Gulf State companies are digging in for a war to recruit the best talent against global rivals, but are refusing to sweeten their deals with big pay packets for expats.
A series of recent surveys have shown average pay and benefits packages in the region have dropped by between 5% and 10% in the past year.
Recruiters are claiming they are struggling to attract the right talent when other regions are willing to pay more.
Expat salaries are generally a stack of benefits on top of a basic salary.
The average package is basic pay, housing allowance, health insurance and air tickets for visits back home.
For senior expats, other allowances and benefits may be bundled with the package, like private schooling.
Limited talent pool
However, the general feeling in the region is companies are turning away from more demanding Western expats to those from North Africa and Asia who have the same skills and experience but accept lower pay packages.
The problem is the talent pool is limited and a lot of companies are chasing the same people, not only locally but worldwide.
One sector where this is more apparent is financial services.
Online job site efinancialcareers points out that recruiters in the Middle East are not only competing with other companies in the region, but also higher salaries and benefits packages paid in Britain, the US, Hong Kong and Singapore.
The balance seems to be slowly changing in the region, as in the past the big draw for expats was tax-free salaries, but other regions are competing by paying a bonus and increased benefits that erode the value of paying no tax.
Many recruiters feel salary and benefit packages offered in the Middle East are inconsistent and lack structure that makes them difficult to compare not only from company to company, but between regions as well.
Rising rents and school fees
A rising cost of living in favourite expats destinations like Dubai and Abu Dhabi are also eating into the value of salary and benefit packages.
Human resource consultants Towers Watson explained many companies are reviewing housing allowances as rents in the UAE continue to increase and some are providing a schooling allowance as fees keep rising as well.
“If an expat expects an employer to pay for absolutely everything when they relocate, then they need to have a rethink about the posting,” said a spokesman. “Gone are the days when firms would pay for transporting pets, visas, maids and drivers.
“Expats have to consider paying for lifestyle choices out of their own pockets unless they are quite high up the chain of seniority.”
