Oman imposes yearly salary increases for workers in the private sector.
As of 2025, Oman has implemented a new system for annual performance-based salary increases for Omani employees in the private sector. This system, outlined in Ministerial Decision 317/2025, requires employers to grant salary increments based on employee performance starting from January 2026.
Key Details of the System
The system categorises employees into performance groups, each with a corresponding increment rate:
- Excellent: Eligible for a 5% increment.
- Very Good: Eligible for a 4% increment.
- Good: Eligible for a 3% increment.
- Acceptable: Eligible for a 2% increment.
- Weak: Not eligible for any increment.
To be eligible for the increment, employees must have completed at least six months of service with their employer by January 1. The increments are calculated based on the employee's basic salary, excluding overtime or commissions.
Employees have the right to contest their performance evaluation results through the Ministry of Labour. If the grounds for suspension are overturned, the increment must be paid retrospectively from the effective date.
Implications for Employers and Employees
For Employers:
Employers must conduct annual performance evaluations and adhere to the new increment rates. Non-compliance may result in fines of OMR 50 per affected employee. Employers are also encouraged to refine their performance evaluation processes to ensure fairness and consistency in awarding increments.
For Employees:
The system provides incentives for high-performing employees, who will receive significant increments, while underperformers may not receive any increase. Employees also benefit from a clearer system of evaluation and have recourse to appeal evaluations they believe are unfair.
Economic and Social Impact:
The mandated increases may help employees deal with rising costs of living and improve their purchasing power. The system may also influence employers to invest more in employee development and performance enhancement to justify higher increments.
Overall, the performance-based salary increase system aims to enhance employee motivation and fairness in compensation practices in Oman's private sector. The ministry's statement aims to "enhance productivity, improve job satisfaction, and ensure fair remuneration for Omani workers in the private sector".
It's important to note that the regulation applies exclusively to Omani nationals working in the private sector and does not cover expatriate employees. The ministry has indicated that enforcement will be supported by a wage protection system, under which employers must submit payroll data for monitoring. Employers may suspend or reduce the annual increase in certain circumstances, such as disciplinary action or adverse economic conditions.
The new regulations repeal earlier rules governing periodic allowances for Omani private-sector employees. Employers may choose to apply similar policies to non-Omani staff in the name of fairness. The annual review process is expected to contribute to a more competitive and motivated workforce.
The new system in Oman's private sector, as outlined in Ministerial Decision 317/2025, will require employers in the finance industry to implement annual performance-based salary increases, starting from January 2026. These increments will be based on employee performance within the business sector, with rates varying from 5% for excellent performance to no increment for weak performance.
Employers in the business sector must conduct consistent performance evaluations to comply with the new regulations, or they may face fines for non-compliance. On the other hand, high-performing employees in the finance industry are expected to reap significant salary increases as a result of the new performance-based system.
