JEDDAH, 9 November 2006 — The latest Hay Group Compensation and Benefits report reveals aggressive salary increases, particularly for management and executive jobs in the Saudi Arabia.
The study, released last month and based on information from 90 employers throughout Saudi Arabia, finds that the average basic salary increase is six percent, which is one of the highest in the Gulf. At guaranteed cash level (basic salary plus the cash allowances) the increases were around 5.8 percent. Samer Fakhouri, who manages Hay Group’s Saudi Arabia survey, said: “Overall, the increases are more aggressive for management and executive levels where the basic pay movement is around 11 percent.”
“Saudi Arabia is only one of a few countries in the region where salary increases are greater than the real inflation. Unlike UAE and Qatar where salary increases are below the inflation, employees in Saudi Arabia have a greater earnings opportunity. Qatar, considered to being a leading payer in the region, especially for professional jobs and below, experienced salary increases much behind the inflation rate.
In Saudi Arabia, however, there is a shortage of key talent and the high on-going hiring rate is causing difficulty in maintaining internal equity within the organization. Companies are offering more competitive salary packages for new hires, particularly in managerial and executive positions, targeting median or upper quartile market levels. This is because of the very high demand for people and reduced supply from traditional markets for hiring expatriates. This has faced employers with a dilemma — do we pay the high numbers sought or settle for a less capable individual? The heightened demand for a scarcity of established talent has also led a significant number of employers to look much more seriously into incentive bonus arrangements to shift the balance from fixed to variable in the package and ensure they obtain real value for higher remuneration arrangements.”
On average, breakdown of the remuneration mix is 64 percent base salary, 23 percent cash allowances, eight percent variable bonus and five percent other non-cash benefits (such as company car, children’s education and leave travel air tickets).
At higher management, the variable pay component is 13 percent of the total package, which is much higher than the variable bonus given by employers in previous years.
Several leading employers have introduced new or extended incentive bonus arrangements in the last year. According to Fakhouri, “In the coming years, organizations will continue to move towards a closer relationship between contribution and reward leading to a higher proportion of performance based variable payments, both short and longer term.”
Dr. Mark Eaton, MD, Hay Group in the Middle East, said: “This is the most volatile period in the pay market in the Middle East in over 10 years. We’re seeing these trends not just in Saudi Arabia but also in most of the Gulf countries, especially Qatar and UAE. Historically, some of the organizations reviewed pay once every five years. However, the trend is changing and more employers are reviewing salaries in this region on an annual basis.”