Complex Made Simple

Will you get a pay rise this year?

Recent reports forecast an increase in inflation in the GCC region this year. The inflation rate in Arab countries may reach 9.8 per cent and 9.6 per cent in 2017 and 2018 respectively, the Arab Monetary Fund predicted in its latest Arab Economic Outlook (AEO) report.

AMEinfo asks the question on everyone’s minds: Will salaries increase to reflect the proposed inflation?

Good news: growth expected

The Robert Half 2017 Salary Guide said that starting salaries for professional roles in finance and accounting, financial services, technology and administration in the UAE are expected to grow by 2.5 per cent in 2017.

Other surveys have revealed a general stagnation of wage growth across the GCC as regional economies deal with decreased government spending, new austerity measures and reduced business linked to lower oil prices.

The Randstad MENA Salary Survey 2017 analysed data acquired from November 2016 to February 2017 and discovered that six per cent of employees saw a decrease in salary and bonus in 2016 compared to 11 per cent in 2016.

Moreover, 37 per cent of the respondents reported an increase in their salary in the past 12 months, whereas 57 per cent said it had remained the same.

Optimism reigns

Employees in the region continue to be optimistic, with 62 per cent expecting an increase in their salary in 2017 and 20 per cent expecting it to stay the same. Another 27 per cent say they are moderately happy with their salary.

The MENA region is still the most popular destination for relocating. Eight per cent of people said they would not consider relocating to another region, as opposed to 16 per cent in 2016, Randstad’s report said.

The 2017 Gulf Business Salary Survey found that the average Asian salary increased 1.57 per cent from $9,231 to $9,376 in 2016. In the same year, the average Arab salary was down 0.08 per cent from $11,787 to $11,778 and the average Western salary was up 0.22 per cent from $12,350 to $12,377.

According to the 2017 Hays Salary and Employment Report, 52 per cent of the respondents did not receive an increment in 2016 and nine per cent saw a reduction in their salary.

Employees’ salary expectations for 2017 have declined year-on-year, with fewer anticipating increases of more than 15 per cent. In fact, two per cent expect a decrease in their salary in the next 12 months.

Can firms afford a raise?

Chris Greaves, Managing Director at Hays – Gulf region, said in the report: “On the face of it, this is quite startling; but maybe understandable when you consider that for most organisations, the single biggest item of expense is the salary bill. Companies simply cannot afford to offer all staff a four or five per cent increase if they cannot themselves boost their revenues or productivity by a similar amount. In 2016, it was not easily achievable, with more competition for available work driving down prices and belt-tightening in the government sector seeing contracts for supply and goods being renegotiated downwards.”

In 2017, 55 per cent of employees surveyed by Hays are open to changing jobs within the next 12 months, and the most common reason is a salary increase.

These findings confirm that salary increases are far from automatic.

Competitive pay

According to the CIPD, in 2016 almost 90 per cent of organisations set their reward packages (base pay, performance pay and monetary benefits) in the median to top tenth of their sector, indicating that competitive pay is seen as the most likely method to both attract and retain employees.

A competitive salary and benefits package remains the key criteria for choosing an employer, according to Randstad. Two basic factors govern how much salary a role attracts:

*What skills are needed, which helps establish likely salary costs

*How that salary links to existing pay grades and/or negotiated agreements

The Randstad report noted that most companies consider and approach pay as a private matter and only provide pay information when required to.

The Hays report meanwhile reveals that roughly seven in ten (72 per cent) employers are looking to hire new staff this year, compared to the 37 per cent who did so in 2016. This means that companies are adjusting to the new economic environment, many operating with a reduced but fully occupied workforce and, with energy prices forecast to stabilise, the employment sector is set for a revival in 2017.