Gulf salaries rise by 9.0%

Posted on September 30, 2007

Intense competition, public sector pay rises, depreciating US dollar, and growth in Asia driving Gulf pay increases

Private sector salaries in the six countries of the Gulf Cooperation Council increased at an average rate of 9.0% over the last year, according to figures released by

In its third annual survey of salary trends in the region entitled “Gulf Compensation Trends 2007”, revealed the following increases in basic salary by country, over the one-year period to August 2007:

Oman registered the biggest jump, from 5.6% last year to 11.0% this year, driven in part by a 15% pay rise for public sector employees. The government’s decision earlier this year to allow expatriates to change employers has dramatically increased staff attrition rates, further adding to the pressure on firms to increase salaries.

The UAE and Qatar, which are experiencing double-digit inflation this year, remain near the top of the rankings. The pay of UAE professionals increased by 10.7% against 10.3% last year, while in Qatar wages rose by 10.6%, marginally lower than last year’s figure of 11.1%.

Bahrain pay rises accelerated to 8.1% from 6.4% last year. Kuwait was virtually unchanged at 7.9% against 8.0% last year, while Saudi Arabia saw an increase to 7.7% from 6.5% the previous year.

Across the GCC, sectors enjoying the highest pay rise were construction, banking and energy – consistent with the last two years’ results and reflecting the sectors’ continued strong growth. Healthcare and education registered the lowest increases.

Among job categories, engineers and finance staff received the biggest pay rises, followed by human resource professionals in third place. Historically under-represented in the region, the HR function has recently been catapulted to the front line as Gulf-based employers grapple with the challenge of attracting, developing and retaining staff. [See full report ]

Key Drivers’s study highlighted continued economic growth and intense competition for talent as key drivers of pay rises, along with spiralling living costs in parts of the region, particularly Qatar and the UAE, as well as large pay rises awarded to government employees in some GCC countries.

It also showed that the continuing depreciation of dollar-pegged regional currencies was diminishing the value of Gulf compensation packages for European expatriates, putting further upward pressure on salaries. Kuwait’s decision earlier this year to drop the US dollar peg and the subsequent 3% appreciation of its currency are increasing the competitiveness of Kuwaiti salaries relative to its neighbours and may intensify the pressure on other GCC countries to follow suit, it said.

Other drivers of pay increase highlighted in’s report were continued economic growth and rising salaries in India, traditionally the main supplier of expatriate workforce to Gulf countries, as well as the easing of laws in some GCC states regarding expatriates changing employment. With government controls no longer protecting employers against staff attrition, many are forced to raise pay levels to retain their employees.

Economic Impact of Staff Shortages

Several executives interviewed by complained that, while market demand was extremely healthy, skills shortages were limiting their companies’ ability to grow, forcing them to turn down new business or, in some cases, causing them to miss targets on their existing projects. The study warned that, if continued, this could limit overall growth in the non-oil sector of the economy, hampering the region’s plans to diversify away from oil.’s research also found that smaller, less well established companies faced the greatest pressure, often unable to compete with pay packages offered by larger firms. The long-term impact for the market could be to impede growth of start-up companies, lead to smaller companies merging with larger enterprises and discourage new entrepreneurial ventures.

The survey further revealed that, as the supply of skilled staff from traditional markets such as India and Egypt diminished, many employers were looking to new sources such as China, Eastern Europe and Latin America. At the same time, staff shortages were forcing companies to outsource more of their operations or to switch to other processes and technologies that are less manpower-intensive.’s study was based on a survey of 18,000 professionals in the six GCC countries, as well as interviews with regional business leaders and human resource managers. [See full report ]

Additional Information – Country Briefings

Saudi Arabia

Salaries in Saudi Arabia increased by 7.7% on average, up from 6.5% last year. Employers continue to face stiff domestic competition for Saudi talent, as well as regional competition for expatriate professionals.

Inflation remains low by regional standards, thanks to generous state subsidies. However, prices have begun to rise as pay packages grow and the dollar-linked rial continues to fall in value, increasing the cost of imports. With a fast growing population, residential rents are also coming under pressure, increasing at an average rate of 10% over the last twelve months.

The participation of Saudi women in the workforce appears to be gathering momentum, with a growing number of Saudi women showing interest in having a career and more companies setting up facilities to be able to employ them. This should help partially ease the pressure on companies in meeting their Saudisation targets, without the need for very aggressive pay hikes.

The UAE saw a slight rise in its annual rate of salary increase from 10.3% to 10.7% this year. Inflation remains a key factor, forecast to reach 12.0% in 2007, largely on the back of rising rent levels. Government-introduced rent caps have partially been successful, reducing average rent rises from 31% in 2006 to 23% this year, although still far above the official 7% cap.

With the rising cost of living exceeding pay increases over the last few years, many expatriates have seen a fall in their net disposable incomes. Of the UAE-based expatriates surveyed in the study, 41% reported making no savings on their income, the highest figure in the Gulf.

