opportunities. Recently, women in Abu Dhabi are participating significantly in the private sector companies. According to (Godwin, 2006) it is reported that Abu Dhabi nationals prefer to work in government sector for the betterment of life and higher salaries, which has resulted in very small percentage accepting employment in private sector.

According to Figliolini, Hofmann and Kanjirath (2008) talent management is critically important to companies operating in the Abu Dhabi because of the substantial opportunities and challenges these organizations face today. With the challenge of attracting and retaining qualified and affordable talent in the Abu Dhabi so daunting, employers in the region must do everything they can to cultivate a powerful, persuasive reputation for talent management.

Compensation In Private Sectors

Developing and executing compensation plans are particularly difficult challenges facing HR professionals in the Abu Dhabi. The challenges of managing compensation in the rapidly changing Abu Dhabi economy, specifically, it identifies and explores the drivers of upward pressure on salaries, including inflation, competition for talent, public sector pay increases and other benefits when compared to locals and expatriates Additionally, it analyzes the added complexities of compensating expatriates in the region, as well as the emerging need for and development of long-term incentives and non-cash benefits. In this region low pay workers interested to work in both private and public sectors (Figliolini, Hofmann and Kanjirath, 2008).

J.P. Morgan an American investor with many investments across the globe argues that he cannot invest in an organization where the CEO earns more than 50% above the immediate executives (Compensation standards, 2009). This basically borders on internal issues while external issues usually involve pay levels offered by competitors or prevailing economic conditions in a specific country or region. In most cases, external and internal pay equity determinants are at logger heads thereby placing organization at difficult position in setting up fair and acceptable pay, rewards and compensation levels for their employees (Compensation standards, 2009).

Economic development and the relative lack of locally available skills drive the basic need for expatriates in the region, the firms major challenge is to design the competitive package to attract the employees group for work culture, where as pay structure in many countries varies according to locals and non local workers, but where as in middle east countries the pay structure is same for the both nationalist, this is the recent implementation tried by the government in Abu Dhabi which is successful by giving high range opportunity of employment for the local youth. Apart from this government started encouraging both private and public sector that to increase the role of local in the job area (Latta and Cummins, 2007)

According to Latta and Cummins (2007), compensation refers to all forms of pay or rewards going to employees and arising from their employment. Compensation varies from organization; it is a comprehensive term which includes everything an employee receives in return for his work such as salaries, wages, allowance, benefits and services. Compensation is given in three styles, they are

Base compensation

Incentive compensation

Benefits and services (Latta, Cummins,2007)

Latta and Cummins (2007) state that the main objectives of employee compensation are the following

To attract well-qualified and competent personnel

To motivate them for higher level of performance by making arrangement of incentives

To raise the morale of the work force efficiency

To establish external and internal equity

To maintain the labour and administration cost according to the organization ability

HR Role In Designing Compensation

HR plays quite interesting role in designing of compensation in an organization, the strategic vision of hr is policies, objectives, systems, Bench marking, scope, targets, quality and budget, these all come under the designing of compensation, which should be look after by the hr implementing very well basing on this. Compensation also based on the relative career, where proper training, succession plan and personal development plan these covered under career compensating, HR designs the compensation on the basis of the knowledge, knowledge in the sense skill transfer, coaching, mentoring, job rotation, placement and shadowing, most important role of HR in compensation is Recognition by the proper rewards system, performance management and scholarship. HR is relative person who will observe all the changes in employee and HR is the correct person to design the compensation for an employee in an organization (Randeree, 2009)

Managing Compensation In Organization

Hofmann et. al. (2008) discusses in their paper that Abu Dhabi region have experienced a period of economic growth, driven largely by high oil prices and a resultant inflow of capital. While this growth created an opportunity for economic expansion and attracted huge number of population to this region. At this moment developing and executing compensation plans were particularly difficult challenges faced by the HR professionals in Middle East, as economic growth and other key factors have resulted in a changing market. Further (Figliolini, Hofmann and Kanjirath, 2008) stated that specifically, it has to identify and explore the drivers of upward pressure of salaries, inflation, competition for talent and public sector pay increases. It analyzed the added complexities of compensating expatriates in the region and as well as emerging need for the development of long terms incentives and non-cash benefits. This makes the transparency of the government in improvising the emiritization program so as to reduce the hiring of expats.

ORGANIZATIONS OF THE STUDY

Securigaurd International

Securiguard Middle East is a full service security company, also offering the "state of the art" technology solutions from Systems Division, as well as full service Information Technology Division. Provides services and does quality assurance testing on a regular basis to ensure that the service being provided exceeds your needs (www.securiguard.ae).

