Companies are using benefits to replace a competitive salary. Is it working?

Employers now use more than a competitive salary to attract talent. Flexible work, additional leave, lifestyle perks, and wellness programs are increasingly being packaged alongside, and sometimes in place of, higher pay. 

But many are starting to see these perks as less valuable, especially when their pay doesn’t cover basic living costs and the benefits don’t meet their real needs. 

In fact, 95% think traditional one-size-fits-all packages are outdated. Employees now want benefits tailored to their age, family status, and gender.

INADEQUATE SUBSTITUTES

Nada Mohamed, 26, works in health insurance. She recently got a job offer from a major insurance company, but the salary was too low even though the package included travel, food, and gym allowances.

She tried to negotiate a slightly higher salary in exchange for fewer benefits, but was unsuccessful.

“Many organizations see certain benefits as a placeholder for a competitive salary,” Mohamed says. “There’s a clear disconnect between what companies believe is proper compensation and what employees need in today’s economy.” She also points out that some companies know their salaries are too low and try to make up for it by offering more benefits instead of fair pay.

Lorna King, Co-Founder of EXE and Workplace Culture Consultant, says more and more companies are looking at the whole package rather than simply increasing salaries. 

A major reason for this strategy is cost. “Increasing base salary is a permanent commitment, whereas organizations have more flexibility around benefits,” says King.

This creates a risk that benefits are used to compensate for fundamentals that aren’t working, King adds. “People come to the UAE and wider region for lots of reasons, but financial opportunity and quality of life are two big ones. So the question employers should ask is simple: does this benefit genuinely improve someone’s life, or is it just window dressing?”

She cites research from her organization: 81% of GCC employees would recommend their organization as a great place to work, yet 24% still expect to leave within the next two years.  

“Liking where you work and choosing to stay are not the same thing,” King says. “Ultimately, the value exchange goes beyond pay and benefits. It is also about how people feel at work and whether what they get back feels worth what they give.”

Nathalie Cooper, Managing Director and Recruiter at LinkkSearch, says a benefits-based strategy largely depends on the company’s size, demographics, and sector.

While benefits such as flexible working can be particularly important for many women with children, and other perks like wellness and lifestyle benefits, or benefits like a gym membership can be attractive, she says, “they are not compensation. You cannot take your gym membership and use it to pay your rent.”

“In practice, if employees are paid competitively, treated well, and given genuine flexibility, many additional perks become secondary. A good salary gives people something that many benefits cannot: choice. They can decide how to spend it based on what actually matters to them,” adds Cooper.

BENEFITS THAT MATTER

Mohamed says, in Egypt, many small companies do not provide social or health insurance, and remote employers may offer only limited coverage.

“Many organizations also refuse to offer flexibility as one of their benefits, requiring employees to be in the office every day,” says Mohamed, adding that flexibility is one of the most valued benefits in the workforce, but is often resisted by organizations.

King says assumptions are dangerous when it comes to benefits. Employees will vary by role, industry, life stage, and personal circumstances, so employers need to understand what their own people actually value. The benefits that matter most are usually those that give people time, flexibility, and a better quality of life, especially in a region where expatriates dominate the workforce.

“Flexibility is a big one. In this region, just sitting in traffic can take a huge amount out of people’s day. Giving someone more control over when and where they work can materially improve their quality of life,” King says. “It also helps employers retain people and widen the talent pool they can reach.”

Well-being cannot just be a program, she says, and a gym membership cannot fix an unsustainable way of working. “And there is a real risk when what an organization says and what employees experience do not match.”

“If you promote well-being, flexibility, and care in policy, but people are routinely worked into the ground, you create an expectation about the culture that the lived experience then fails to meet. That can make the disappointment even greater.”

Cooper questions whether some things, like employer-provided health insurance, should even count as benefits, since private-sector employers are required to provide it.

“The real benefit is in the level of cover an employer chooses to provide – better networks, dental, optical, international, or family coverage, for example.”

Housing and education allowances also remain highly valuable because they address two of the highest living costs for expat families in the UAE.

She points out that education allowances are often less generous than they used to be.

“Where 100% school-fee coverage was historically seen in some senior packages, today I increasingly see allowances capped annually, limited to a percentage of fees or restricted to a maximum number of children. In some offers, they have disappeared altogether.”

She says families should try to keep and negotiate this benefit. In the UAE, paying for one child’s private school can feel like paying a second rent.

“We need to distinguish between benefits that look good on paper and those that genuinely change an employee’s day-to-day life. The benefits with real value are the ones that either reduce a high cost or give people back something equally valuable: time and flexibility.”

EMPLOYER DISCRETION 

One question should remain relevant for companies: Are you attracting and retaining the talent you actually want?

King explains that a compensation package might look good on paper but still fall short in real life. Many factors matter, like brand reputation, location, leadership, culture, flexibility, and career growth. Benchmarking has a role, especially for pay, but it is not the only answer.

“If you are struggling to attract the right people, losing strong employees, or seeing candidates turn you down, then something in the proposition is not landing. The next question is why. And the best way to find that out is to ask them,” King adds.

She advises companies to talk to candidates who decline offers, people who leave, and the employees they most want to keep.

“Ask what mattered in their decision, what they valued, and where the proposition fell short.”

Monitoring what competitors are doing is also key. Cooper says, “Employers need to benchmark both salary and benefits against comparable organizations in their sector, rather than looking at the overall package and assuming it is competitive.”

Similarly, she believes that the best information is already inside the organization.

“Anonymous employee surveys can provide valuable insight into how people genuinely feel about their compensation and benefits before it becomes a retention issue. If employees are leaving for competitors, conduct proper exit interviews and understand why. Was it salary, benefits, flexibility, or a combination of factors? Patterns will quickly tell you where you may be falling short.”

THE FUTURE OF BENEFITS

It is hard to predict how companies will shape job offers in the future, since people make work decisions for many different reasons at different times in their lives. King says, “Some people leave highly paid jobs because the culture is making them miserable. Others stay in lower-paid roles because flexibility works brilliantly for their life. And others will leave a workplace they genuinely like because someone else is offering significantly more money.”

“There is no single hierarchy, but there is a threshold,” she adds, explaining that if an employee feels materially underpaid, benefits can only compensate for so long.

The real question is why someone wants to leave. For some, it is about money. For others, it could be their manager, workload, career growth, flexibility, or time with family.

“Nobody is staying in a job they hate because they have a gym membership.”

As the cost of living rises, King says people need to feel that what they earn still supports the life they are trying to build. “Benefits can strengthen the overall experience, but they cannot replace fair pay and a healthy culture.”

In the long run, Cooper says, employees who feel underpaid will rarely be satisfied by benefits they may not fully want or need in the first place.

“At some point, feeling underpaid also becomes about more than money. It becomes about perceived fairness and how much an employee believes their contribution is valued. No amount of additional perks can easily compensate for that.”

While benefits may help retain someone for a period of time, they cannot continuously be used to plaster over or disguise a below-market salary.

“The reality is, benefits can enhance the employee experience, but they cannot fix a compensation problem,” adds Cooper.