Gulf salaries rise by 11.4%

Posted on October 08, 2008

Inflation and talent shortages drive up salaries, but pay rises may ease with influx of Western expatriates following global downturn

Private sector salaries in the Gulf region increased at an average rate of 11.4% over the last year, according to figures released by GulfTalent.com.

In its fourth annual survey of salary trends in the region entitled “Gulf Compensation Trends 2008”, GulfTalent.com revealed the following increases in basic salary by country, over the twelve-month period to August 2008:

The UAE and Qatar topped the list of pay rises with increases of 13.6% and 12.7% respectively. This was followed by Oman at 12.1%.

Bahrain came fourth at 10.5%. Kuwait and Saudi Arabia once again came at the bottom, with average rises of 10.1% and 9.8% respectively, though still high by historical standards.

All six markets saw pay increases accelerate relative to last year. The majority of these, however, are still below the forecast rates of inflation for 2008, suggesting diminishing net disposable incomes as pay rises fail to keep up with rising cost of living.

A notable exception is Bahrain, where the average salary increase of 10.5% is marginally higher than the 9.0% inflation rate forecast for the country this year.

Across the region, the frantic pace of growth in the construction and energy sectors escalated demand for engineers, who received the biggest average pay rises. This was followed by finance professionals in second place, largely due to the rapid expansion in the banking sector.[See full report ]

Key Factors

According to GulfTalent.com’s study, pay rises were driven by a continued shortage of talent across most sectors, as well as the spiralling cost of living, particularly in residential rents. Following global trends, food prices have also soared this year, helping bring double-digit inflation to virtually all the Gulf states.

Other contributing factors highlighted in the report include large pay hikes awarded to government employees, as well as rising salaries in India, the Gulf’s main source of expatriate professionals.

The weakness of the US currency until a few months ago is cited as another factor driving up wages for much of the year, with several companies introducing formal exchange rate protection in the compensation packages of their expatriates. The pressure has subsided, however, following the sharp rise in the value of the US dollar over the last few months.

Kuwait appears to have benefited from its decision to unpeg its currency from the US dollar. With the Kuwaiti dinar rising by 8 percent against other Gulf currencies, Kuwaiti salaries have become more attractive for expatriates relative to its neighbours.

Five-day week

According to the report, the region’s ongoing war for talent is forcing employers to adjust, not only their salaries, but also their working practices.

In a major new trend, 2008 has seen a large number of companies with six-day working weeks, including many in construction and retail sectors, switch to shorter five-day weeks in an effort to improve staff retention. The trend is expected to continue towards further consolidation of the five-day week, bringing the region into line with much of the rest of the world.

Another common trend is the emergence of pay disparities between new and existing employees. Several employers surveyed by GulfTalent.com reported offering higher packages to new hires than those received by existing staff in similar roles, as firms struggle to attract talent in a tight market. The disparities are causing significant tension among employees, sometimes leading to further attrition, requiring yet more recruitment at higher pay, the report said.

2009 Outlook

Most human resource managers surveyed by GulfTalent.com reported aggressive recruitment targets over the next 12 months, and the majority expected 2009 salary increases to be similar to those in 2008.

According to GulfTalent.com, this is consistent with the current fundamentals of the economy – with the oil price still at historically high levels, inflation rampant across the region, and salaries in India so far continuing to experience double-digit growth despite the global slowdown.

The study cautioned that beyond the next few months, the upward pressure on pay rises may start to ease - depending on the strength of the US dollar, the depth and severity of the expected downturn in Western markets, and the extent to which the downturn spreads to developing economies, including India.

Given the current economic gloom prevailing in the US and Europe, the report highlighted the possibility of a flood of Western-based professionals to the region, including those of Arab or Muslim origin, on a scale not seen since the post-9/11 influx. The employers’ ability to benefit from this trend would vary, however, depending on their sector of activity, their location within the region, and the management’s ability to attract and absorb a Western talent pool, the report said.

