The Real Cost of Underpaying Salaries in UAE

Scenario:

A promising candidate impresses during the interview process.

HR: “We loved your interview—you’re the best person for the role.”

Candidate: “Amazing!”

HR: “What’s your salary expectation as a Senior?”

Candidate: “AED 28,000 to AED 30,000 a month, as per my submission.”

HR: “Oh well, our budget is only AED 25,000. However, after probation, we can increase it.”

Candidate: “Okay, that would be fine.”

HR: “Great, send me your passport, and we’ll send you an offer.”

Candidate: “Great, can we put this in writing?”

HR: “No, unfortunately, our employee contracts are standard and we cannot amend them.”

Candidate: “OK.”

Despite having a budget higher than AED 25,000 for the role, HR celebrates their success in negotiating a lower salary, thinking they’ve saved costs for the organization. However, this short-term win often leads to long-term consequences that can be detrimental to both the employee and the company.

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The Fallout of Salary Disparities

Initially, the new employee agrees to the lower salary, believing in the promise of a review and increase after the probationary period. But as the months pass, the salary review doesn’t materialize. The employee begins to feel undervalued, leading to dissatisfaction, disengagement, and eventually, disloyalty.

By the end of the third month, the employee has found a better opportunity elsewhere and decides to resign. What follows is a costly and time-consuming recruitment process for the organization to fill the vacancy, resulting in performance gaps and additional expenses.

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The Importance of Fair Compensation

To attract and retain top talent, it’s crucial for organisations to provide fair and appropriate compensation from the outset. When employees feel they are being compensated fairly, they are more likely to be engaged, loyal, and productive.

In fact, a recent study in the Middle East found that 70% of employees consider fair pay as a top decision factor with regards to their basic salary in UAE  to stay with a company. Conversely, 64% of employees who felt underpaid were likely to look for a new job within the next year.

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This short-term win often leads to long-term consequences that can be detrimental to both the employee and the company.

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The Power of Written Agreements

Moreover, it is strongly recommended to document everything formally in writing. When promises about salary reviews or potential increases are not documented, it leaves room for misunderstandings and can create a sense of mistrust between the employer and employee. Written agreements provide clarity and protect both parties, ensuring that expectations are aligned.

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Knowing your worth

Salary guidelines are crucial for candidates when deciding on a job because they provide clarity on what to expect in terms of compensation and benefits. They help candidates understand their market value, make informed comparisons between different offers, and ensure they’re being paid fairly for their skills and experience. Additionally, transparent salary structures reflect a company's commitment to fairness and transparency, making it easier for candidates to choose an employer that values and rewards their contributions appropriately.

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Conclusion: The Real Cost of Saving on Salaries

In the end, while HR may feel they’ve saved the company money by negotiating a lower salary, the reality is often far more costly. The expenses incurred from high turnover rates, the loss of a talented employee, and the subsequent recruitment process far outweigh the initial “savings.”

Organizations that recognise the value of fair compensation and formalize agreements are better positioned to maintain a motivated and committed workforce, ultimately leading to greater success in the long run.