Dubai: A higher salary increase is still on the cards for some employees in the UAE next year, although the impact of falling oil prices can now be felt across the Gulf Cooperation Council (GCC) region, according to a new report.

Based on a survey of 600 multinational companies and locally-run conglomerates in the GCC, Aon Hewitt has forecast salary adjustments in the UAE to average 5 per cent in 2016, higher than the 4.8 per cent forecast and actual increase implemented this year.

Across the region, however, a slowdown is expected, with increases forecast to average 5 per cent, down from an anticipated 6 per cent in 2013, 5.5 per cent in 2014 and 5.1 per cent in 2015.

Aon Hewitt said that the recent moves to cut back on government subsidies and infrastructure spending, as well as the widely publicized plans to implement taxes, are putting pressure on profit margins and operating costs of companies.

The UAE has recently removed oil subsidies, causing pump prices to increase, amid concerns that falling fuel prices could hurt government finances. There have also been discussions about a proposal by the International Monetary Fund (IMF) to collect value-added tax on consumer goods and services.

“Clearly, the impact of lower oil prices can be felt across the region, with governments cutting back on subsidies, reducing spending on larger projects and thinking about introducing some form of taxation,” Aon Hewitt said in a statement on Tuesday.

Robert Richter, GCC compensation survey manager at Aon Hewitt Middle East, noted that the overall outlook for 2016 is not as rosy as recent years. “But the news that employers are predicting salary increases in the 5 per cent range should come as a comfort to employees, suggesting that there is still optimism in the market,” Richter said.

Kuwait companies lead the region in highest level of salary increase at 5.2 per cent. The forecast, however, is slightly down from the 5.3 per cent predicted for 2015. Salaries in Kuwait rose by 4.7 per cent, on average, this year.

Saudi Arabia comes second, with salary adjustments forecast to average  5.1 per cent, followed by UAE, Qatar and Oman, all at 5 per cent.

Workers in Bahrain are likely to receive the lowest salary increase at 4.7 per cent, down from the 4.5 per cent forecast for 2015.