GulfTalent.com’s study was based on a survey of 29,000 professionals in the six countries of the Gulf Cooperation Council (GCC), as well as interviews with regional business leaders and human resource managers. The survey was conducted between 15-30 September 2008.

[See full report ]

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Comments (11)

Sultan
Team Leader | Dubai-based Bank | UAE

What use if rent increases by 25% and salary only 13%. And you receive this 13% increment only if your manager is happy with you. And if your manager is not happy with you, even if you give your best performance, you can't get an increment.

Last year all my other office staff got increments, even new hires. I gave my best performance and I am working from the first day in this department, before anyone else. At the end of the year I got a positive evaluation, so deserved to receive at least 25% increment, but I got nothing, because I don’t sit with the boss, I don’t do back-biting and I don’t say “Yes Sir” to the boss even when he is wrong. So he stopped my promotion and my increment.

Posted on 18 Oct 2008

V.C. Amohan
Regional head | India Tyre & Rubber Co. | India

The increase in salaries is due to more job opportunities and specialization of the particular field, inflation as well as a change in social economy; the change in the nuclear family system has increased the saving pattern and family needs.

Posted on 18 Oct 2008

Muhammad Rizwan
Relationship Manager - Corporate Finance | ORIX Corporation | Pakistan

Your report mentions that this trend of increase in salaries will remain the same for the next financial year but is this possible in the current scenario of financial crisis? The financial crisis that started from the USA has now captured all markets of the world and will no doubt affect the Gulf region also.

Posted on 18 Oct 2008

Syed Zahuruddin
Construction Manager | Isam K. Kabbani Group | Saudi Arabia

I am working in Saudi Arabia since 1991. You are correct; due to inflation our company has given an increment of 10% over the normal increment, but we are still finding difficulties in finding professional engineers for any branch – civil, electrical, mechanical.

Posted on 19 Oct 2008

Kadhem AlAsmawi
Engineer | Ministry of Health | Bahrain

No matter how much the raise is, the Bahraini salary remains the lowest in the Gulf countries. It will remain the lowest unless there is a huge salary raise to compete with the day-to-day expenses.

Posted on 19 Oct 2008

Nidal
Manager | Jumeirah International | UAE

It is true, the market is desperate for quality professionals and skilled employees but unfortunately most employers are hiring only volume, just to finish the projects.

Posted on 20 Oct 2008

Nelson Coelho
New Zealand

Thank you for the well balanced summary of salary trends across the Gulf region. What struck me most was the cost of accommodation.

Posted on 21 Oct 2008

Vinu
Engineer | Kuwait

Absolutely wrong… We did not get any pay rise!

Posted on 21 Oct 2008

Mahesh DR
Manager HR | Al Fara'a Group | UAE

This is really valuable information for all HR managers working in the GCC. One should update himself with such kind of research report. This report helped me align my company HR strategy to retain talent.

Posted on 22 Oct 2008

British expat
UAE

I don't agree with your comment that global downturn will lead to influx of western expatriates. Firstly a downturn could mean that people are trapped in Western countries like the UK, tied down by their financial circumstances and not able to move. Maybe they are in negative equity and are having to re-mortgage. You may find that the global downturn makes the movement of Western professional less likely. Secondly, UAE does not appeal to all Westerners.

Thirdly and probably most importantly is the fact that inflation here in Dubai is a killer and if salary increases ease then that will in fact prevent Westerners from coming to Dubai. Westerners will not expect to downsize to apartments; for example a 4 bedroom house in South West England, with a garage, a big garden etc... can be rented there at 7,000 AED per month. Here a 3-bed villa in Springs costs 22,000 AED per month… If salaries do not keep up with inflation then that will take away the tax-free incentive of working here. It will not stack up, if this is not the case already.

Posted on 22 Oct 2008

Ramu K C
Oman

Influx of Western expatriates would only push the salary levels higher.

Posted on 24 Oct 2008

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