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17 April 2013

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Introduction to the Contingent Workforce in the Middle East

Speaker: John Nurthen, Executive Director, International Development

©2013 by Crain Communications Inc. All rights reserved.

Improving financial

performance

Benchmarking

business performance

Market trend data

Implementing best

practices

Refining market entry

strategy

Identifying new business

opportunities

Understanding evolving

buyer needs

[email protected]

CWS Council Members (partial list)


Countries in Scope

• Bahrain

• Kuwait

• Oman

• Qatar

• Saudi Arabia

• United Arab Emirates


Country GDP GDP

%

2013

Population

(estimate)

Unemployment

Rate (estimate)

Ease of

Doing

Business

Corruption

Index

Bahrain $15bn 2.8% 1.2m 8.0% 42 53

Kuwait $80bn 1.9% 3.9m 6.0% 82 =66

Oman $36bn 3.9% 3.3m 8.0% 47 61

Qatar $99bn 4.9% 1.9m 3.0% 40 =27

Saudi Arabia $277bn 4.2% 29.4m 10.5% 22 =66

UAE $193bn 2.6% 5.7m 14.0% 26 =27

Source: IMF, World Bank, Transparency International, Gulf Investment Corporation & Staffing Industry Analysts

Economic Indicators


Unique Challenges

• Authoritarian governments and some political

instability

– Structural dependence on oil exports

– Strong investment in infrastucture projects

– Public demonstrations in Bahrain and Oman

– Wealth distribution measures to stifle protests

• Blur between private and public company ownership

– Oligarchical, family controlled businesses with familial ties to

government officials


Unique Characteristics

• Endemic skills shortages– Huge migrant workforce

• Leading to Emiratization policies (or similar)

• Restrictions on the free movement of labour

• Western notions of equality not applicable– No anti-discrimination legislation in the workplace (apart from

Kuwait and a few free trade zones)• Women comprise only 15% of Saudi Arabian workforce

• Sex segregation walls for Saudi Arabian retail workers

• Very low (or no) personal income tax rates

• Highly fragmented and untidy staffing markets– Legislative environment fluid


Unique Characteristics

• Sharia Law

– Most Arab countries refer to Sharia either as a primary source

of law or the source of law

– But variations from country to country

– Can have certain implications in the workplace

• Dress codes

• Working time

• Contracts


No Ratification of ILO Convention 181

• To date, no Middle East Countries have ratified ILO

Convention 181 (1997) on Private Employment

Agencies

– Provides legal recognition and support of the development of

the activities of private employment agencies by way of a

tripartite employment relationship

– Proven to be an important first step in many countries,

especially among emerging economies


Licensing Issues

• Staffing companies must be properly licensed throughout

the region

– Procedures can be opaque and enforcement has traditionally

been weak

– Restrictions on licenses to foreign companies

– And sometimes wider restrictions on establishment of foreign-

owned companies

• Use of local agents/partners

• Bureaucratic obstacles to enterprise development including labour

clearances, business regulation and property rights

• More relaxed rules in Free Trade Zones

– Most providers are unlicensed

• Including a number of rogue operators paying cash in hand

– Many suppliers trade as ‘HR Consulting firms’


UAE Legislation

• Limitations on certain categories of workers– Includes medical staff, engineers, legal advisors, teachers, accountants,

computer operators as well as federal and local government workers

• Licensing requirement for employment brokerage and for the

supply of expatriate manpower – renewed annually– Limited to UAE nationals and UAE companies

– Plus furnishing of a bank deposit to the Ministry of Labour & Social

Affairs worth UAD 1 million (approx USD 271,750) per Emirate

– License within Free Zone means you can only operate within that Zone

but no bank deposit required

• 90 day work permit requirement for foreign temporary workers

in the private sector on an individual basis– Group permits (25 employees or more) only permissible in certain

urgent circumstances


Market Sophistication

• MSP and VMS in region is negligible

– Only exist as a result of global employers expanding established

programmes

• Kuwait* = 3 MSP, 3 VMS

• Qatar* = 2 MSP, 2 VMS

• Saudi Arabia* = 3 MSP, 2 VMS

• UAE* = 4 MSP, 5 VMS

• But RPO is highly visible

– But beware of companies using the term as a proxy for standard

permanent placement rather than outsourcing of (all or part of)

the recruitment function


*Source: Staffing Industry Analysts VMS/MSP Global Landscape Report 2012

Protection of Native Workforce

• Governments seeking to control and regulate labour

markets in order to replace expatriate personnel with

national manpower gradually

– Bahrainization/Emiratization/Saudization/Kuwaitization/

Omanization/Qatarisation

• Tight restrictions on foreign labour

• But skills shortages among native labour force, especially in the private sector


0%

5%

10%

15%

20%

25%

Qatar Kuwait UAE Saudi Oman Bahrain

Nationals employed in private sector as % of total private sector employment (2011)

Source: GCC Labour Ministries

Strong Bias Towards Dubai


0% 5% 10% 15% 20% 25% 30% 35% 40%

Sharjah

Manama

Dammam

Makkah

Riyadh

Madina

Kuwait

Muscat

Jeddah

Abu Dhabi

Doha

Dubai

Ranking of Gulf Cities – By Attractiveness to Expatriates

Source: GulfTalent

15 Source: Staffing Industry Analysts

Size of Staffing Markets

UAE

58%

Saudi Arabia

16%

Qatar

11%

Oman 4%

Kuwait

5%

Bahrain

6%

Staffing spend in Region worth USD 3.1bn in 2013


• Gulf staffing markets will more than treble in size over the next

five years if the economic environment remains positive

2012 2013 2014 2012 2013 2014

UAE 1,381 1,809 2,442 29% 31% 35%

Saudi Arabia 390 491 624 26% 26% 27%

Qatar 268 346 457 37% 29% 32%

Kuwait 120 161 212 33% 34% 32%

Bahrain 134 173 224 32% 29% 29%

Oman 97 120 151 29% 25% 26%

Source: Staffing Industry Analysts

Country Estimated Market Value

(USD million)

