Salaries in Saudi Arabia ‘are ahead of inflation’

The impacts of Nitaqat and national minimum wage are shaping the Saudi labor market, according to Hay Group’a annual Saudi Arabia Compensation and Benefits report.
Wendell D'Cunha, unit manager at Hay Group and author of the report, said more than 380 private sector companies in Saudi Arabia participated in the report covering almost 300,000 employees, including those in Saudi Arabia's major industries of oil and gas, chemicals, banking, and construction.
The GCC market is expat driven, he said, adding that the private sector in Saudi Arabia is certainly feeling the impact of Nitaqat.
“The biggest difference in Saudi Arabia is the implementation of Nitaqat program, which is more stringent than any other GCC country,” D'Cunha told Arab News.
“In 2012, and to a greater extent this year, we see evidence of Nitaqat in private sector companies’ data. Organizations in Saudi Arabia spent one percent more on payroll costs in 2012 to 2013 than they had budgeted for and we expect to see a continuation of this pattern because it is strongly linked to nationalization," D'Cunha said.
The report also points out that salaries in Saudi Arabia have risen by 6 percent against the 4.4 percent inflation in the last 12 months resulting in a real increase of 1.6 percent.
As a sign of the changing times in Saudi Arabia, employers have opted to submit data relating to gender for the first time this year. Two percent of the report's data is based on female employees who are largely grouped in support functions such as administration, HR, secretarial roles and a limited number in banking roles. There is a pay disparity between men and women of around 9 percent across all job levels however, there is variation across roles and seniority, with the gap closing as women move up the ranks, D'Cunha said.
However, he said salary rises had more impact over the last 12 months than in recent years.
“For the first time in four years, salaries in Saudi Arabia are ahead of inflation meaning a real increase in the purchasing power of employees. Between 2010 and 2012 incremental increases were effected, but higher inflation countered the impact from pay rises. In 2014 Hay Group forecasts that salary rises will be ahead of inflation, which is promising news for employees,” D'Cunha said.
He added that salary increases given to people last year were actually lower than inflation.
Companies in the Kingdom find difficulties in retaining good national talent because they are getting better offers from different places, and also because every company wants best nationals to work for them, he said and stressed that Saudi companies should focus on developing the local talent.
D'Cunha recommended that Saudi companies should develop future managers to help perform better with proper training. Companies forecasted a 5 percent increase in salaries in 2014 in Saudi Arabia which will increase the purchasing power of the employees and also help raise the standard of living.
D’Cunha said implementation of the new national minimum wage legislation is also a large influence on pay in Saudi Arabia. “The minimum wage of SR3000 is altering the shape of the labor market with Saudi nationals at entry and clerical levels receiving the biggest pay rises as organizations strive to meet their nationalization targets in line with government regulations,” he said.
“As part of their efforts to support nationalization and promote gender equality in the workplace, organizations are taking measures to ensure they create a more efficient and amenable working environment. We hope that by providing information and clarity to organizations that want to employ Saudi women, they will in future make up a larger proportion of our report, and at more senior levels in 2014 and beyond,” D'Cunha said.