A GCC-wide survey of 600 multinational companies and locally-owned conglomerates – the largest study of its kind in the Gulf region – has forecasted that salary earnings will increase an average of 4.7% in 2017, demonstrating a more optimistic outlook across the board as GDP growth is also expected to climb in the year ahead. The same survey noted that in 2016 the region saw an average salary increase of 4.3%, which although positive, is down from an anticipated 5% increase for the year.
According to the latest GCC Salary Increase Survey conducted by Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), salaries have been largely influenced by fluctuating oil prices and states’ initiatives to diversify national economies. While 2016 proved to be a challenging period for economic expansion in some markets, over the next few years new policies governing inflation, taxation, diversification, and commodity pricing are anticipated to come into effect and lead to a general upswing in GCC salaries.
Moreover, the impact of lower oil prices and reduced public spending has not had the detrimental impact that some have anticipated, with most employers surveyed increasing the salaries of their employees this year and planning for even greater increases next year. As governments cut back on subsidies, refocus spending on large mega-projects, and with the announcement to introduce a region-wide VAT of 5% in January 2018, real GDP growth is expected to climb across the region in 2017 to 3.3%—up from 3% in 2016—according to the IMF.
Both UAE and Oman-based companies projected an average salary increase of 4.6% for 2017. Oman’s outlook for 2017 shows a marked increase from its latest 4.2% increase noted in 2016. For the UAE, this marks a slight increase from the 4.4% average salaries growth seen in 2016.
Among the participating GCC organizations, companies based in Saudi Arabia noted the highest projection for salary increases in 2017 at an average of 4.9%; an increase on this year’s actual 4.6% climb.
Kuwait-based organisations have estimated salaries to rise by 4.8% in 2017, a significant increase from this year’s 4.3% climb although down from a 5.1% increase in 2015.
Companies operating in Bahrain have registered the third-highest salary increase projection within the GCC for 2017, reaching an average of 4.7%. Although optimistic, that falls just under the growth rate of 4.8% for this year—the highest in the region for 2016.
Although companies in Qatar have again predicted the lowest increase in the Gulf region at 4.5% for 2017, that outlook is significantly higher than the recorded salary growth of just 3.6% this year.
Robert Richter, GCC Compensation Survey Manager, Aon Hewitt Middle East, said: “Lower oil prices are likely to continue moderating the GCC’s economic growth this year, but a refreshed focus on non-oil sectors along with sustained programs of state investment should underpin GDP expansion into 2017. Of course it is important to remember that HR salary projections are subject to change. However, the latest predictions for 2017 salary increases do fall in line with the general economic climate with signs of optimism on the horizon.”
The latest survey also notes that actual salary increases for the year 2016 have been the highest for Pharmaceutical, Media, and Food/Beverage/Tobacco industries. The industries with the lowest salary increases for 2016 are Telcos, Construction and Oil & Gas, although salaries in each of these three sectors are expected to rebound year-on-year in 2017.
Aon Hewitt has been conducting a global salary increase survey on an annual basis across the globe for 30 years and launched it in the Middle East for the first time in 2012. The report is free to participating organizations and available at a price of $1000 to others.
The survey is part of Aon Hewitt’s suite of evidence-based, research-led studies including Qudurat, Best Employers Middle East (BEME), Total Compensation Measurement (TCM™) and Top Companies for Leaders.