Al Fara'a General Contracting

Al Fara'a Geenral Contracting Company is a national leader in civil engineering, procurement and construction (EPC), the flagship company of the Al Fara'a Group'. The group has a history of more than 26 years in executing prestigious projects around the UAE and has reputation for delivering outstanding client value and completing projects on time and within budget. Led by a team of experienced engineers, managers and technical experts, and utilizes the most advanced technology (www.alfaraa.com).

RESEARCH METHODS

For the purpose of collecting required information on the chosen topic and analysis this research used qualitative methodologies which include both primary and secondary data collection methods.

Primary Data Collection

The primary data collection methods include

Random Interviews

Primarily, this research used a sample survey questionnaire for local and non local employees and conducted random interviews with the selected employees in the selected organizations. Sample of 10 UAE nationals and 10 Expatriate employees were selected from both the organizations and their views and opinions were collected, discussed and analyzed.

Semi Structured Interviews

Next this research conducted semi structured interviews with the HR managers of Securigaurd Middle East and discussed their views on impact of emiritization program on compensation. Further their views and opinions were collected, discussed and analyzed.

Secondary Data Collection

The secondary data collection methods will include

Literature review

The research reviewed the past literature which helped in giving strong theoretical background and good amount of knowledge on the chosen topic.

Others

Apart from the above the research also looked for reference books, articles, news papers, journals, internet and search engines for collecting relevant information to the topic.

Research Questions

Sample Questionnaire for HR Managers

What are the major issues private sectors is facing in relation to emiritization program?

Are the private sectors able to find UAE nationals for positions where in it needs highly qualified and experienced personnel?

If no what are the alternative solutions you find to recruit personnel for such positions?

Is Emiritization program going to bring differentiation in compensation levels between locals and non locals?, if yes how do you manage them?

Do you think that UAE government needs to change its strategies in regards to Emiritization process? What are your suggestions in regards to this?

Sample Interview Questionnaire for Employees

Non Locals (Expatriates)

Do you feel that your nationality is an issue in the current employment terms?

Do you feel Emiritization could be a hurdle for expatriates as most of the expats are into private sectors? And how?

Do you think Emiritization has affected the compensation levels and other benefits of expats in private organization?

Locals (UAE Nationals)

What is your opinion on Emiritization program is it useful for nationals? to what extent?

Do you feel Emiritization program is going to affect expatriates as most of the expats are into private sectors? And how?

Do you think the current generation of nationals has the capability to handle senior positions in private organizations?

Do you think UAE nationals can justify for positions in private sector which especially requires high qualification and more experience?

Given the opportunity, how would you handle the problem of expat influx especially from other nations?

ANALYSIS AND INTERPRETATION OF RESULTS

Results of Discussion with HR Manager / MD

Semi structured interviews with the Senior HR Officer Mr. Saad Hassan and Managing Director Mr. Nabeel Al Afifi of Securigaurd Middle East has brought about many facts on the Emiritization program and what are the major issues the private sector is facing due to this program. When asked about the main issues they are facing Mr. Saad expressed that the program is beneficial to the nationals as now a day's many UAE nationals are undergoing good qualifications and this helping them in reducing the cost of hiring the expatriates. Hiring expatriates includes giving them extra facilities and other compensations and benefits this is a part of beneficiary program for most companies.

When asked about whether they are able to find the right person for right job, if not what are the alternatives they are following, Mr.Saad said that in most of the instances especially for the higher positions the private sector is not able to find the right National to recruit. In this concern Mr.Nabeel (MD) added that they are been forced to hire UAE nationals only for few of the Administrative positions where in they are not able to find the experienced UAE nationals (i.e., in some instances they are able to find well qualified nationals but not well experienced). In such cases the company is hiring UAE nationals in that positions and assigning them the work of other job profiles and next they are hiring well experienced expatriates in the lower positions and assign the job of high profiles.

Mr.Nabeel further expressed that even though this is against the Emiritization law, as the company is in need of experienced personnel they are following this method and further added that most of the private sectors are following the same procedures only due to the government regulations. Further Mr.Saad expressed that as per the rule only administrative posts are assigned to the nationals and other are opened for expatriates, this brings a difference in the employees as all the low profile and outward (such as security guards, supervisors, attendants etc.) jobs are to be done only by expatriates and UAE nationals are not ready to take up such jobs even though they are less educated.

