Salary Hikes Predicted across the Gulf

The average pay rise of 6.5 per cent across the UAE as a whole during the 12-month period to August 2005, although significant, seems modest in comparison with the rent and fuel inflations running at 30 to 50 per cent.

This is the finding of the "Gulf Compensation Trends 2005" survey conducted across the GCC by Dubai-based GulfTalent to quantify the magnitude of the salary increases so far. The survey covered professionals while interviews were also conducted with a number of human resource managers to form a view on the likely future trends in compensation.

GulfTalent is a leading online recruitment service for professionals, managers and senior executives across the Middle East.

The results of the survey indicate an average Gulf-wide salary increase of 7 per cent between September 2004 and August 2005. Qatar leads the increase with 7.9 per cent, while Oman has had the lowest increase at 5.9 per cent.

UAE salary increases in 12 months to August 2005 are: 3 per cent in Sharjah, 6.1 per cent in Abu Dhabi and 7.4 per cent in Dubai, according to the survey.

The salary increases so far have not been uniform across the UAE. While the figures for both Dubai and Abu Dhabi have been close to the national average, Sharjah pay rises have been significantly lower, rising only 3 per cent during the period.

On a gender basis, women outperformed men in the UAE, receiving an average pay rise of 7.8 per cent compared to just 6.2 per cent for men.

With a large number of candidates chasing a limited number of jobs, employers had the upper hand in dictating terms. As a result, pay rises in the UAE were lagging behind those in other Gulf countries.

Over the last 9 months, however, the persistent rise in costs, particularly of rental accommodation, has changed the picture in the UAE. In April this year, the UAE government announced a pay increase for all federal government employees, 25 per cent for UAE nationals and 15 per cent for expatriates. Many private companies have followed suit. The trend is clearly upwards, the survey found.

The GulfTalent survey said that the overall trend in salaries remains upwards, with most HR managers interviewed expecting their company’s next pay increase to be greater than the previous one.

On the future trends of compensation in the Gulf, the survey said that while many companies have already raised their salaries, the ripple effect of massive public sector pay rises will take some time to fully feed through to the private sector. Given this, the continued rise in living costs as well as the continued strength of the regional economies, the upward pressure on salaries is expected to continue if not accelerate.

This report predicts further increases in compensation levels across the Gulf well into next year. January 2006 may see one of the largest average monthly salary increases the region has seen for many years, given the current trends and the large proportion of companies, which implement their annual pay increases in the month of January.

Beyond the next 6-12 months, the outlook is uncertain. Current inflationary pressures and increased purchasing power resulting from current pay increases will lead to further price hikes, which may in turn push salaries even higher.

With the high level of mobility between the countries, increases are expected to be in a broadly similar range across the Gulf. Saudi Arabia is likely to see the highest increase over the next 12 months, given the lower structural flexibility of its labour market and the larger impact of its public sector pay rise.

Over the long term, the continued rise in salaries is likely to have a number of structural consequences for the regional economies. Clearly the increase in the cost of labour cannot continues indefinitely. At some point, it will become uncompetitive for some businesses to continue to operate profitably.

The survey said that with the economies of the Gulf growing at a rapid pace, compensation has become a hot issue across the region. The increase in cost of living in many cities, growing demand for skilled staff, limited supply of available talent, and Gulf citizens’ growing expectations of a share in their countries’ oil revenues have all combined to put significant upward pressure on compensation in both the public as well as the private sector.

Pay rises have varied substantially by industry. Sectors with the fastest growth and/or greatest reliance on local knowledge and regional expertise, such as real estate and construction) have had the highest increases at 8 to 9 per cent, while those with more modest growth or those with the largest proportion of expatriates in their workforce, such as healthcare and education, experienced the lowest increases at 5 to 6 per cent.