Companies in the UAE are budgeting for higher salaries next year amid calls for higher compensation to offset rising inflation.

In a survey by global consulting firm Mercer, companies said they are planning to grant salary adjustments of 5% in 2023, which is higher than the 3% to 4% salary hikes rolled out in recent years.

So far, most businesses have been hesitant to heed calls for higher salaries this year, with almost 84% of those polled by Mercer acknowledging that they have yet to adjust workers' pay despite soaring living costs.

Mercer's survey, which included more than 200 global and local organisations from all sectors, showed that nearly seven in ten (67%) of companies in the country have already received requests from staff regarding compensation and allowance adjustments.

Plans for salary adjustments

Among those polled, nearly half (47%) said they don't have plans to make adjustments, while over a third (37%) are either considering or planning some form of off-cycle adjustment to workers' earnings in 2022.

Only 16% have responded to requests by taking some form of action, including one-time lump-sum payments, off-cycle salary increases and housing allowance adjustments. Others have also granted salary increases of 4%.

"Most businesses in the UAE, however, are resisting employee demands," Mercer said.

"Employers are being cautious about immediately bumping up wages to match inflation, and many are considering short-term actions with less permanent implications such as lump-sum amounts or retention bonuses or are investing in improving employees' work experience by offering improved work-life balance, flexibility and training," said Andrew El Zein, senior associate consultant for career, MENA at Mercer.

Inflation in the UAE is expected to reach 5.6% this year, according to the data from the Central Bank of the UAE. Dubai also ranks among the world's most expensive cities to live and work in for expatriates this year, according to Mercer's 2022 Cost of Living survey.

(Reporting by Cleofe Maceda; editing by Mily Chakrabarty )