Dubai - A GCC-wide survey of 600 multinational companies and locally-owned conglomerates has forecast that salary increases will average five per cent in 2016.
UAE companies project a five per cent increase in salaries next year against the 4.8 per cent forecast made for 2015 as the emirate fares better than most oil-producing nations in the region due to its diversified economy, according to a latest study.
A GCC-wide survey of 600 multinational companies and locally-owned conglomerates has forecast that salary increases will average five per cent in 2016, down from an anticipated six per cent in 2013, 5.5 per cent in 2014, and 5.1 per cent in 2015.
"Among the participating GCC organisations, UAE firms projected a five per cent increase in pay in 2016, up from the 4.8 per cent projection made for 2015. In terms of actual increases for 2015, the UAE recorded a 4.8 per cent increase," the latest GCC salary increase survey conducted by Aon Hewitt revealed. Aon Hewitt has been conducting a global salary increase survey on an annual basis across the globe for 29 years and launched it in the Middle East for the first time in 2012.
The global talent, retirement and health solutions business of Aon said GCC states have seen GDP levels drop due to weak global oil prices, with less foreign direct investment being recorded amidst security concerns in the region and struggles amongst large economies such as Russia and China. The situation, however, has clearly had a somewhat limited effect on firms, with most by leading employers still planning to increase the salaries of their employees by a good amount next year.
"Salary increases typically take into consideration a number of other factors which go beyond the general economic climate. These include company performance, the need to reflect promotions and the need to ensure that employees at the same grade remain within a single pay band," said Robert Richter, GCC compensation survey manager at Aon Hewitt Middle East.
Kuwait-based companies gave the highest salary increase projection for 2016 at 5.2 per cent. This is a slight decrease on 2015's 5.3 per cent predicted raise. Kuwait's actual salary increase figure for 2015 stands at 4.7 per cent.
Companies based in Bahrain predicted the lowest increases in the Gulf region at 4.7 per cent, which is slightly higher than last year's predictions of 4.5 per cent. In 2015, Bahrain-based firms reported actual salary increases at 4.7 per cent.
Qatari and Omani firms, on the other hand, estimated a five per cent salary growth for 2016, lower than 2015 predictions which stood at 5.2 per cent and 5.4 per cent, respectively. Actual salary increase figures for 2015 stand at 4.7 per cent and 4.6 per cent, respectively.
Firms in Saudi Arabia forecasted a 5.1 per cent figure for 2016 - down by 0.3 per cent on this year's 5.4 per cent projection. In terms of actual increases for 2015, however, the kingdom recorded the highest level of actual pay rises at 5.2 per cent for this year.
"Overall the outlook for 2016 may not be as positive as recent years, but the news that employers are predicting salary increases in the five per cent range next year should come as a comfort to employees, suggesting that there is still optimism in the market," said Richter. According to the study, the impact of lower oil prices can be felt across the Gulf, with governments cutting back on subsidies, reducing spending on larger projects and thinking about introducing some form of taxation.
"All these factors will have a direct or indirect effect on industry sectors, and will continue to put pressure on profit margins and operating costs for organisations. Despite this, the GCC is faring much better than other oil producing countries in the Middle East and predicted increases in compensation will also help to ease inflationary pressures on employees while markets rebound," the study said.