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Tax-Free Salaries and Higher Increments in the UAE Continue to Lure Professionals

Tax-Free Salaries and Higher Increments in the UAE Continue to Lure Professionals

By Devika Arora

The charm of better growth prospects and tax-free salaries in the UAE is attracting several employees and job seekers to its most popular cities Dubai and Abu Dhabi. According to a recent report by The National, the average salaries across the UAE saw 5.3 per cent growth in 2013. The report also suggests a further growth of 5.9 per cent in 2014. All these factors are contributing to this country becoming a coveted employment hub, especially for expat job seekers.            

The Working Conditions

All the employment details of different occupations in the UAE are based on the UAE Labor Law of 1980, which includes employees’ duties and details related to holidays, employment contracts and compensation. The maximum number of working hours in the private sector is eight hours per day and 48 hours in a six-day week. This number goes up to nine hours a day for those working in restaurants, hotels and retail. However, there are days when employees may even have to dedicate 10 hours in a day over a five-day week with no payment for overtime. The official weekend for employees working in the public sector is Friday-Saturday.

Reasons for No Tax on Income

Even after occasional suggestions by the International Monetary Foundation (IMF) the UAE does not levy any federal income tax on salaries or wages. The organization maintains that the tax would be beneficial for the country. However, there are those who feel it is unfair for expatriates to pay income taxes for benefits they are not eligible for. This would then go against Islamic teachings and that the tax would then be considered un-Islamic or ‘haram.’ This may be the reason why the country does not impose taxes on the incomes of expats.

The Current Scenario

Nearly 65 per cent of the expats working in the Gulf say that the United Arab Emirates is their preferred place of work. Also, since there is wage stagnation and high rates of unemployment in the Western countries like Europe it is easy to attract professionals from there.

Not only Europe, expat employees in the immediate GCC area also feel Dubai is an attractive proposition. Nearly 48 per cent of these individuals wish to move to Dubai for work. This figure was only 40 per cent in 2013. The second most coveted destination for work is Abu Dhabi where 20 per cent of the GCC region’s expats would prefer to be.

As per the given figures, the average salaries in the private sector in the entire GCC region rose 5.9 per cent, which is considerably higher than the pay packages offered in the UK, Australia, Canada and also the US. This year is likely to see a 6.3 per cent growth in pay. In the UAE, real salaries, that cause inflation, rose 4.2 per cent.

Now that 57 per cent of the companies in the UAE expect to raise their headcount in 2014, there will be ample jobs for everyone to pursue. This figure reflects growth of a progressive job market as last year witnessed just 51 per cent of employers who intended to raise headcount.

The Recent Rise in Pay

Working in the UAE has its own advantages. Till now the tax-free salaries were pulling employees this way. But now there’s more. It is being said that there will be an increase in the earnings of doctors, engineers, pharmacists, nurses and auditors. They are among the 2,000 Dubai Municipality employees to be provided with higher allowances. There will be an increment in the allowances of supervisors and staffers in 700 different job categories.

Dubai Municipality’s Human Resources Director Khalid Abdullah confirmed that the increment will be of about 30-60 per cent and will depend upon the nature of work and job description. The move is likely to pump up the sentiments of the employees serving the community more than the designated working hours and will increase productivity.

The Dubai Government is trying its best to remain attuned to the international labor laws and has been updating its policies according to expectations. It is going to allocate around DH 7 million a month, which sums up to Dh 85 million a year, to pay for these allowances.

The benefit provided will also extend up to workers in other departments, including legal affairs, media and human resources. This way, these departments will be able to improve their performance while also attracting and retaining specialist employees by offering higher pay packages.

Not only are the employees working for these industries enjoying better pay, there is another industry posing as a major pull for professionals. Banking is going to be one of the industries that will draw professionals not only from the GCC area but from all over the world. A report by Astbury Marsden published in The National had stated that in 2014, hiring of financial services professionals in the UAE would increase at the second-fastest rate in the world. Today, the city of Dubai seems to have become one of the most attractive providers of banking jobs. According to Bloomberg, mid-level banking jobs in the UAE offer almost 36 per cent higher pay than the same jobs in London. Salary consultancy firm Emolument’s latest reports also reveal that junior bankers in the UAE get almost double the bonuses received by their banking counterparts in London. In-house data information revealed by 20,000 professionals showed banking analysts in the UK are paid $73,000 on an average, while those in the UAE get $91,000. Similarly, mid-level banking bonuses were also higher in the UAE ($27,000) in comparison to $14,000 in the UK. At the associate level, however, fixed pay and bonuses in London are higher.

Part of the Dubai’s high demand is due to its tax-free income that the expatriates enjoy. It offers a vibrant financial industry and is a regional hub for some major banking and investment firms. While the base salaries and bonuses may be higher in London at the MD and Director levels, the UAE emerges as the winner after adjusting for tax and benefits for expats. The UAE does not impose taxes on income, which is why professionals from all over the world wish to work and earn here. The tax-free business park Dubai International Financial Centre houses regional offices of financial institutions such as Goldman Sachs Group Inc, Standard Chartered Plc and Citigroup Inc.

According to Morgan McKinley’s Market Insight 2014, the basic salaries are expected to increase this year by 6-8 per cent in the banking and financial services. Overall, the year will see a rise in recruitment in the UAE which will further improve the salaries.

Devika Arora is a professional writer currently focusing on the extensive domain of career building. She has written various articles and blogs for the benefit of job seekers who are looking for jobs in Dubai and would like to learn more about the work culture and remuneration in the region.

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