JEDDAH, 5 February 2008 — Reactions following a decision by the Shoura Council nearly a week ago to establish an inflation allowance, which will increase the salaries of government employees and pensioners by five percent has Saudi government workers, excited but has left some private sector employees saying they have little to celebrate.
The salary increase is reportedly expected to begin showing up in government employee’s paychecks as a combined payment for the present month of Muharram and Safar next month.
The allowance was created as part of a 17-point program to ease the burden on Saudis of the rising cost of living after inflation climbed to its highest in the Kingdom in at least a decade in December, reaching 6.5 percent in some Saudi cities and registering an overall year-end rate of 4.1 percent.
However, private sector employees feel that the increase in salary just isn’t fair and that they too should receive the similar means of financial relief.
“We have to pay the same high prices for items such as food and rent as the government sector employees and I don’t feel it is right for workers in private companies to be excluded, yet again,” said Ashraf Abdulmalik, a local call center employee.
“I can understand the point of view of the private sector employees and why they are disappointed,” said Fuwazia Ahmed, a teacher at a government school. “I think that everyone should have received the increase because everyone is being affected by high prices.”
Ahmed said that some of her relatives work in Saudi private schools and that they became upset when they heard the announcement.
On the other hand, John Sfakianakis, chief economist at SABB Bank in Riyadh, told Arab News he doesn’t agree that private employees should be upset and believes that government employees deserve the extra assistance.
“This is the second time that government employees have received a wage hike since 2005, but before that government workers hadn’t seen an increase since 1985,” he said.
“Private sector workers, I think have been in a better position financially for some time than government regulated businesses due to their ability to set their own prices on goods and services and obtain a higher return of profits, Sfakianakis said, adding that it is for this reason that over the years private sector employees have received a number of salary increases and bonuses that government employees simply never saw.
According to quarterly reports of major companies such as SABIC which reportedly increased employee salaries by 6 percent, Saudi Investment Bank which was quoted to have raised salaries by 15 percent, in addition to Savola and Etihad Etisalat (Mobily), the companies have been registering profit increases and outperforming analysts predictions which has allowed for the company to pass on financial success to their staff by implementing their own inflation allowance.
Citing its 2007 Q4 report, Savola recorded a net profit of SR 233 million up 21.3 percent compared to a year earlier. Abdullah Al-Harbi, spokesperson for Savola, told Arab News that in the past the company rewarded a salary hike of 10 percent for certain employees but has no knowledge if the company is planning another salary increase in light of the recent governmental decision. Etihad Etisalat (Mobily) is another company who has been outperforming according to its latest 2007 Q4 report and beating analysts forecasts of between SR 280-291 million to post a net profit of SR330 million a 55.8 percent increase over the same period the previous year.
Mobily has also reportedly clinched 40 percent of the mobile telecom market share up from 30 percent of the market gained in the first 18 months of launching its services to rival Saudi Telecom Company (STC).
As a result beginning last month, Mobily implemented an employee salary increase of 20-40 percent, a move a spokesman for the carrier says is to help employees meet the growing rate of inflation and rising cost of living.
Humoud Al-Ghobaini, senior manager of corporate communications for Mobily told Arab News that the salary increases are being issued on a temporary basis following an evaluation that is being carried out by the company’s HR consultant, taking into account the local inflation rate, rising consumer prices and the company’s employee salary structure. “The results should be ready in 3-4 months allowing for Mobily to get a clear picture of the cost of living issue and adjust salaries accordingly,” he said.
Mazen Fayed, head of corporate communications for private company Saudi Oger Ltd. says he supports the government’s idea of setting up a 17-point program accompanied by a 5 percent salary increase rather than rewarding civil employees a lump sum of 15 percent - 20 percent.
“I applaud the government’s efforts in trying to assist its citizens in affording basic needs but I think that the government should also find an overall solution to the inflation problem rather than raising salaries in intervals,” he said.
Fayed added that he believes that salary increases for government employees will help create a solid economic base for those employees but if private companies decide to implement their own inflation allowances it will only serve to create a vicious cycle.
“If private companies give salary increases to their employees, those same companies will be forced to raise the prices of their goods and services in order to afford the increases and then what will be the use,” he concluded.