Construction firms warned against slashing salaries

Pay cuts will ?almost certainly? impact negatively on the quality of projects, say experts

GCC construction sector, Michael Burchell, FiveTen Group, Dr Jay Palmos, Mike Al Nassir, partner in charge of Middle East, Africa and India, Mace Group project director Mark Kennedy A recent report signalled a drop of up to 25% in salaries paid to employees in the GCC construction sector, but experts say those construction companies that resort to cutting wages do so at the expense of project quality and risk losing their top staff.
Demand for construction engineers, architects and project managers has taken a major hit in the UAE with their salaries declining by up to a quarter this year, recruitment experts told online news agency Emirates 24|7 last month.
“The salary package offered to construction professionals now is considerably low compared to a couple of years ago. On average these positions have seen a fall of 15-25% in salary levels, although it depends on companies and the project they are working on,” said Mark Baxter, who is regional director of global recruitment consultancy FiveTen Group.
However, Dr Michael Burchell, partner and director of global research and consultancy firm The Great Place to Work Institute warns companies against slashing salaries or devaluing new and existing staff.
“The biggest danger of salaries declining is the probability that top talent will move to another sector, company or country. Even if the decline in salaries was mostly shouldered by lower-performing employees, top staff members look for trends and indicators that their jobs and their companies are stable.”
Similarly, Hill International managing consultant Dr Jay Palmos says: “Limited demand in the
UAE and smaller packages on offer will lead to many of the best people leaving the emirates, attracted by more lucrative markets such as Libya, Kuwait, Saudi Arabia and Qatar.
Furthermore, Burchell suggests that salary reductions, alongside other retrenchments, are likely to negatively impact on the quality of projects.
“Lower salaries will certainly impact the quality and diversity of new hires and may lead to turnover of existing talent. Lower salaries, coupled with the stress of fewer workers to do more work, the focus of quarterly profit making and the removal of employee development programmes due to a lack of time or money, will almost certainly impact the quality of projects,” he tells The Big Project.
“Pay cuts are usually just one aspect of a management team’s retrenchment in difficult economic times. So, while construction companies need to be mindful of how they demonstrate respect through paying people appropriately, they also need to be aware that there are a number of other issues that are likely to impact project quality.”
Mike Al Nassir, partner in charge of Middle East, Africa and India at global executive search firm Pedersen & Partners told Emirates 24|7 that the biggest drop in remuneration packages offered to construction professionals has been in terms of the non-salary benefits or perks offered to new recruits, rather than in the actual basic salary.
For instance, the amount of housing allowance paid now is typically lower than what it was several years ago.
Similarly, instead of getting three or four free return tickets for annual holidays, new recruits might get one or two return tickets home per year. “The benefits have gone down on average by up to 40%,” he says. Pay cuts have not been confined to the UAE or to white-collar jobs either, says Nicholas McGeehan, one of three founders of regional workers’ rights group Mafiwasta.
“The recent cuts in salaries for skilled construction workers reflect the overall problem in the construction sector, but the different manner in which skilled and unskilled workers are treated is incomparable, as is the manner in which this global financial crisis has affected those two groups.”
McGeehan says that many workers from India, Pakistan and Bangladesh have faced serious  monetary problems. in light of redundancies, large pay cuts, and in some cases, the folding of
contracting firms, which still held onto their passports.
“The reaction of the construction sector to the global economic downturn may simply be to bring in even cheaper labour from even more impoverished states. Chinese workers have been
operating in the Gulf for some years and are said to be paid less than south Asian workers, but this would be ill-advised.”
He concludes that the construction sector will continue to prosper in the UAE, but only based on solid finances, reasonable expectations and the principle of equal pay for work of equal value. However, others in the industry believe that increased competition in the jobs market is likely to have the adverse effect of driving up the quality of projects.
Mace Group project director Mark Kennedy asserts: “A reduction in contractor salaries doesn’t affect the quality of a project. In fact, quality can be improved during the current market. While contractor profits and, hence, salaries may be higher in a boom period, when the demand is down you can get better quality contractors for less money.
Likewise, Palmos says today’s jobs market has alleviated some of the issues that may have negatively impacted on project quality in the past.
“In 2006, the biggest problem in the UAE was getting materials and a skilled workforce, but now there is no trouble getting skills. Qualified people are fighting for whatever jobs they can get.
At one time you would have had to pay one person a massive sum to do a job and the workmanship would be poor because they could get whatever job they wanted. This has changed.”
But Burchell says construction firms should avoid neglecting staff during a downturn, as these companies could find themselves struggling to attract talented individuals once the market picks up. In fact, the companies that look after their staff during both the highs and lows of business could find themselves in a much stronger position in the future, and may even make it onto The Great Place to Work Institute’s ‘Top Companies to Work For’ programme, which was recently launched in the UAE.
The programme is an annual ranking of the nation’s best employers and is one of several business and advisory services that the institute will make available to GCC markets over the coming months.
The firm says its workplace assessment is a valuable tool for companies seeking a competitive edge in the post-recessionary business climate. Following last year’s slowdown in the UAE labour market, when a reported one in 16 professionals lost their jobs, measuring the extent to which employee loyalty and engagement has been maintained will be vital in preparing for the upturn.
But what qualities make a construction firm one of the top companies to work for? Burchell outlines three key factors: Clear, robust and consistent communication with employees, coupled with feedback loops for questions and suggestions. Secondly, the appointment of leaders and managers which “are present” and show up on the various construction sites, the company should be able to relate to employees and ensure they are well supported to do their work. And thirdly, top firms demonstrate respect, such as implementing a comprehensive safety programme, offering staff opportunities to develop personally and professionally, and recognition of excellent work.

Know your rights

International law firm Clyde & Co LLP senior associate – Employment & Incentives Group – Sara Khoja tackles some of your frequently-asked questions relating to employee rights

My salary has been slashed but I still remain in the same role
Any variation to an employee’s terms and conditions of employment must be agreed with the employee and cannot be imposed unilaterally. An employer can only reduce an individual’s salary by agreement.

What are an employer’s legal obligations when introducing a salary cut?
The employer should negotiate the salary reduction with the employee and receive his agreement. A new Ministry of Labour employment contract will also need to be registered to show the revised salary rate.

What if I do not agree to a proposed wage reduction?
Although salary reductions cannot be imposed unilaterally, if a business makes a decision that employee costs are too high then it can decide to make terminations rather than salary reductions. An employer can do this by serving contractual notice at any time and paying out the contractual entitlements, together with the end-of service gratuity entitlement.
In 2009, many employers consulted with employees and agreed salary reductions across the workforce as a means of avoiding possible redundancy terminations.

I’m about to accept a job offer, is there anything in the contract that could lead to future disputes?
It is unusual to build into a contract that the salary will not be decreased. It is more common for an employee to negotiate specific year-on-year increases. That said, an employee can ask an employer to guarantee a set salary or salary and bonus for a specific period of time.


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