As Persian Gulf economies continue to grow at a rapid rate, a war is being raged throughout the region’s corporate corridors for attracting suitable candidates seeking employment and retaining current employees with jaw-dropping compensation packages. Regional recruitment consultants are working hard in order to create a balance between demand coming from the corporate sector and the supply of suitable candidates entering the labor market. The current state of economic affairs and the stunning pace of economic growth have created a situation in which companies are vying to maintain their valued employees that have valuable knowledge and functional sophistication.

In a highly competitive business world that requires firms to continuously strive for higher performance, companies have been cognizant of the need for attracting the right talent. Thus, they have been increasing their salaries and re-negotiating compensation packages. These acts are invariably affecting the labor market and creating an alarming upsurge in salary levels. While salary increases vary widely throughout the region, reports indicate that employees successfully achieve 25 to 50 percent increases in their salary packages when changing employers. However, other analysts warn that such high increases only represent extreme instances and the norm in salary increases over the past year ranges between 10 to 12 percent.

Moreover, salary increases vary across the corporate ladder and amongst the different skill pools. Salaries in certain industries are reaching global salary levels; yet, the rise is not at all uniform and fluctuates from sector to sector. In the banking sector, for example, "salary levels for the lower levels have risen more than that for the higher level," says Adel AI-Alawi, CEO, Forum International Executive Search. This is caused by greater demand for middle and lower level employees that reflects a fast-moving economy. In general, rising salaries favor new employees, especially those working in construction or the oil and gas field. Existing employees also enjoy salary hikes usually ranging between 5 to 25 percent.

Regional recruitment consultants are working hard in order to create a balance between demand coming from the corporate sector and the supply of suitable candidates entering the labor market.

The salary surge has not engulfed all Persian Gulf countries and salary levels in places such as Kuwait and Bahrain are expected to remain relatively stable in the year to come. Noora E. Feleyfel, Regional Director, Marketing and Business Development, MRI Middle East, mentions that "the banking and finance sector, as well as construction are the two main indus­tries that have seen salaries rise," in Bahrain. She also pointed out that one reason for higher salaries is an escalating cost of living in the country. "The influx of Saudi residents moving to Bahrain and commuting to Saudi, as Saudi companies offer their employees a higher housing budget," is a main factor behind the rise of living costs in Bahrain according to Feleyfel.

Yet, the need for great talent has forced companies in the region to carry the heavy burden of increased salaries. One factor is the economic vitality of the region. For example, over the past year, the trend in IPO activity in the region has nearly doubled with $7.61 billion in capital being raised - a 10.7 per cent of total capital raised globally- which has resulted in the creation of invest­ment banks, private equity firms and financial institutions in the region. This has also brought with it greater demand for top tier human capital especially in more senior levels and for people with specialized skill sets.

Giulianotti of Nadia Recruitment says that "these new employers are prepared to pay at levels not seen before in Dubai salaries and far in excess of the current market levels." Thus, a newly-established institution such as Dubai Silicon Oasis Authority (DSOA) moves to bring engineers and specialists from abroad since the nature of the field doesn’t necessarily allow people to be trained for the job or recruited in a short time period. Moreover, a number of factors will be affecting the regional labor market in the near future that makes decision makers apprehensive about a looming talent shortage.

One factor is the availability of greater opportunities across the region. This has led more people to come to the Persian Gulf region in pursuit of jobs. It has also brought about inter-regional job mobility as domestic markets pull skills from one country to another. The main pull is coming from Saudi Arabia, mainly due to its relatively large market size. Further, as different countries position them­selves as having different specializations, demand for experts in specific industries varies accordingly. For instance, demand for insur­ance personnel is currently highest in Bahrain. Moreover, competition for skilled labor is intense as countries push ahead with ambitious economic development plans, specifically astounding construction plans. In this light, one can also point out to the rise of small and medium-sized companies that offer greater opportunities for executives to shape company decisions and have a tangible impact as compared to larger firms.

Another important factor can be termed the "sub-continental pull." With India emerging as an economic powerhouse providing new employment opportunities, many Indians currently working within the Persian Gulf region are considering moving back home and recruiting from that resource pool has become limited. For the first time, Indian companies are vying to pull back people from the GCC markets. Career growth considerations and feeling a bond with the motherland are factors affecting this trend which has led recruitment officers to look to other talent pools for potential employees.

There is also the challenge of finding the suitable people that will match the high salaries being paid. According to Nadia Recruitment agency only 15 out of every 150 applicants have the suitable experi­ence or transferable skill sets necessary for the job. The challenges associate with recruiting new suitable employees has forced companies to adopt a two-pronged strategy. On the one hand, companies are expanding their scope in recruiting new employees from new source markets, and, on the other hand, they are working harder to retain current employees. Retention, therefore, has become an important challenge as well.

In order to retain employees companies are moving to offer timely career opportunities and have had to become much more responsive with their policies towards remu­neration and reward in order to attract and retain the most talented professionals. Thus, they are increasing their House Rent Allowance (HRA) component in direct proportion to the market rent percentage rises. In fact, the rise in rents has been a major concern for companies. They are also offering other valuable benefits that might help in retention efforts as well as moving to award staff members for individual efforts rather than offering across the board salary increases.

Different companies in the region are taking on different measures to tackle this issue and have developed innovative ideas for retaining and recruiting talent. This new methods include paying more guar­anteed bonuses for the first year, providing air miles and other physical bonuses, and designing performance-based incentive schemes (commissions). Both large and small firms have been forced to adjust in the short-run and will have to be more vigilant in identifying talent and emphasizing quality over quantity in the long-run. It has also brought about a new focus on talent development and management.