Recent cuts in government subsidies along with higher consumer prices have raised cost of living in many Gulf Cooperation Council (GCC) countries. Despite this, average pay increases in Kuwait and across the GCC states are likely to be lower in 2016 than at any time over the last ten years, says a new report out last week.
According to the latest research conducted by online recruitment firm GulfTalent, “Many professionals in 2016 are likely to face a double-whammy of rising living costs coupled with stagnant wage growth. As a result, real salary increases net of inflation are expected to be significantly lower than in previous years.”
The report, based on a survey of 700 employers and 25,000 professionals across the GCC, found that salaries across the Gulf states are forecast to increase at an average of just 5.2 percent in 2016, down from 5.7 percent in the previous year. One consolation for consumers in the report was the finding that rents have fallen or remained stable in parts of the six-nation bloc.
Saudi Arabia is expected to top the region’s pay increases, at 5.9 percent. However, with inflation in the Kingdom forecast at 4.7 percent in 2016, real pay rises net of inflation will average just 1.2 percent.
Professionals in the UAE are expected to enjoy the region’s second highest salary increase at 5.3 percent. Qatar is next with 4.7 percent, followed closely by Kuwait and Oman at 4.6 and 4.4 percent respectively. But, with inflation averaging 3.3 percent in Kuwait, real pay rises in the country will be around 1.3 percent.
Bahrain fares the worst among the six GCC states, with the projected salary increase of 3.7 percent matching the forecast inflation rate exactly, leaving employees with no net increase in their purchasing power.
The study also found that, in addition to lower pay hikes, employers in the region are much more cautious when it comes to adding to their payroll. A marked slowdown in recruitment was reported across the GCC with recruitment focused mainly on replacement hiring.
The slump in oil prices since mid-2014, which have impacted government investment in oil and gas and construction sectors, have also impacted hiring in these manpower-intensive sectors. Overall, 14 percent of firms surveyed in these sectors in Saudi Arabia reported plans to reduce headcount in 2016, compared with 9 percent in the UAE. The healthcare sector was an exception with 68 percent of companies surveyed in this segment revealing an increase in their headcount during 2015.
The study found that, with fewer jobs in the market and candidates seeking stability, employee turnover had fallen in most sectors. It warned, however, that employers failing to meet the pay expectation of their top performers due to financial pressures could risk losing them to competitors.
According to the study, employers currently hiring are having much greater success in securing top candidates than in previous years and some are using this as an opportunity to upgrade their staff.
Private sector salary increase forecast for 2016
Country Gross increase Inflation Net increase
Saudi Arabia 5.9% 4.7% 1.2%
UAE 5.3% 3.1% 2.2%
Qatar 4.7% 2.7% 2.0%
Kuwait 4.6% 4.2% 0.4%
Oman 4.4% 2.0% 2.4%
Bahrain 3.7% 3.7% 0%