Saudization: Is the Bubble About to Burst?

149397561The war for talent in Saudi Arabia is heating up as a program puts pressure on companies to increase the number of Saudi National employees and retain existing employees.

The Saudization program stipulates a minimum proportion of Saudi National employees in relation to expatriates. If the total number of Saudi employees comprises less than six percent of the total workforce, it is not possible for an employer to receive new visa allocations for expatriates. The ideal number for more than 40 percent of the workforce to be Saudi nationals, according to the program.

With 58 industry sectors subject to the program, it can be a daunting task for employers to hire qualified Saudi nationals – particularly as approximately 50 percent of the Saudi population is under the age of 25. This is in fact typical of the Gulf region, where around 60 percent of the population is younger than 30 years old. It is of course important for these nations to provide employment for the younger generation and the measures in place are there for the right reasons.

But those measures are making it more difficult to for companies to obtain the skilled workers they need. Companies are learning to be more strategic in order to retain talent. Among the issues they need to content with is the attraction of a significantly higher salary luring employees away and the temptation to make a counter offer.

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But there are a number of negative outcomes for both companies and employees who are continually offered increased salaries over and above the market rate. This is particularly prevalent for Saudi national employees due to high demand. Employees who choose to change companies every two years see an effect on their ability to increase skills and add real value to the organization. For industries such as private equity in particular, the real rewards will only materialize over the longer term. For employers, it is unsustainable to continue increasing salaries without negatively impacting the P&L and creating internal conflicts. The right way to achieve the desired levels of retention is to ensure each staff member understands their opportunities within the firm and the importance of development over the longer term. Loyalty programs and bonus schemes can also be used to motivate retention.

Other measures can be taken to retain the best staff. Prevention is better than seeking a cure and providing a clear understanding of an employee’s career path together with the right level of training and development will help to decrease turnover. In order to continually upskill the promising junior Saudi employees, businesses should still look to place more experienced expatriate hires at a senior level to assist with the development of the Saudi teams. Training and development does not always need to be a technical or a team building exercise. Educating employees in regard to the longer-term benefits of remaining with a firm is also important. Ideally, this of course needs to be completed before an employee has already received an offer of employment from a competitor. There seems to be a catch 22 situation in Saudi Arabia’s job market. Businesses in the kingdom need to grow and the younger generation of Saudis need to be employed and trained, but the question is – can both these objectives be met?


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Richard Foulkes

Richard Foulkes
Richard Foulkes is a client partner at Dubai-based Pedersen & Partners.

Richard Foulkes

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