Employees in the Gulf states should be prepared for a ‘long winter’ with no real wage growth in the coming year, two reports this week have indicated.
According to an analysis from recruitment firm Korn Ferry Hay Group, there has been a decline in annual pay rises for the last two years in the region, even as base salaries for some positions remain among the highest in the world.
The analysis was based on a survey of more than 2,600 companies in the GCC, Egypt, Jordan, and Lebanon—more than half of these were in Saudi Arabia and the UAE.
It found that at least 25% of the surveyed companies in the UAE, Qatar, and Saudi Arabia awarded pay rises to less than half of their employees, pointing to the wider economic slowdown as a prime reason.
Bonus payments in the region have also been on a decline since 2015, and this trend is expected to last into 2018, the firm found.
The firm also found that 30% of the surveyed firms gave pay hikes to a select group of employees compared to over 75% of such firms between 2009 and 2014, which the recruitment firm deemed unsustainable.
“The increase in total payroll costs are at 2% to 3%; however, by issuing salary increases to high performers, high potentials or employees who are promoted, organizations can issue considerable increases but to a smaller population,” the report said.
“The reality of managing talent with limited budgets has begun to sink in as we see the shift towards businesses selectively rewarding high performing employees through bonus schemes and performance-related pay rises.”
Meanwhile, another report found that UAE consumers could expect their incomes to slow down or stagnate for the rest of the year and in 2018.
According to the analysis by Oxford Economics, workers’ earnings are likely to face pressures on account of higher living costs, including the introduction of value-added tax (VAT), and “unfavorable macroeconomic environments.”
The report revealed that real salary growth in the UAE, which includes pay hikes offered by firms or earned by employees through promotion and moving jobs, will be at 2.9%, down significantly from 3.6% in 2016.