Employers of expats in the Middle East are facing a range of problems which could bring lucrative postings to an end for many reasons.
Traditionally, employers have offered high tax-free salaries and generous allowances to attract expat talent, but once there, very few want to move on.
The cost of providing benefits is also increasing, particularly for free healthcare, and many multinational firms are looking to adopting strategic talent management policies to attract quality staff without the accompanying high overheads.
In addition, there are also the future problems with governments imposing employment quotas to boost the numbers of locals employed in the private sector – at the expense of expat jobs.
The report by HR specialist firm Mercer, focuses on the region’s Gulf Cooperation Council (GCC) which consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.
Dominated by foreign workers
The report describes the GCC as being the most dynamic region in the Middle East, while also employing the largest number of expats.
Most of the region’s governments are investing heavily into the country’s infrastructure in a bid to boost growth in the non-oil and gas sectors in their economies, but this is having an effect on inflation and salaries.
However, the employment market is dominated by foreign workers who make up 90% of the workforce in Qatar and UAE and up to 50% in Saudi Arabia.
The report highlights the problems with the working visa sponsorship system run in these countries, which makes freely moving between employers difficult for expats.
An expat without a sponsor is not legally entitled to live or work a GCC country, and many states ask for a ‘no-objection letter’ from a current employer before the expat can switch jobs or even leave the country.
There is now a trend, led by multinationals in the region, which sees a move away from such systems and, instead, establishing umbrella companies.
Bahrain is one country to relax its sponsorship system and Qatar is in the process of setting-up a trade union to protect the rights of private sector workers.
The report also highlights potential issues for employers in the GCC region which is seeing local governments establish quotas for employing locals.
For instance, in Saudi at least 30% of a company’s workforce must be nationals before work permits for expat employees can be applied for.
The report states: “It is notoriously difficult to attract Saudi nationals to the private sector and 43% companies risk losing privileges for not meeting minimum quotas.”
Traditionally, the public sector in the GCC region has been the main employer of nationals, but critics point to low productivity as an issue.