Gulf countries experience dramatic rise in salaries
Employee compensation across all Gulf Cooperation Council (GCC) countries is rising at a rapid pace, fueled by the increased cost of living, limited supply of available talent, and GCC citizens’ growing expectation of a share in their countries’ windfall oil revenues, according to a study just released by GulfTalent.com, one of the region’s leading online recruiting agencies.
The report entitled “Gulf Compensation Trends 2005” was presented during the Middle East HR Summit held this week in Dubai. It revealed an average Gulf-wide salary increase of 7.0% over the one-year period to August 2005. Qatar leads the group with a 7.9% increase, followed by Saudi Arabia with a 7.4% increase, Kuwait with 6.9%, UAE with 6.5%, Bahrain with 6.3% and Oman with a 5.9% increase.
GulfTalent.com’s earlier research released in March of this year had indicated a limited rise in UAE salaries, despite massive increases in rents. The latest findings, based on a survey of 3,000 professionals across the GCC, provide a strong indication that the rising inflation and increases in public sector pay packages are finally having an impact on private sector compensation.
With higher income from oil exports, several GCC governments have taken the lead in increasing salary levels, which has put increased pressure on the private sector to follow suit.
In April of this year the UAE government announced a major salary increase of 15-25% for its employees. Similar moves followed from the governments of Kuwait, Bahrain and Saudi Arabia. The Saudi increase of 15% for its employees marked the Kingdom’s first across-the-board shift in pay scale in more than two decades.
All these developments have sent HR managers across the region into what the report characterizes as ‘a frenzy of activity’ as human resource departments rush to calculate appropriate pay increase levels for their organisations.
An HR manager from a major European multinational oil and gas company told GulfTalent.com interviewers, ‘We know we have to increase our compensations, but as a multinational it is difficult for us to get approval from head office without reliable data, which is very difficult to get for the Middle East.’
The study by GulfTalent.com highlighted the robust growth in India and other countries such as Jordan as another factor contributing to increased salaries in the Gulf, as top candidates had to be offered larger packages to lure them from other attractive options back home.
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 Gulf-based recruiter said, ‘Nowadays when you get a CV from someone in Jordan and send him an offer, it is no longer a foregone conclusion that he will accept.’
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.
According to GulfTalent.com’s report, sectors enjoying the highest pay rise across the Gulf were banking & finance, construction and real estate. The lowest pay rises were reported in healthcare and education.
Within the UAE, Dubai had the highest average salary increase with 7.4%, followed by Abu Dhabi at 6.1% and Sharjah lagging behind with just 3.0%.
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.
The report also anticipated that the higher cost of staff will encourage companies in the region to invest more in recruitment and training of Gulf national women, particularly in Saudi Arabia where female participation in the workplace has been the lowest.
© 2005 Al Bawaba (www.albawaba.com)