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Do bankers deserve to earn more in the Gulf?
5 August 2008
What with tax-free salaries and fierce competition for talent, the GCC is fast becoming a location of choice for Western bankers. But pay is fast being eroded by spiralling inflation. Should banks in the Gulf increase pay accordingly?
For bankers based in the GCC, the most obvious answer is yes.
Before tax, bankers in the Gulf are still a lot worse off than their Western counterparts. A salary survey by recruiters Charterhouse Partnership suggests that the average analyst investment banker will earn around $65k in the UAE. Meanwhile, US peers can expect $60k-$70k in the first year, rising to $70k-$80k and then $80k-$90k, according to search firm The Options Group.
At the senior end the difference is more pronounced. An MD in the Gulf will haul in an average $343k in the UAE. London counterparts will take home £270k ($540k), according to a Robert Walters salary survey.
When tax is taken into consideration, the GCC bankers at the lower end are actually better off. An analyst earning $80k in the US would take home $65.1k. While an MD (on the higher tax bracket) will only be marginally better off than those in the GCC – earning a net $374k.
Still, headhunters tell us that Western bankers are increasingly refusing to take a lower gross salary in the Gulf, in spite of the tax-free benefits.
It’s also questionable whether GCC-based banks can afford to pay up. A survey by Hewitt Associates says that salaries now make up 60% of their operating costs.
Should local pay increase in line with inflation? Or do GCC bankers already earn too much?
I think that the bankers in the gulf are dealing with simplier products, more plain vanilla products and services compared to their Western counterparts. Therefore, there is no need to match their salaries with those of the West.
CT 05 Aug 2008
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