At the same time, employers in the UAE, and Dubai in particular, still benefit from the relative popularity of the country with expatriates, thanks to attractive career opportunities, modern infrastructure and facilities, and a relatively liberal society. This is allowing UAE-based employers to continue to attract and retain professionals with below-inflation pay rises, albeit with greater difficulty than previously.

According to the study, public sector pay rises announced in Dubai, Abu Dhabi and Sharjah this year have raised the stakes for the private sector. Some human resource managers, already struggling to attract sufficient numbers of UAE nationals due to the more attractive lifestyle on offer in government jobs, said that they were now under even greater pressure to match public sector salary increases to attract and retain Emiratis.

On the other hand, the UAE government’s decision earlier this year to tighten the rules on expatriates switching employers has helped companies reduce attrition rates, partially easing the upward pressure on pay levels, the report found.


The rate of salary increase in Kuwait was virtually unchanged at 7.9%, compared to 8.0% last year.

While nowhere near the levels seen in the UAE and Qatar, inflation remains a problem in Kuwait, officially forecast at 3.9% for the year. Based on’s survey results, residential rents increased by an average of 12% over the last twelve months.

Kuwait’s decision in May 2007 to unpeg its currency from the US dollar has already resulted in a 3% appreciation of the dinar, a trend that may continue over the coming months. If sustained, this should help ease inflationary pressures, particularly in goods imported from Europe. More importantly, it has had a direct immediate impact on pay packages of expatriates, increasing the value of their packages in dollar terms. This should improve Kuwait’s competitive position in the regional battle for talent, partly reducing pressure for further pay rises.


Salaries in Qatar increased by 10.6% on average, slightly lower than last year’s figure of 11.1%.

With the economy forecast to grow by 7.8% this year, employers in the country continue to actively seek expatriate talent, paying some of the region’s highest salaries to attract professionals.

Inflationary pressures are a key driver of pay rises, particularly in accommodation rentals which grew by 29% over the last twelve months – despite earlier hopes that the ending of the 2006 Doha Asian Games and release of buildings previously reserved for athletes and officials will ease the situation. Several new real estate developments have also reportedly seen their completions delayed, further exacerbating the housing shortages.

Unlike neighbouring Bahrain, the 20-40% pay rise announced for public sector employees in Qatar is not expected to have much direct impact on private sector salaries, since the private sector employs very few Qataris. The pay rise could contribute to further inflation, however, which will indirectly increase pressure on compensation.

A new immigration law currently under review by the government is widely rumoured to include some easing of restrictions on expatriates changing employment. Based on the experience of other Gulf countries, most recently Oman, such a move is likely to increase staff turnover and strengthen the bargaining power of employees, pushing salary levels higher. Several human resource managers interviewed by reported already planning a pay rise in anticipation of an imminent change in rules.


Bahrain saw an acceleration of pay rises to 8.1% against 6.4% last year. In addition to domestic growth and regional competition, a key driver has been the much anticipated pay rise for the public sector, which was finally announced in September.

Bahrain’s 15% pay rise for civil servants is expected to have a much bigger impact on the country’s private sector than similar raises in neighbouring Saudi Arabia and the UAE, given the much higher proportion of private sector jobs that are filled by Bahraini nationals. In particular, more women are expected to leave the private sector, as the reduced pay premium over the public sector may no longer be seen to justify the perceived lifestyle sacrifice.

Further ahead, the study predicts the planned Bahrain-Qatar ‘Friendship Bridge’, due for completion in 2010, to have a significant impact on salaries in Bahrain. The bridge will enable Bahraini professionals to take up job opportunities in neighbouring Qatar, while commuting daily from their residence in Bahrain, forcing Bahrain-based companies to match the much higher pay levels in Qatar to maintain retention.


The Oman labour market has had an extremely turbulent year. The Sultanate, which until recently appeared to be lagging behind pay rises in the rest of the Gulf, has this year registered the region’s largest average pay rise at 11.0%, almost twice the corresponding rate last year.

The key factors behind this trend have been the 15% pay rise announced for the public sector and the easing of restrictions on expatriates switching jobs, which has forced employers to raise pay levels to keep their staff.

Inflation has also surged this year, particularly in housing rents. Based on the survey results, rents in Oman increased by 29% over the last year, resulting in the government’s decision in September to impose a 15% cap on rent increases.

In addition, the devastation caused by Cyclone Gonu in June has contributed to rent increases, as many buildings were severely damaged. It has also increased the demand for skilled professionals, as a stream of reconstruction projects have been announced, putting further upward pressure on salaries.

Although this year’s above-average pay rise may help partially close the gap with other GCC countries and slow the brain drain experienced by the country over the last few years, Omani salaries still remain in absolute terms well below their counterparts elsewhere in the Gulf.

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