Article: Salary Outlook 2025: What % pay hike to expect this year?

With 2024 ending on a high note, 2025 is off to a positive start too. Looking at the salary trends and reports, the UAE is set to see a pay hike of 4 percent. And industries like consumer goods, tech, and life sciences are leading the way. In addition to this, over a quarter of the UAE companies are also planning to hire more people, signaling a strong demand for talent.

Meanwhile, in Saudi Arabia, it’s a mixed bag—while salary hikes expected between 2 and 4 percent, although booming sectors like logistics and renewable energy could see double-digit growth. With Vision 2030 driving big projects, competition for skilled workers is heating up.

Beyond pay, perks like housing allowances and training programs are becoming just as important. It’s clear that both nations are gearing up for a future where talent and innovation are key. Check out the salary hike outlook for 2025 below.

UAE salary hikes outlook 2025

Mercer has released findings from its annual Total Remuneration Survey (TRS), highlighting a positive outlook for the United Arab Emirates (UAE) workforce. According to the survey, salaries across all industries are projected to rise by an average of 4 per cent in 2025, with 28.2 per cent of organisations planning to increase headcount next year, signaling a growing demand for talent.

The survey, which analysed data from over 700 companies across industries such as energy, financial services, engineering, retail, technology, and life sciences, revealed that organisations in the consumer goods sector are leading the way, anticipating the highest salary increases at 4.5 per cent.

The life sciences and technology sectors are close behind, forecasting increases of 4.2 per cent and 4.1 per cent, respectively.

Energy and financial services industries are aligned with the overall market average of 4 per cent. Importantly, the study found that salary adjustments will apply equally across all employee levels, reflecting a consistent approach to compensation.

Andrew El Zein, Mercer's UAE Career Product Leader underlined, ‘It is very encouraging to see that a large segment of UAE employers plan to increase base salaries in 2025, reflecting a resilient and optimistic economic outlook. In addition to increasing salaries, HR professionals should also review their housing allowances, in light of increasing housing costs in the country, to remain competitive.”

GenAI and automation reshape workforce demands

Mercer’s findings also underscored the transformative impact of generative AI, automation, and digitalisation on workforce dynamics. With the UAE leading the Middle East in AI adoption—74 per cent of residents reportedly use AI at least once a week—business leaders are focusing on preparing for a digitally driven future. CEOs in the UAE identified AI as a key growth driver, as detailed in Mercer’s Global Talent Trends.

You may also like:

Ted Raffoul, Mercer’s Middle East Career Products Leader added, “Generative AI and automation are rapidly transforming the job landscape, shifting the skills our workforce needs and placing additional pressure on salaries. Business leaders play an important role in nurturing digital literacy and fostering cultures open to change, ensuring employees at all levels are ready for the future of work.”

Adapting to new workforce realities

To address the challenges and opportunities presented by digital transformation, the report recommends that employers need to:

Assess current skills: Identify gaps and areas for development in their workforce.
Understand hiring drivers: Gain insights into what attracts and retains talent.
Develop a differentiated Employee Value Proposition (EVP): Create compelling incentives to stand out in a competitive market.

As the UAE continues its rapid technological evolution, these strategies will be critical for businesses to remain agile and attract top talent in an increasingly digital economy.

Saudi Arabia salary hikes outlook 2025

2024 saw an average salary hike of 4 percent, but this year there’s a drop. KSA’s salary hike is expected to be about 2 percent in 2025, according to Cooper Fitch’s Saudi Arabia Salary Guide 2025.

Trefor Murphy, the founder and CEO of Cooper Fitch, highlighted that salaries in Saudi Arabia are on average 15 to 20 percent higher than in the UAE. He explained, “With the UAE being one of the highest-paying places globally, companies in Saudi Arabia must already be paying above that. Over the past five to six years, Saudi Arabia has transformed into a modern country, with improvements in dining, living standards, and accommodation. Companies are probably questioning the need for continuous salary hikes. It’s fair to say that a CFO in Saudi Arabia might be earning more than counterparts anywhere in the world.”

