Dubai: Workers in UAE and the rest of the Gulf are headed for a sluggish growth in personal incomes next year, as businesses keep a lid on financial rewards amid low oil prices.
In 2017, headline pay increases in the UAE are forecast to average 3 per cent. If inflation is taken into account, real wages will rise by 0.5 per cent, the lowest in ten years and down from 0.9 per cent in 2016.
"It is the lowest in the decade on real pay," said Vijay Gandhi, regional director for productized services at Korn Ferry Hay Group, which released the forecast based on data from over 20 million employees across 25,000 organisations in 110 countries.
"Companies in the Gulf have taken a cautious view on pay increases. With oil prices averaging in the range of $40 to $60 a barrel in the last few months, this new reality is shaping the way organisations focus on costs - including reward."
Companies in oil-dependent economies have been feeling the pinch of low oil prices, prompting business owners to cut costs and staff numbers this year. Over the short term, UAE bosses are expecting organisations to undergo a significant "transformation" as employers attempt to further soften the blow from oil price volatility.
Real pay increases across the Gulf region will average 1.3 per cent, also the lowest in 10 years and lower than any other region in the world, except Latin America (1.1 per cent) and Africa (0.7 per cent).
Real earnings in Bahrain, Kuwait and Oman are expected to rise by 1.8 per cent, 0.8 per cent and 1.8 per cent, respectively.
In Qatar, real wages will grow by 2.1 per cent, while in Saudi Arabia, workers can expect salaries to grow by 0.8 per cent in real terms. All the average pay increases forecast for all GCC countries are lower than in 2016.
"Companies are focusing on cost optimisation, doing more with less and prefer paying out incentives based on performance than increasing fixed costs, unless it is for a promotional hike," added Gandhi. "Promotional increases are between 6 per cent and 10 per cent, depending on the role and responsibilities."
A report by accountancy firm KPMG said that more than 70 per cent of chief executive officers in the UAE expect that the next three years will be "transformational" for many organisations in the country.
Workers around the world are likewise expected to see lower real salary increases compared to last year, averaging at 2.3 per cent, as companies keep a check on pay budgets due to slower economic growth in mature markets.
The highest jump in real wages will be enjoyed by workers in Asia, where salaries are forecast to increase by 6.1 per cent, down 0.3 per cent from last year and 0.7 per cent from the preceding year. In real terms, Asian salaries will rise by 4.3 per cent, the highest globally.
Within Asia, workers in Vietnam will get the biggest leap in real wages, at 7.2 per cent, followed by Thailand (5.6 per cent), Indonesia (4.9 per cent) and India (4.8 per cent).
