KUWAIT CITY, Sept 29: With the economy starting to turn around, organizations again face the prospect of a tussle for top talent at a time they most need the expertise and the experience. And organizations are recognizing the importance of their pay strategies in attracting and retaining this talent.
Ms Safa Al Hashem, Chairman & Managing Director of Advantage Consulting Company, while releasing the latest report titled, ‘Salary Trends - The Changing Landscape’, published by the Markets Insights Division (MID) at Advantage said, “Organizations are now reengineering their workforce and talent strategies, to take advantage of the recovery to better adapt to the new business normal that the financial crisis has resulted in.” Elaborating further, Ms Safa said that, going forward, the dynamics of a new business environment would result in an organization’s compensation strategy being a key differentiator in its ‘War for Talent’.

The report analyzes, in detail, the trends witnessed in salary increases across the GCC, with 2010 witnessing a relatively stable and moderate increase at 7.7%, far from the highs experienced in the pre-recession period. It has also been noted that far fewer organizations in the GCC opted for salary freezes in 2010, as against 2009, when salary freezes and cuts were the order.

Recruitment in the region, as outlined in the report, continues to be guardedly optimistic with hiring in specific functions such as Finance and IT, having gradually picked up over the period. Also, as noted, most experienced professionals who kept on hold their plans to change jobs over the last 2 years due to the market instability, have started to seek newer opportunities, signaling a change in the overall business sentiment. Organizations are looking at ramping up operations in areas that offer long term potential growth, such as Asset Management and Project Finance. As Private Equity firms undergo a focus change in target sectors from real estate and financial institutions, to healthcare, education and utilities, hiring is expected to eventually emerge in this area.

