Employees’ spending power stunted despite growing Qatari economy

Author: Kirsty Tuxford | Date: 27 Oct 2015

Qatar's salaries increased by an average of 4.2 per cent in 2015, but inflation and rising rents have countered the positive effects for workers

Qatar is the GCC's fastest-growing economy, and before oil prices dropped, the predicted salary increase for employees in 2015 was 5 per cent. In reality, salaries have grown by 4.2 per cent on average over this year. But with inflation growing to 3.5 per cent, and rising rental feels, employees’ disposable incomes have been dropping. The result is that the real growth of workers' spending power is a feeble 0.7 per cent, according to global management consulting firm, Hay Group.
 
The Group’s annual Compensation and Benefit Report for Qatar analyses salary and benefits data from more than 212 companies, representing 115,000 employees.
 
“Approximately 92 per cent of companies paid performance-based target bonuses for their employees this year: this is relatively high by global standards,” explained Harish Bhatia, regional manager at Hay Group.
 
“Leaders in Qatar are looking at bottom-line performance as key to the success of their business and where companies achieve this success, employees at operational and middle-management levels have received payments in line with their target bonuses,” says Bhatia. “The same is not necessarily true for senior managers, who received a slightly reduced bonus payment in 2015 due to reduced overall organisation performance.”
 
However, the overall economic outlook for Qatar is positive, and employees can expect to see their performance-based pay rise in 2016. Organisations are also considering adjusting employee housing allowances to keep up with the rising cost of rent. Hay Group found that 25 per cent of the 212 companies surveyed plan to increase their housing allowances in 2016, by an average of 8 per cent.
 
Statistics point to a contented and committed workforce, with more than 50 per cent of employees saying they have been with their current employer for over five years. “In the past, we have seen high levels of fluidity in the market, with staff moving quickly from one job to another,” said Bhatia. “Increased investment in training and development for both national and expatriate employees is helping organisations retain their staff over the longer term.”
 
However, companies looking to cut costs said they would axe training and development budgets; an approach that may not be sustainable over the long term. Qatar's goal is to develop into a knowledge-based economy, with solid leaders. “Organisations need to train and develop their employees,” says Bhatia. “Companies that lack these opportunities often struggle to retain their top performing talent. The cost of replacing staff can equal up to eight months’ salary, so businesses simply must find alternative ways to maintain profitability in difficult times and cut down on development costs.”
 
Bhatia concluded: “In a time of economic uncertainty, it becomes important for organisations to differentiate their high performing employees – by higher than average pay increases, while it’s likely that poor and average performing workers will receive little or no increase. However, a business is nothing without its people and, during periods of a perceived slowdown of the economy, organisations must think creatively about how they motivate and reward their best employees with limited budgets.”