The document discusses compensation challenges facing companies in the KSA/GCC region, highlighting issues such as rising turnover rates and the need for competitive pay policies to attract and retain talent. It emphasizes the importance of aligning compensation strategies with nationalization goals, and creating flexible total compensation packages for enhanced employee engagement and performance management. The text also provides insights into popular trends and challenges in devising effective compensation policies tailored to local labor markets.

1. Kensington Consultants
COMPENSATION CHALLENGES FOR
KSA/GCC COMPANIES
Establishing Equitable/Competitive Basic Pay Policies,
Measuring And Rewarding High Performance
Mr John Douglass, MBA/SPHR/CCP
Dr Ali M Albaity
Dr Karl Larson

2. COMPENSATION DEVELOPMENTS IN THE
GCC 2013-2014
• During the past three years our consultants (www.kensington-consultants) have met with
and submitted proposals to numerous clients looking for help in marketing, finance, supply
chain management (SCM), and in particular the total scope of human resources
management.
• In almost all of these discussions, these questions seem consistently to come up: (1) “What
can you do for us in the compensation area? ”; (2) “What is going on in the GCC these days?”;
(3) “How can enhanced compensation policy improve the nationalization process?”.
• Surveys of regional employers during the past three years confirm that markets are becoming
more dynamic and there is increased planning for growth through the end of 2015.
• Annual turnover rates are higher for all job levels and there is increasing pressure for
employers to attract and retain more qualified talent from both domestic and international
markets.

3. TURNOVER RATES AND BASIC SALARY/BONUS
MOVEMENTS
• In 2013 41.2% of surveyed companies experienced turnover rates of 8-10% or
higher; almost half of this group experienced turnover greater than 10%.
• In highly developed, competitive markets 8-10% turnover is fairly common and
accounted for during the annual manpower planning process.
• For the GCC market where turnover rates have traditionally been 2-4%, the
increased rates are considered a serious retention problem and there is significant
pressure on talent acquisition.
• From 2013 to 2014, the number of annual basic salary increases of 4.5% or lower
will be substantially reduced; the opposite is the case for increases of 5-6.5% or
higher.
• Given the demand for talent and increasing inflation/cost of living, it’s no surprise
to see these increasing salary trends.

4. TURNOVER RATES AND BASIC SALARY/BONUS
MOVEMENTS (Cont’d)
• 56% percent of companies reported they would continue bonus programs at the same
rates or higher.
• Of increasing concern to CEO’s in the region is the increasing movement of their key
executives to other companies and industries; more sophisticated short and long-term
incentive compensation policies for these executives is getting a lot more attention.
• Steadily increasing number of managers now seeing the strong relationship between
employee engagement/retention and equitable pay and effective overall rewards for
superior performance.
• The top areas of strategic focus by employers are: (1) Improving employee engagement;
(2) Improving employee retention; (3) Review and modification of salary structures, with
emphasis on proper job grading.
• There is concern for increasing housing, education, and medical costs with various ideas
for addressing these issues; interest in flexible benefits is in the infancy stage, but it will
be awhile before individuals are ready to make these kinds of decisions on their own.

5. NATIONALIZATION
• All GCC countries have national plans in place to increase the number of
nationals in the private sector
• Attracting and retaining qualified nationals a key challenge for compensation specialists
• Designing schemes to make the best of local talent pool
• Many organizations in the region are conglomerates that address
different industries; there is more awareness to move away from out-dated
unified compensation packages to a more flexible total
compensation approach
• “Fresh graduates” from secondary schools, technical colleges, and universities; traditional survey
data tend to align beginning salaries only with level of education; now a need to align specific
competencies of the graduate with varying competency sets associated with different professional
specialties and levels of work.
• Creativity in total rewards packages and the need for transparency; need to regularly communicate
to all employees, especially the local nationals, the value of such packages
• Performance Management
• Improved coaching and mentoring between supervisors and subordinates
• Goal-setting and competency gap analysis
• Individual development planning and e-learning
• Increased career visibility

