Employers and employees in the UAE and Saudi Arabia are set for a potential conflict in 2018 on the back of a contraction in salaries in real terms as the region's two biggest economies introduce value - added tax (VAT), according to the human resources consultancy Korn Ferry Hay Group.
Salaries in the UAE are expected to rise 4. 1 per cent this year but after factoring in an expected inflation rate of 4. 6 per cent, they will on average contract by 0. 5 per cent, it said in a report released on Wednesday.
"Employers in Saudi and UAE are bracing for a challenging time as they battle with managing business costs and meeting the expectations of disgruntled employees, " the HR consultancy said.
Businesses and employees are preparing for additional complexities of managing costs with the introduction of VAT from January 1, 2018. The biggest impact will be on end - consumer products which will see a 5 per cent rise in all major purchases including household goods and utility expenses, Korn Ferry noted.
"There seems to be little indication of employers supporting any real wage increases to support employees with the additional cost of living, " it said.
Globally, employees will see an average wage increase of just 1. 5 per cent after adjusting for inflation, while in the Middle East, wages on inflation - adjusted basis are set to rise 0. 9 per cent.
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