Forecast Growth

Percentage

Staffing Market Forecasts


• Gulf staffing markets are unusual in comparison to

staffing markets in the rest of the world

– More typically, a staffing market is dominated by the Industrial

and Administrative skill segments that can comprise anything

between 50%-90% of the market

– In the Gulf region, higher value professional sectors (ICT,

Accounting & Finance, Engineering/Construction, etc)

predominate and comprise 80% of the staffing market

– Permanent recruitment is a much more significant feature of the

market than we see in either US and European staffing markets

…..but boundaries are blurred

Size of Staffing Markets



Temporary Staffing Options

Contract Staffing/

Outsourcing

Temporary Staffing

Multinational

Staffing Firms

importing highly

skilled expatriate

labour

Volume/Bulk

Recruiters

importing low

skilled workers

from low waged

Asian economies

Local Providers

Local Providers



Staffing Market Mix

Permanent

Recruitment

35%

Contract Staffing/

Outsourcing

44%

Exec

Recruitment

11%

Temporary Staffing

4%

Other Services

5%

Contract Staffing/Outsourcing is the most significant service line

for staffing firms in the Middle East


*Source: GulfTalent

Permanent Hiring Options

• Permanent recruitment (and Executive Search) of

foreigners is really contract staffing by default as

employment only granted for a limited period

– Expatriates normally awarded an ‘indemnity’ at the end of their

contract (also known as ‘end of contract benefit’)

• Usually between 15 to 20 days of basic pay per year of employment for

first three years and thereafter a month’s salary per year of employment

• Expatriates may be restricted in swapping jobs

• Salaries rose ahead of inflation in 2012*

+4.5% in Bahrain

+4.9% in the UAE

+5.1% in Kuwait


+5.6% in Qatar

+6.0% in Saudi Arabia

+6.5% in Oman

Source: Bayt.com

Hiring Expectations

Permanent

Recruitment

35%%

Probably

Hiring

27%

Definitely

Hiring

30%

Don’t know/

can’t say

30%

Probably

Not Hiring

Next 3 months


Next 12 months

7%

Definitely

Not Hiring

6% Probably

Hiring

37%

Definitely

Hiring

30%

Don’t know/

can’t say

24%

Probably

Not Hiring5%

Definitely

Not Hiring 4%

Use of Independent Contractors

• Plan ahead to ensure you have time to get appropriate

sponsorship/approvals/permits/medicals

– Factor in cost of premium for state or private medical care

• Payrollers/Umbrella companies active in supporting

Freelancers in the Middle East

– Low/No Income tax

– Authorities are growing ever more aggressive in targeting

Contractor Management Companies

– Easier to switch between assignments

• Freelancers using limited liability personal companies

faced with extremely challenging obstacles and

expensive accounting and legal advice


Private SectorPublic Sector

18%

82%

UAE

10%

90%

Saudi Arabia

17%

83%

Oman

10%

90%

Qatar

21%

79%

Kuwait

9%

91%

Bahrain


Private v Public Sector Mix


• Despite legal restrictions on ownership, international

staffing companies are a significant feature of Gulf

Staffing markets responsible for 42% of revenues in the

region

– International firms are less likely to operate in Saudi Arabia,

and Oman

– In Qatar, international firms represent two thirds of the market

• Recently announced changes to UAE Commercial

Companies Law may make it easier to establish an

international office

International v Local Staffing Firms


InternationalLocal

56% 44%

UAE

60% 40%

Saudi Arabia

63% 37%

Oman

33% 67%

Qatar

41% 59%

Kuwait

42%58%

Bahrain


International v Local Staffing Firms


Country Size of

Staffing

Market

Legislative

Environment

Ease of

Doing

Business

Economy

(GDP

2011-

2016)

Short Term

Growth

Potential

Long Term

Growth

Potential

Market

Competition

Political

Risk

Total

Kuwait 1 1 2 5 4 5 2 2 22

Qatar 1 1 3 5 4 4 2 2 22

Saudi Arabia 1 1 5 4 3 5 2 1 22

UAE 2 2 3 3 4 3 1 3 21

Bahrain 1 1 4 3 3 5 2 1 20

Oman 1 1 3 3 3 5 2 1 19


Most Attractive Staffing Markets


Country Market

Maturity

Staffing

Market

Regulatory

Efficiency

Employ-

ment

Law

Burden

Labour

Market

Efficiency

Enforcing

Contracts

Pricing

Environ-

ment

MSP/

VMS

Maturity

Trade

Union

Influence

Inde-

pendent

Contractors

Stablity/

Corruption

Total

Oman 1 1 4 5 1 1 1 5 5 1 25

Bahrain 1 1 4 4 1 1 1 5 5 1 24

Qatar 1 1 4 4 1 1 1 5 4 2 24

UAE 1 1 3 3 1 3 1 5 3 2 23

Kuwait 1 1 4 2 1 3 1 5 2 2 22

Saudi

Arabia1 1 2 3 1 4 1 5 3 1 22


Most Complex Contingent Markets


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