6. NATIONALIZATION (Cont’d)
• Saudization (KSA)
• Crackdown on illegal workers in 2013 led to departure of 900,000 expatriates, creating
upward pressure on labor costs
• Longer-term national target is for Saudis to Occupy 75% of the private sector workforce
• Existing regulations require Saudis to make up a portion of the workforce based on the
number of employees and work activities
• The standard for 10-3000+employees is for Saudis to occupy 10-36% of the workforce;
standards established in 4 different tiers.
• Sanctions for not meeting standards; benefits (e.g. liberalized expatriate visas) for meeting
or exceeding standards

7. HOW WELL IS YOUR COMPANY MEETING THE
CHALLENGES?
• Do you have a written compensation philosophy that is transparent to all employees?
Where do you position basic pay for jobs in the competitive market (e.g. at the median
or 60th percentile?)? How do you measure and reward superior performance?
• Is your basic pay policy based on internal equity and external competitiveness?
• If you are recruiting talent internationally, how do you establish a competitive
expatriate compensation package? Do you account for international transfer costing?
• Do you monitor the rates and reasons for turnover in your organization?
• If you have a bonus program, is it linked to performance? If so, is it tied to individual
performance only, or is there also a link to unit and organization performance? Are
payouts discretionary or incentive-based? Do you award both short and long-term
bonuses?
• Is your compensation program designed to attract, develop, and retain qualified
nationals?

8. HOW WELL IS YOUR COMPANY MEETING THE
CHALLENGES (Cont’d)?
• Is your bonus program extended to employees for retention purposes or as
motivation for those in positions to improve revenue growth? Have you cost-projected
your program and can your company afford it?
• Does your total compensation policy adequately differentiate executive pay
and rewards from the rest of the workforce? Are you contemplating stock
options for executives? If so, is this driven by the need for retention or the need
for your executives to make decisions as owners of the company, or both of the
above?
• Are you adequately monitoring the cost of your total benefits, with particular
attention to housing and health care? Is your program market competitive?
• If you believe some of the above are areas of concern, our team of consultants
can help you

9. OUR TEAM WILL HELP YOUR OWN HR PEOPLE TO:
• Develop a compensation philosophy and strategy with management input
• Develop a basic salary policy through job evaluation, market survey data, and
statistical methodology
• Determine how performance should be measured at organization, unit, and
individual levels
• Financial/KPI measures for organization/units
• Individual – goal setting, competencies as performance factors, and individual development
planning
• Determine the viability of existing or proposed merit increase programs
• Consider incentive-based bonus programs for production executives; bonus
alternatives for other staff members
• Participate in at least two major surveys and use final reports for comparative
analysis of total compensation (salaries, allowances, and other benefits)

10. OUR TEAM WILL HELP YOUR OWN HR PEOPLE TO:
• Improve the Saudization process
• Analyze workforce to determine degree of compliance with Saudization regulations
• Calculate turnover rates among units and professional specialties
• Use job analysis, documentation, and evaluation to determine requirements for vacant
positions; identify, screen, and select qualified Saudis for these open positions
• Strong training and development for national supervisors to enhance communication,
coaching, and mentoring with lesser experienced Saudis
• Reconcile job competencies with both competencies and education levels of Saudi
candidates; ensure starting salaries are aligned with range of salaries assigned to job
• For certain job families (e.g. engineering, banking) consider establishing competency-based
career ladders; nature and culture of the organization to be considered carefully

11. OUR CONSULTING PHILOSOPHY
• We will work along side your key executives and key supporting HR experts to help
them review, research, analyze, and create their own effective total compensation and
rewards policy.
• We believe in acting as change agents to develop your own internal resources and
enable staff to:
• Identify problems, barriers and areas of improvement, rather than relying solely on our consultants to
outline your weaknesses for you;
• Develop the skills necessary to solve their own problems, rather than relying completely on our
consultants.
• Our goal is to help your staff come up with the best possible compensation and rewards
policy that is possibly unique but definitely compatible with your own company
philosophy and needs.
• We will work to make you happy with our work and the fees you have paid us by
making your staff as self-sufficient as possible and minimizing the need to call us back
for more assistance.