On the increasing adoption of Performance linked Pay across the region, Ms Safa said that “Performance linked Incentive Schemes provide the perfect tool for organizations to align employees with its long term and short term objectives. By linking incentive payouts to performance, organizations will be able to elevate the sustainability of their overall compensation strategies, and will help tie employee performance to the organization’s bottom line, thereby ensuring a greater focus on return on investment.” The report explains that organizations, to offset the relatively low increases that have been given since the recession began, have restructured their compensation strategies to include a higher proportion of variable pay to fixed pay, over the last period.
In its conclusion, the report say that organizations shall be driven to design talent strategies that will help them gain competitiveness and become more efficient. Organizations will have to ensure that they maximize all resources to optimize effectiveness of their operations.  Considering the need to remain competitive, companies will have to implement innovative compensation strategies to attract, develop, motivate, and retain its Human Capital.
Introduction
Employee retention is one of the key concerns of most businesses today. Every successful organization today realizes that keeping employees motivated is a critical step toward ensuring that business goals are met. As the world recuperates from the drastic effects of the financial crisis, companies are finding innovative means to retain their most valuable assets.
At the peak of the financial crisis, the world witnessed large number of organizations frantically reducing their manpower in their effort to cut down on costs. Now as the economy continues its upward climb, companies now need to focus on their employees more than ever and make sure that they are given the rewards and recognition they need to ensure successful performance at the workplace.
While the uncertainty about what happens globally remains, there is increasing clarity about companies using the downturn to harden the focus on balance sheet, people management and reward. This report looks at the evolving trends in the job market, as the GCC economies slowly come to terms with the after effects of the financial crisis. Most of the companies have been able to weather the peak of the financial crisis by rationalizing on their manpower plans, and restructuring their internal organizations. Companies across the GCC are also moving to sharpen their pay practices to make their firms more competitive in the war for talent.
There are other trends as well, all of which augur well for the GCC economy and business practice overall. An increasing number of firms have been adopting a two-track approach - shedding excess and unproductive talent, but paying greater attention to the remaining top talent that will take the company forward, the approach commonly referred to as the total employment deal. 
With signs that the economy is starting to turn around, firms will again face the prospect of a tussle to attract, develop and retain top talent at a time they most need the expertise and the experience. And companies are recognizing the importance of their pay strategies in attracting and retaining this talent. This report looks at the changing landscape in the GCC with reference to salary and recruitment trends.
Salary Trends in the GCC
The global financial crisis has inevitably resulted in an unwelcome downward pressure on salaries across the globe. However, the GCC, while not immune to the financial downturn, was impacted less than other areas, with studies reporting that salary growth in the region has been amongst the highest in the world.
Despite the volatility in salaries in the GCC through out much of 2009, the salary increases in 2010 have been relatively stable at 7.7%. Although this is a positive sign, it is far from the highs experienced in the pre-recession period.
It should be noted that significantly fewer organizations have opted for a freeze in salary hikes in 2010, as opposed to 2009, when organizations froze salary increases, in anticipation of a deepening recession and in response to organization-wide cost containment efforts. A similar trend has been witnessed on salary cuts, with a drastic reduction in the number of organizations implementing salary cuts.
An analysis on country-specific increases reveal that Oman and Qatar leads the GCC pack with overall increases at 9.8% and 9.4% respectively, while Bahrain and Saudi Arabia posted salary increases at 7.8% and 6.9% respectively, faring better than Kuwait and the UAE which experienced the lowest increases at 5.8% and 6.6% respectively. These increases, though higher than those seen in 2009, are down sharply from the increases previously seen in 2008.
The GCC markets, industry experts have pointed, are more resilient, have stable economies, provide significant growth opportunities, and provide a genial climate, making it a preferred business destination. It has been seen that many organizations across the GCC are reinventing themselves to maintain their market positions in order to achieve more profitability and emerge stronger through the crisis.
An analysis of sector-wise data reveals that the Oil & Gas sector has led sector specific increases with an increase percentage at 8.9%, while the Construction sector has witnessed the lowest salary increase at 5.7%. The low salary increases in the Construction sector can be attributed to the large number of real estate projects that have been shelved or suspended, owing to a lack of consumer demand. The Telecom, Healthcare, and Banking & Finance sectors have posted modest percentage increases at 7.7%, 6.9% and 6.8% respectively. 
With stronger economic growth projected for the GCC countries, companies are budgeting larger pay rises, as they compete for talent with other firms in the region. Many local organizations have realized that the economic downturn has provided improved avenues for expansion and diversification. With the GCC governments poised to spend significantly on local and regional infrastructure, and on the back of increasing oil prices, companies will find themselves once again under pressure in competing for the best talent.
Research has also shown that salary increases have been the highest for Middle Management professionals, with an overall percentage increase at 8.6%. Executive Management personnel received an overall percentage increase at 7.5%, significantly lower than the 11.5% witnessed in 2008. The salary increase percentages for Middle Management professionals are projected to outpace that of other Job levels over the coming years, while that of the Professional/ Supervisory and the Clerical/ Administrative are expected to ease over the same period.
Recruitment Trends 
Job Cuts
The effects of the financial crisis are still looming over the corporate world with different sizes of unsettling waves hitting the market since 2008. As detailed in our previous reports concerning the effects of this crisis on the labor markets, many organizations undertook job cuts at the peak of the financial crisis in 2009, adding to the soaring unemployment rates in the Gulf region. Although signs are surfacing that indicate recovery all over the world, job cuts continue to sweep the world with over 10 million employees expected to be relieved from their corporate duties by the end of 2010.
Research studies have indicated a rise in the unemployment rate in the GCC to 10.4%, an increase by 1.6% as when compared to the 8.8% seen last year. This is due to the even more stringent recruitment standards and skill sets required by organizations, those which are not available to the newly graduated students and the less skillful professionals. Most of the new graduates have indicated their job preferences towards the governmental sector, who would rather not face the insecurities of the private sector, resulting in increased pressure on governmental institutions to hire in excess of their requirements. GCC governments are planning to introduce initiatives to promote entrepreneurial ventures by its fresh graduates, to help offset the increased demand on the governmental sector.
Research studies have shown that Kuwait, Bahrain, UAE, and Qatar will experience the highest number of layoffs, with a significantly large number of organizations also undertaking manpower rationalization initiatives, resulting in a number of jobs being made redundant.
Recruitment Trends
The recruitment outlook in 2010 has undergone drastic changes, and most organizations continue to be cautious in conducting any recruitment activities. However, most recruitment experts are guardedly optimistic for 2010, with hiring activities slowly picking up, especially for finance related jobs. Studies have shown that new vacancies in the financial services sector are 15% higher than from the same period in 2008.
The optimistic recruitment outlook in 2010 is due to the fact that job offers increased by the end of 2009, indicating higher recruitment activity specifically in investment banks and brokerage firms. The IT sector has also shown signs of improvement, with organizations increasingly looking to leverage technology to minimize manpower costs and enhance internal efficiencies.
Despite the fact that most organizations prefer experienced professionals to fill up vacancies, the requirement for graduates is showing steady signs of improvement in 2010, with organizations offering newer roles with competitive compensation for fresh graduates. Also, most employees who were seeking to change jobs in the last two years have kept their plans on hold since the job market has been very unstable through the crisis. However with continuing signs of improvement over 2010, experienced professionals are more confident in the market and the economy to seek new opportunities.
Recruitment Trends in the GCC
In the Banking sector, recruitment activity has increased in 2010, due to the development of new business models which has led to the creation of new strategies and the formation of new functions and departments, resulting in increased recruitment activity. In terms of positions in demand in 2010, analysts and associates have been in demand in the banking sectors, in addition to a demand for Executive Management personnel in certain functions. Also, increased income tax in the UK, and the imposition of tough bonus laws in Europe, may continue to make the GCC a tempting destination for Executive and Middle Management banking professionals.
With banks planning to ramp up operations in areas that offer long term potential growth, hiring for the asset management function has begun to pick up. Banks are aiming at boosting their assets under management, and exporting their investment capabilities to new markets, resulting in expansion of their Asset Management teams. And because of the relatively underdeveloped nature of the asset management industry, local investment banks are looking to build out this function in order to compensate for shrinking revenues elsewhere. With the regulatory environment in the GCC attempting to encourage more asset managers to the region, recruitment activity for experienced professionals in this area will pick up steam steadily.