57% of companies postponed their 2020 salary increases due to the COVID-19 pandemic
• A 4% increase in salaries is expected in general in the Kingdom of Saudi Arabia in 2021, indicating cautious optimism despite the economic repercussions of “Covid-19”
• Saudi companies rely on flexibility to operate as the primary solution to recover from the effects of the pandemic
Mercer’s annual gross wages survey for 2020 revealed that Saudi companies have remained resilient and adapted to the pandemic, despite the great challenges that accompanied it.
The survey, which covered 424 companies in the Kingdom of Saudi Arabia, showed that some may resort to an increase in annual salaries for the year 2020 by 3.7% in the market in general, and the life sciences, medical materials and technology sector recorded the largest increase. 22.5% of firms reported an increase in productivity caused by home work, despite 6.2% of firms in Saudi Arabia having temporarily reduced wages.
In the past, the general market witnessed positive salary inflation, despite 19.4% of companies indicating that they had frozen salaries in 2020, while 21% of companies intend to reduce their workforce to maintain productivity and profitability. It is worth noting that most of the decisions related to the budget and salaries for 2020 were taken early in the year at the beginning of the pandemic, that is, before the economic repercussions of the complete closure imposed by the state. On the other hand, 57% of companies postponed salary increases for 2020 due to the “Covid-19” pandemic, for an average of 7 months.
While the general market expects an increase in salaries for 2021 by 4%, the numbers in the various sectors vary greatly. As for the largest increase, it was for the life sciences and medical materials sector (4.6%) and technology (4.5%), while the energy sector is still witnessing the slowest increase in salaries, with expectations of 1.2%.
The Covid-19 pandemic has led to the implementation of flexible remote work procedures at a breakneck speed, as 66% of companies have put in place new remote work policies, while only 23% of them had remote work policies even before the Corona pandemic. This, in turn, has led many employers to report increased productivity, in addition to their expectation that flexible working arrangements will continue even after the end of the Covid-19 pandemic.
Commenting on the results of the survey, Najla Najm, Professional Business Manager at Mercer Saudi Arabia said: “In general, it is clear that many Saudi companies are still trying to deal with the strong economic impacts of the pandemic, but some companies in the Kingdom have shown great flexibility at times. The current crisis, and we also note many initiatives in response to the new operating environment brought about by the “Covid-19” pandemic. It is also encouraging to witness an increase in salaries by some companies in the Kingdom of Saudi Arabia in 2020. With regard to the companies that reported Regarding the salary cut, it is indicated that it has taken this measure temporarily, which indicates cautious optimism and an expectation of a gradual recovery of the economy with the end of the pandemic period. This year like the logistics sector
It is likely that a large part of this growth will come from the life sciences, medical materials and technology sector, both of which will be extremely important for the development of the Saudi economy and the achievement of Vision 2030. As for the numbers included in the survey, they are a clear indication of the expected economic recovery in the near future.
Basem Samara, Director of Products and Functional Solutions at Mercer in the Kingdom of Saudi Arabia, said: “The gross wages survey results shed light on the measures taken by companies in the Kingdom of Saudi Arabia as we enter the last quarter of the year and prepare for 2021. On the one hand, In spite of the remarkable economic effects of the pandemic, the government incentive measures provided some assistance to Saudi companies and were able to reduce the negative effects of the pandemic on employees.From here, we expect the return of gradual growth despite the ongoing stability caused by the “Covid-19” pandemic. “
In 2021, we expect companies to continue to adapt to the new normal, with more than a quarter of them expecting to maintain flexible work arrangements even after the pandemic ends. This will positively affect both employees and companies, and its multiple benefits will emerge, most notably online learning, reducing travel costs, office construction costs, and many more.
Mercer’s annual gross wage survey is conducted regionally in more than 15 countries in the MENA region. In Saudi Arabia, the survey was conducted on 424 institutions in all sectors, which include manufacturing, retail and wholesale trade, high technology, chemicals, consumer goods, life sciences, medical materials and energy.