Average pay rises of more than five percent are expected to be given in Qatar in 2013, down from 6.5 percent this year, according to a new report.
Hay Group said salary increases in the Gulf state have consistently been among the highest in the GCC over the past three years but the rate has fallen from 14 percent in 2011.
Its report is based on salary data for 54,000 employees in Qatar from 128 organisations and 13 key industries mainly within the private sector.
Harish Bhatia, Hay Group consultant, said the pay rises compared to an inflation rate of just 1.4 percent.
"Ambitious plans for infrastructure development buoyed by the increasing presence of non-oil sectors such as real estate, hospitality and manufacturing are fuelling Qatar's sustained demand for skilled talent," he said.
"Multinational organisations are setting the pace and local organisations are growing, keeping pressure on pay, both for nationals and non-nationals," he added.
Hay Group's research showed that salaries in Qatar have consistently been amongst the highest in the GCC over recent years.
The salary premium, which last year was 16 percent, was largely provided to compensate for the high cost of living, it said.
However, with the recent mandated rise in pay levels for Qatari nationals, the gap between Qatar and other GCC states has increased further to over 25 percent, it added.
Bhatia said that the large pay premium has impacted only Qatari nationals who comprise just 16 percent of the overall sample.
There were also marked differences between the sectors of banking, oil and gas and other industries.
He added: "Between 2008 and 2012 the pay premium for nationals rose from 28 percent in 2008 to 154 percent this year.
"This increase in the pay gap has historically been driven by the banking and oil and gas industries where most nationals are employed but with a 60 percent pay rise in the public sector last year the premium has grown substantially."
Hay Group reported that while the oil and gas industry and banking sectors continue to be the preferred employers of seasoned and experienced nationals, nationalisation remains a challenge for other private sector organisations in the retail, hospitality and engineering sectors looking to hire experienced nationals.
This problem is accentuated by the fact that the oil and gas industry is paying 80 percent above the market average, the report said.
Bhatia said: "Nationalisation is, and will continue to be, hindered by a shortage of skilled Qatari nationals with the technical experience that the economy needs. The best and brightest are still going in to the oil and gas industry."
He said the Qatari government understands the issues facing the private sector and is taking a longer term view of developing their workforce.
"Qatar is investing heavily in education to ensure bottom up investment in Qatar's future rather than pushing changes down from the top," said Bhatia.
"This investment will pay dividends in the longer term but private sector employers today face recruitment and retention challenges in the short term because of the population demographics in relation to rapid economic growth."
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