Salary gap widens for expats in Saudi Arabia

The salary gap between Saudi nationals and expats is growing as a result of the government's Nitaqat policy which aims to get more Saudis working in the private sector, a new report has said.

Hay Group's 2012 Saudi Arabia Compensation and Benefits study found that the average salary increase is holding steady tracking just below inflation.

It added that nationals now receive 17 percent more than the market average while non-nationals now receive four percent below the market average.

A total of 340,000 employees from 356 companies in 17 industry sectors were included in this year's study which reported that salaries in Saudi Arabia rose by 3.8 percent over the last 12 months.

It also said that organisations are forecasting a higher increase of 5.6 percent in 2013 in order to offset inflation.

Hay Group's Wendell D'Cunha said: "Within the basic pay rise of 3.8 percent there are three key trends, so we should be cautious in looking at the average.

"One trend is the expanding salary gap between nationals and non-nationals, the second is that national new hires are receiving the largest pay increases, and the third trend is an increase in the proportion of salary that is a performance based bonus."

D'Cunha added that the gap between salaries of nationals and expats was likely to continue to grow.

"The widening of this gap can be attributed to a combination of the efforts of Nitaqat and a talent shortage in certain functions and industries.

"In 2013 we expect to see more demand for nationals with specialist skills such as finance, IT, HR, engineering and production. 51 percent of our participating companies told us there is a scarcity of candidates."

The report said that Nitaqat is succeeding in encouraging the recruitment of nationals into the private sector, with Saudi new joiners being paid a 19 percent premium.

D'Cunha added: "Private sector organisations are recruiting more nationals and we see high premiums for nationals, especially when they enter a specialist field which is where the critical shortage of national talent lies."

The study also showed that in Saudi Arabia, the proportion of an employee's package that is performance based bonus has doubled from 4 to 8 percent since 2010.