Bahrain stands fifth in GCC salary hikes
Bahrain, 25 Sep 2005
A survey of salary trends in the GCC has revealed that Bahrain stands fifth among the six Gulf countries in terms of increase in salaries and compensation packages with a 6.3 per cent rise recorded over a twelve-month period ending August 2005.
The report entitled "Gulf Compensation Trends 2005" revealed an average Gulf-wide salary increase of 7.0 per cent over the one-year period to August 2005. Qatar leads the group with a 7.9 per cent increase, followed by Saudi Arabia with a 7.4 per cent increase, Kuwait with 6.9 per cent, UAE with 6.5 per cent, Bahrain with 6.3 per cent and Oman with a 5.9 per cent increase.
The latest findings, based on a survey of 3,000 professionals across the GCC, by GulfTalent, one of the region's leading online recruiting agencies, provide a strong indication that the rising inflation and increases in public sector pay packages are finally having an impact on private sector compensation. According to the report, the sectors enjoying the best compensation package improvements in the region are banking & finance, construction and real estate. The lowest pay rises were reported in healthcare and education.
"An increased cost of living is of course the top reason why employee compensation packages in the region are rising," said Suhair Ajjawi, Executive Recruitment Manager at Ernst & Young in Bahrain, "However, we have not seen any major increase in Bahrain - the change is actually more in how people perceive moving and working in other countries than in the compensation packages."
People in India and Pakistan who were eager to take up GCC jobs in the past are today more interested in going West where they have better career opportunities and the option of taking up citizenship and putting down roots in the long run, she said.
"If there is no opportunity for substantial savings, professionals are just not interested anymore in coming to the Gulf," she said, "It is not like the "seventies and "eighties when people were willing to work their way up the pay scale."
Meanwhile, Bahraini professionals are more open to jobs outside Bahrain and the movement to seek jobs in other GCC countries - Qatar and Dubai top the list - is gaining momentum, Suhair said.
With higher income from oil exports, several GCC governments have taken the lead in increasing salaries, which has put pressure on the private sector to follow suit. In Bahrain, which has the slimmest oil resources among the GCC countries, the government passed a hotly-debated bonus package for civil servants but despite pressure from the Chamber of Deputies, the private sector has so far resisted any effort to make it follow suit, citing infringement of its freedom to conduct business and diminishing profits as reasons for not doing so. GulfTalent's earlier research released in March had indicated a limited rise in UAE salaries, despite massive increases in rents.
The latest findings provide a strong indication that rising inflation and increases in public sector pay packages are finally having an impact on private sector compensation. In Bahrain, while rents have increased, rental allowances that are an integral part of expatriate compensation packages, have not, thereby offsetting any increase in salary levels.
While the overall trend in pay rises across the GCC reflects fundamental similarities between their economies, there were some differences. Rises in the overheated UAE economy have been fueled by high inflation resulting from a dramatic and sudden rise in rents and basic amenities. The same is true in Qatar and to some extent in Kuwait. On the other hand Saudi Arabia, Bahrain and Oman have had low inflation rates with pay rises in those markets driven primarily by increased competition for a limited supply of qualified talent.
All these developments have sent HR managers across the region into what the report characterises as "a frenzy of activity" as human resource departments rush to calculate appropriate pay increase levels for their organisations. Multinationals, especially, are scrambling for accurate data to compute new pay scales since they have to deal with head offices in other countries and tough internal policies that demand sound data inputs for every decision. A Bahrain-based HR Manager for an international bank told interviewers, "We offered a job to a candidate, but he turned it down and joined a competitor in India, with a similar package to what he would get with us here in Bahrain!"
Another recruiter from the Kingdom was surprised when he went head-hunting in India for a senior manager and found the interviewees setting deadlines for a response from the company since they were weighing options from Singapore and from within India itself which matched Gulf packages.
The report predicts that salaries will continue to rise over the next year, noting that higher salaries may in turn lead to further inflation as employees with bigger paychecks spend more money. If the trend continued in the long term, the report said, the growing costs of operating in the Gulf may force some businesses to relocate elsewhere, or to outsource their non-customer-facing operations to other cheaper parts of the world.
Although the report anticipated that the higher cost of staff would encourage companies in the region to invest more in recruitment and training of Gulf nationals, particularly women, whose participation in the workplace has been the lowest, recruitment professionals are seeing mixed trends.
"We don't see any huge spending programme in training in Bahrain unlike in the '60s and '70s when top companies like Bapco, Batelco and Banagas invested heavily in grooming business leaders," Suhair said, "As for women benefitting from the training drive, well, Bahrain has already done pioneering work in this field as has Oman while Saudi Arabia has just started and we shall have to wait to see the results."