Employers across the Gulf region are more optimistic about prospects for the year ahead, with two-thirds (66 percent) forecasting an increase in business and 71 percent stating an intention to hire extra staff, according to a new survey.
Recruitment consultancy Hays said in its 2018 GCC Salary and Employment Report that although the employment market over the past two years had experienced some turmoil as a result of the economic impact of lower oil prices, with 35 percent of the firms who responded to its survey stating that they reduced headcount in 2017, it is more confident about an increase in activity this year.
Chris Greaves, Gulf region managing director of Hays, argued that, in the United Arab Emirates (UAE), specifically, economic activity should improve as a result of the work now taking place ahead of Dubai's Expo 2020.
He argued that most of the employment being created is not on the Expo site itself, but is through the indirect impact created via the building of the metro extension, for example, and the slew of new hotels.
"(Expo) 2020 is not happening in isolation, is it? That's one of the 'jewel in the crown' projects that is supporting a load of other tourist and infrastructure building, which is predicated on tourist numbers, and also resident numbers, continuing to increase," he said in a telephone interview with Zawya on Tuesday.
Although the majority (52 percent) of the 3,500 employees surveyed said that they had not received a salary increase last year, and 9 percent reported a pay cut, both companies and employees expect salaries to rise this year.
Some 68 percent of employers expect to increase salaries in 2018, but employee expectations were slightly more subdued, with only 61 percent expecting a pay rise.
Compensating for VAT?
"Everyone's conscious of the rising cost of living here and VAT is coming, so there might be some subliminal white flag-waving from employers thinking 'we might have to do a bit more this year than we did last year, and we are hoping that conditions are going to get marginally better'," Greaves said.
However, he argued that "across the board" pay rises for entire organisations were unlikely.
"For most companies, the salary bill is the single biggest line of expenditure they have in their accounts. Anyone who says 'let's just put 5 percent on our salary bill'... that could wipe out your profit margin.
"Companies simply can't afford to give everyone a pay rise in a difficult economic environment. But companies are looking after their top performers."
Leith Ramsey, Middle East managing director of rival recruitment firm Michael Page, argued that companies were reacting to VAT in one of two ways.
"Some of the big companies... are giving bigger increases to the lower-paid staff and no increases to the senior staff," he said in a telephone interview on Tuesday.
Other firms, he argued, were not making any concessions at all.
"Organisations haven't rolled out VAT... that's a country-level decision that everyone has to come to terms with," Ramsay said.
He said that some firms took the view that employees' earning power, even after the introduction of VAT in the UAE and Saudi Arabia on January 1, is greater than it is in their home markets.
Dubai-based financial comparison website yallacompare said in a press release on Monday that almost 45 percent of UAE residents expressed concern about not being able to afford the increased cost of living as a result of the introduction of VAT. It also said that 62 percent of those surveyed expected a salary increase this year.
Michael Page published its own 2018 Middle East Salary Survey last week, which was slightly more downbeat in its outlook than the Hays report.
Ramsay said that, at the start of 2017, it had expected a recovery in the market by mid-to-late 2017.
"But we then had Donald Trump, the Qatar embargo, the Saudi corruption crackdown," he said. "The oil price has stabilised, but then you've got the geopolitical issues in the region as well. All of those things meant the market didn't bounce in Q4 like we thought it would.
"Most people I'm talking to in the market feel that 2018 will be only marginally better than 2017," Ramsay added.
However, he argued that there is some respite likely for workers in markets which have faced the toughest conditions since the oil price decline - energy, real estate and financial services.
"They were the three big ones that went into cost cut mode quite quickly. But your first in the hole are the first out. We've had meetings with oil service company providers that are hiring again," Ramsay said.
"The banks, similarly, are starting to hire again because they cut pretty hard. And a lot of the real estate work in Saudi is quite significant."
Reporting by Michael Fahy, Editing by Shane McGinley
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