Running a pay review in the United Arab Emirates
Reviewed by Mellow Editorial Team, HR & payroll content team
A pay review in the UAE has no legal minimum frequency, but most employers run one annually — typically aligned to the calendar year or financial year end. There is no statutory requirement to increase salaries, so the process is driven by market practice, retention needs and budget.
What triggers a pay review
Most UAE employers run a formal pay review once a year. Common timing choices are January (aligned to the calendar year), April (aligned to a financial year) or after annual appraisals, which many companies complete in Q4.
Outside the annual cycle, a pay review is also warranted when:
- A role has changed significantly in scope
- A high performer receives a competing offer
- A new salary survey shows your pay is materially below market
- You are promoting someone into a new grade
Ad-hoc reviews are normal. The UAE labour market moves quickly, and waiting twelve months to address a clear pay gap usually costs more in replacement fees than the salary adjustment itself.
Building your benchmark data
There is no single official salary index in the UAE, so you will need to pull from several sources and triangulate:
Salary surveys. Mercer, Korn Ferry and Hays all publish UAE-specific data. Most are subscription-based, but Hays publishes a free annual guide that gives reasonable directional data for common roles.
Job postings. LinkedIn, Bayt and Naukri Gulf regularly show salary ranges. These skew toward what employers are advertising to attract new hires, so they reflect the external hire rate rather than the total-cost-of-tenure figure.
Internal equity analysis. Before looking outward, map what you are paying today. For each role, plot employees by tenure, performance rating and current basic wage. Outliers — both underpaid and overpaid relative to peers — should be flagged before you set budgets.
A useful starting point is to benchmark basic wage separately from total package. In the UAE, total package often includes housing allowance, transport allowance and medical insurance. Candidates compare total cash; your payroll team cares about basic wage because gratuity and WPS calculations are based on it.
How end-of-service gratuity affects your thinking
End-of-service gratuity is a real liability that grows with every salary increase. Under Federal Decree-Law No. 33/2021, expatriate employees accrue 21 days' basic wage per year for the first five years of service, and 30 days' per year after that, capped at two years' total pay.
When you increase an employee's basic wage, their future gratuity accrual increases from that point forward. For a long-tenured employee on the 30-day rate, a 10% basic wage increase means a 10% increase in gratuity accruing annually. Factor this into your total cost modelling, not just the headline salary number.
UAE and GCC nationals enrolled in the GPSSA pension scheme are subject to separate employer contribution obligations, so any basic wage change also affects your pension contribution line for those employees.
Structuring your pay review budget
Most UAE employers set a pay review budget as a percentage of total payroll — commonly in the 3–6% range for a standard annual cycle, though this varies significantly by sector and business performance.
A few principles that hold up in practice:
Differentiate on performance. A flat across-the-board increase rewards poor performers and under-rewards strong ones. A typical split might allocate nothing to employees rated below expectations, a base increase to solid performers and a larger increase plus a one-off payment to top performers. One-off payments do not compound into future gratuity liabilities, which makes them a useful tool.
Protect your critical roles first. Before spreading the budget evenly, identify the five to ten roles where losing the person would cause the most operational damage. Make sure those employees are at or above market.
Hold back a reserve. Announce individual increases and retain 10–15% of the budget for mid-year adjustments, counter-offers or new hires who come in above the existing band.
Communicating the outcome
Employees in the UAE are accustomed to receiving a formal offer letter or salary amendment letter when pay changes. Issue this in writing, signed by both parties, and retain a copy in the employee file. WPS submissions will need to reflect the updated figures from the effective date.
Be direct about what drove the decision. Employees generally respond better to "we benchmarked your role and you are now at the 60th percentile" than to vague language about the company valuing their contribution. Specificity builds credibility, even when the increase is modest.
If an employee is not receiving an increase, explain why and — if possible — set a clear condition or timeline for the next review point. Leaving someone in the dark is the most reliable way to start a resignation conversation.
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