Meanwhile, Mercer’s salary trends report predicted a 4 percent salary hike across KSA’s various industries. As the Kingdom pursues its ambitious Vision 2030 plan to diversify its economy, it has become a key destination for companies manifesting global expansion, but also competitive talent. Global businesses, from private equity firms to legal practices, are setting up offices in Riyadh to tap into local opportunities. In addition to this, the megaprojects like NEOM are also driving a massive demand for skilled talent. Moreover, KSA has made strides in becoming a more family-friendly location, investing in international schools, cultural centers, and modern infrastructure to improve quality of life.

Trefor added, "People may wonder, 'Why aren’t we seeing salary increases despite high inflation?' But inflation and salary increases are driven by different factors. When the cost of living rises and salaries don’t keep pace, people may simply need to adjust their budgets."

Around 40 percent of surveyed organisations in KSA are planning to double their employee strength in 2025. But, there’s a catch – scarcity of skilled talent in sales, marketing, and data analytics.

Trefor underlined, “Wages in sectors like logistics, transportation, supply chain, and energy—particularly green energy—could rise by over 10 percent next year,” He also noted that industries such as government, public sector, aviation, defense, and aerospace are likely to see a 5 percent pay hike in 2025, while professionals in heavy engineering, manufacturing, hospitality, travel, and tourism can expect wage growth between 0 percent and 5 percent.

Though, engineers working in Saudi Arabia’s public sector have a reason to celebrate, thanks to a newly introduced salary scale announced by the Ministry of Human Resources and Social Development (MHRSD) and approved by the Council of Ministers. The new salary structure, which is effective from December 31, 2024, and includes transport allowances. It is detailed in Chapter 5: Allowances, Benefits, and Rewards, introducing new provisions such as an annual allowance, along with annual increments and transport benefits.

According to Cooper Fitch’s 2025 Saudi Arabia Salary Guide, nearly 50 percent of organisations in KSA increased salaries in 2024, with 8.5 percent offering pay hikes of more than 10 percent.

When we look at the industry-wise pay hikes in 2025, workers in life sciences and tech are expected to see a 4.2 percent hike, while those in the energy sector may receive a 4.3 percent bump. While in Marketing, advertising, and public relations roles, they could see a salary hike exceeding 10 percent, as predicted by Mercer.

Emerging sectors like renewable energy, tourism, entertainment, and logistics are offering competitive salaries to secure specialised talent essential for reducing the kingdom’s dependence on oil and gas.

Beyond pay hikes

In addition to this average pay hike, dynamic sectors like tech and financial services may offer bonuses equivalent to one or two months’ salary, similar to trends in the UAE – Nevin Lewis, CEO of Black & Grey HR predicts. He added, “We’re seeing salary increases similar to Dubai’s range of 4 percent to 6 percent, but in Saudi Arabia, it’s driven by transformative projects and diversification efforts,”

According to Mercer, industries with short-term incentives (STIs) as part of their rewards structure will likely continue this practice in 2025, with STIs typically comprising 12 percent of the total compensation package.

Lewis also points out that companies are increasingly focusing on holistic rewards, offering training programs, family-friendly perks, and competitive pay. “Employers now recognise that investing in employees’ futures—beyond just their paychecks—is key to building loyalty,” he says.

Mercer’s Global Talent Trends report emphasises that training in artificial intelligence and other emerging technologies will be a significant focus for employers in 2025.

You may also like:

Andrew El Zein, UAE Career Products Leader at Mercer says, “With rising housing expenses, HR teams are reviewing housing and schooling allowances to remain competitive. These adjustments aim to attract and retain top talent in an increasingly competitive market.”

As Saudi Arabia’s economy continues to diversify, talent availability will remain a key challenge, making international recruitment a critical part of corporate hiring strategies in the year ahead.