Qatar and the UAE lead the regional trend with pay hikes of 11.1% and 10.3% respectively
Private sector salaries in the six countries of the Gulf Cooperation Council increased at an average rate of 7.9% over the last year, according to figures released by GulfTalent.com.
In its second annual survey of compensation trends in the region, GulfTalent.com revealed the following increases in base pay by country, over the one-year period to August 2006:
Qatar topped the list for the second year running, with an average pay rise of 11.1% compared to 7.9% last year.
Sectors enjoying the highest pay rise in the survey were construction and banking - consistent with last year's results and reflecting the sectors' strong growth. Healthcare and education registered the lowest increases. [See full report ]
The study highlighted continued economic growth and growing competition for talent as key drivers of pay rises, along with spiralling living costs in parts of the region, particularly Qatar and the UAE. While there was continued inflow of expatriates into the Gulf, particularly Dubai, the report said, some expatriate residents were leaving the region as high inflation had eroded their saving potential.
Other drivers of pay increase highlighted in GulfTalent.com's report were the robust economic growth in India, traditionally the main supplier of expatriate workforce to Gulf countries, and the weak US dollar affecting recruitment from Europe. Gulf currencies are pegged to the US dollar.
Legislation, including the governments' workforce indigenisation policies, were further tightening the labour market, the report said, while geopolitical developments including the recent conflict in Lebanon hindered the attraction of talent from some countries.
The study also highlighted a number of structural changes in employment and pay practices. Commenting on these trends, a GulfTalent.com analyst who led the study said "The compensation landscape is fast changing. Variable pay is becoming much more common, particularly at the senior level, with pay increasingly linked to performance."
According to the report, more companies are instituting formal pay structures and annual salary review processes, many are introducing long-term saving plans in an effort to improve retention, and even stock options are now being considered by some employers.
The study suggested that the Gulf's tightening labour market was forcing employers to reach out to new sources of talent - including countries further a field such as China and Malaysia, fresh graduates, and women, traditionally an under-represented segment of the Middle East workforce.
The report also pointed to a narrowing of nationality-based pay differentials, a common feature of compensation practices in the Gulf. With salaries fast rising in India, Gulf-based employers in some sectors had to offer above-average pay rises to retain Indian professionals, reducing the pay gap with their Arab and Western counterparts in the region.
GulfTalent.com's study was based on a survey of 3,000 professionals in the Middle East, as well as interviews with regional business leaders and human resource professionals.