Next talking about the compensation differences between UAE nationals and expatriates Mr.Saad expressed that as per the law there is a minimum fixed pay scale for UAE nationals where as it is not for the expatriates, so here the company is forced to pay the pay as per the law, where in the expatriates are not. Mr.Saad also expressed that most expatriates feel that they are paid less when compared to the locals and this could sometimes effect the employee performances because of which the management is taking up steps to pay the expatriates in other means such as giving extra allowances such as transportation, housing, rewards, appraisals promotions etc.

Further Mr.Nabeel and Mr.Saad talking about the government regulations expressed that the Government has to make changes in the law as most of the companies are facing the problem of finding experienced personnel from the UAE nationals and this can cause huge losses to the companies (in other words mismanagement of tasks due to lack of enough experience in handling the tasks).

Results of Discussion with Employees

Non Locals (Expatiates)

Most of the expatriates expressed that there is a lot of difference in the compensation levels when compared to nationals and non nationals. Being a non national they are been paid less when compared to the locals, even though locals in the same position are less educated and less experienced. Talking about the main components of their compensation they feel that they are reasonable and adequate to some extent as they are been given free transportation, housing, rewards and other allowances which are not given to locals. Additionally, immigrant workers tend to be placed in unfavorable working hours that attract no additionally compensation. This makes it hard for immigrant workers to pursue other aspects such as vocational training.

Talking about the difference in the wages between the nationals and expatriates, most of the expatriates felt that UAE nationals are paid much higher that them and the only reason is being a UAE national. They expressed that they have more experience and should get more benefits and compensations when compared to locals. Organizations and government has to take steps for better levels of compensations for expatriates.

Locals (UAE Nationals)

Interviews with UAE local staff has brought many aspects into focus of which one of the most interesting is UAE national feel that they cannot deny the effects of globalization and must be keen to protect nations and national issues. They feel that by allowing excessive inflow of expatriate workers from foreign lands, locals perusing higher qualifications in local and international institutions will be without work but will also be a waste of investment. In the long run, UAE will be out of business as employers will be tempted to fetch cheap foreign employees thereby failing the education system.

Next most of the local staff feel that UAE government has been fair enough towards the nationals by imposing restrictions on work requirements for all private sector organizations as this helps them form preventing the job market.

FINDINGS AND CONCLUSIONS

Thus it could be said that establishing reasonable pay system is a complicated process that requires lots of efforts to achieve pay equity therefore attracting new employees and retaining current ones. Also to achieve employees satisfaction therefore better performance

Most organizations are following a common trend relying on imported labor more in the developing world. It is seen that private organization tend to take advantages of the dire economic situations in the under developed and developing countries to import cheap labor. This idea is bad and good at the same time depending on the perspective. On one hand, importing skilled labor from under developing nations provide a ready market for their education systems outputs. When employed, such persons invest back in their home country thereby spurring economic growth. From another perspective, importing skilled labor form such countries denies them the skill and expertise to help them develop. Many nations in Africa and Asia that have high rates of exporting labor do actually suffer shortages in the respective field. However, would have these governments been able to employ the otherwise exported skilled labor and provide the same level of pay as offered by other countries and organizations

Immigrant workers feel that by working in foreign lands, they are offered well paying opportunities that are not available back home. Standards of living in many of the labor exporting countries are low and the economies cannot be able to fully absorb the output from the education and training system. Therefore, exporting help create a balance and provides a life line of the education system in those countries. It also creates hope for the youth and encourages them to take up training in order to increase their chances of getting a job. On the other hand, once at the designated place of work in the foreign land, in this case most of the private sector expat employees feel that they are actually being offered less pay than the resident workmates with whom they have the same qualifications and same job descriptions. Thus the perception of unfair pay by employees leads to low levels of motivation and often poor performance.

RECOMMENDATIONS

After the analysis and interpretation of data, the following few recommendations are put forward by this research study

From the point of view of UAE nationals, they must be given well training on the required job profiles before entering into the field, either in the universities or by the governement

UAE nationals must look forward to get good amount of experience by working at various levels, irrespective of the job profiles, this will help them to gain good amount of work experience and knowledge

Government has to bring about changes in the UAE labor law and give enhancement to the private sector especially for higher admin positions to hire expat employees as currently these organizations are finding difficulty in hiring locals with required qualifications and experience.

Even though a big task private sector HR should also take measures to train the UAE nationals so as to suite them to the required positions and continuously guide them until they get experience, this will help them to reduce of the cost of hiring expats from various countries

Government should encourage UAE nationals to work in all job profiles as this will not only help the employee to learn and perform better but also will help in effective organizational outcomes.

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