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GCC companies project 5 per cent salary hike amid slowing GDP growth

Kuwait prepares for the highest increase in the region, while Bahrain predicts the lowest

Companies in the GCC project an average five per cent hike in salaries next year, down from 5.1 per cent in 2015. Firms in Kuwait are preparing for the highest increase at 5.2 per cent, while their counterparts in Bahrain have given the lowest projection in the region at 4.7 per cent, slightly higher than last year’s 4.5 per cent.

Meanwhile, companies in the UAE forecast a five per cent pay raise, up from the 4.8 per cent projection made for 2015, according to the latest “GCC Salary Increase Survey” by talent solutions firm Aon Hewitt.

Firms in Qatar and Oman followed the UAE with five per cent salary growth for 2016, lower than their estimations for 2015 – 5.2 per cent and 5.4 per cent respectively.

Companies in Saudi Arabia predict a 5.1 per cent salary increment for 2016, down from this year’s 5.4 per cent.

In terms of actual salary increases for 2015, the UAE recorded 4.8 per cent growth while Saudi Arabia recorded the highest at 5.2 per cent. Kuwait’s actual salary hike for this year stood at 4.7 per cent, whereas Bahrain was at 4.7 per cent. Qatar and Oman recorded hikes of 4.7 per cent and 4.6 per cent respectively.

The GCC states, which are heavily reliant on hydrocarbon revenues, have seen a drop in GDP levels due to declining oil prices. The financial crisis in China and rouble trouble in Russia have also affected the economies in the Arab world, which saw reduced inflows of foreign direct investments amidst security concerns in the region. The survey, however, says these had limited impact on GCC companies, as evidenced by their positive salary projections for the coming year.

“Clearly, the impact of lower oil prices can be felt across the region, with governments cutting back on subsidies, reducing spending on larger projects and thinking about introducing some form of taxation,” says Robert Richter, GCC Compensation Survey Manager at Aon Hewitt Middle East.

He explains: “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 organizations. Despite this, the GCC is faring much better than other oil-producing countries in the Middle East. The predicted increases in compensation will also help to ease inflationary pressures on employees while the markets rebound.”