12. JOHN DOUGLASS, MBA, SPHR, CCP
In recent years John has been employed by Mideast organizations where he has contributed significantly
to the development of domestic and international compensation and benefits programs, performance
management, leadership and succession planning, and manpower analysis and planning. He
complements this expertise with an understanding of the language, culture, and religions in the Mideast
region and has consistently taken a big picture, strategic approach throughout his career. In all of his
assignments he has mentored, coached, and trained less experienced HR professionals.
Recently he served as Head/Compensation & Benefits and partnered in the building of HR programs for
Tatweer Petroleum, a newly-formed oil and gas joint venture in Bahrain. Previously he was employed by
Saudi Basic Industries Corporation (SABIC) in Riyadh, Saudi Arabia, where he was an advisor and
consultant to senior management at the corporate headquarters and also to the presidents of 17 affiliate
companies. While at SABIC he led a teams in the development of competency-based career ladders for
Affiliate engineers, technicians, and operators. To his impressive HR portfolio he added the competency
development process and its application to compensation schemes, individual/ group development
planning, and learning management systems.
As Vice-President of Administration and Human Resources with the Arab Banking Corporation in New
York City (ABC/NY) during the 1990s he developed base pay policy through use of his Hay System
expertise, as well as performance management, incentive compensation, and health care management
programs.

13. DR ALI ALBAITY
During the past 30 years, Dr. Ali Albaity has occupied leading positions of increasing responsibility at the US Agency
for International Development (USAID), U.S. government State Department, National Commercial Bank, Bank Al
Jazeera, Al Rajhi Banking Company, the Consulting Center for Finance & Investment, Dallah Group & Altawfeek
Financial Group.
In 2007 and 2008 he established two investment banks/companies in the KSA and is acting in an advisory capacity for
local and international institutions where he is providing consulting services in the field of banking, finance,
management, investments, and project management. In his early years he was involved in supply chain
management in aircraft and office equipment parts; he was responsible for branch maintenance and control in the
KSA. Dr. Ali has had re-engineering successes with a number of organizations, including the Aljeraisy Group,
Alfawfeek Company, Bank Aljazira, Arab Media Corporation, and National Commercial Bank.
Dr. Albaity has received international and local appreciation, recognition and commendation awards. Among these
are appreciation awards from Saudi Monetary Agency for his contribution in the introduction of the Saudi Payment
Automated Network (SPAN), as well as from Deloitte & Touche Consulting Firm for preparation and acceptance of
business plans for Investment Banking companies operating under the auspices of Saudi Capital Market Authority
(CMA). He is also member of Saudi Economic Association, Saudi Management Association, Saudi Accounting
Association, and Saudi Association of Certified Public Accountants.
Dr. Ali Albaity holds a PhD in International Banking & Finance, Washington University-USA; Master's degree in
Finance from the American Academy, New York; Certificate in Advanced Management from International
Management Institute –USA; Post Graduate Higher Diploma in Finance from Syracuse University – USA.

14. DR KARL LARSON
Karl brings to his clients over 40 years of professional experience from the fields of
international consulting, corporate management, retained executive search,
executive outplacement and higher education.
For many years he owned and operated his own international consulting firm with
offices in Houston, New York, Los Angeles, Manila, Singapore and Sydney. He
has had extensive living periods while serving clients in the United Kingdom,
France, Australia, Holland, the Philippines, the Balkans-Macedonia, Saudi
Arabia and Bahrain.
His corporate experience has included senior level positions with Corning Glass,
Rockwell, and Tiger International. He also has held various administrative and
academic appointments at Northeastern University, UCLA, Springfield College
and the University of Texas at Austin where he taught graduate MBA courses in
Strategic Management, Global Marketing and Human Resources Management.
Karl also served as Senior Vice President for a retained executive search firm in
Southern California as well as an Executive Vice President for a well-known
retained Outplacement Firm