Labor Quotas Impact Hiring, Recruiting in the Gulf

By Jamil Monahan, SPHR Oct 31, 2014
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The countries of the Gulf Cooperation Council (GCC) are moving full steam ahead with labor nationalization programs intended to replace foreign labor with local talent.

The GCC countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates—have struggled with the consequences of relying on large expatriate workforces for years, specifically rising unemployment among nationals, underdeveloped educational systems and low levels of citizen participation in the private sector.

In Saudi Arabia, for example, Saudis hold only 15 percent of jobs in the private sector, with expats filling out the rest. More than 85 percent of the United Arab Emirates’ population is made up of foreign workers. And more than two-thirds of employed Emirati locals work in government, a trend seen across the GCC.

Unemployment for the under-30 demographic is in the double digits for all six countries.

To combat this unsustainable trend, all GCC nations have implemented labor nationalization programs, usually a combination of national labor quotas with incentives and penalties to ensure the quotas are met.

The Situation in Bahrain

In Bahrain, the Labour Market Regulatory Authority (LMRA) is tasked with regulating and controlling work permits for expatriate employees and the self-employed. It also introduces labor market reforms and employment policies for nationals and expat workers. Registering a company legally with the LMRA is the first step in receiving a Commercial Registration (business license) and work permits for expat labor.

According to the Employer Services Guide on the LMRA’s website, the number of expat work permits granted to an organization depends on the type of activity of the establishment. Through the Expat Management System (EMS) employers can check if they meet the minimum set for Bahraini employment in their establishment. For some organizations, there is a mandatory minimum ratio of the number of Bahraini nationals to the number of non-Bahraini nationals. If an organization does not meet the quota of required Bahraini staff, then new visas for foreign staff will not be issued.

Workforce Planning

Workforce planning is a cornerstone of human resources management. It is HR’s responsibility to ensure planning and employment activities comply with country laws and regulations. Nationalization quotas significantly impact hiring budgets and recruiting practices throughout the GCC. Human resource departments struggle to find equilibrium between filling their immediate needs (using skilled, willing foreign labor) and satisfying their long-term needs (hiring local nationals with the right knowledge, skills and attitude). The pressure of this conundrum can lead companies afoul of national law if they choose to deal only with the immediate future.

The solution to the nationalization dilemma requires an approach to workforce planning that advocates hiring plenty of young talent. Hiring young, inexpensive, local talent will help your organization meet nationalization requirements and secure a talent pipeline for years to come.

Try Before You Buy

Bahrain Polytechnic was established as a higher education institution by the government in 2008 to address knowledge, skills and attitudinal gaps in the labor market. Polytechnic graduates are touted as work-ready, competent and aware of what is expected of them in the professional world. In their final year, students are required to gain experience by way of an industry project. These projects can be used by organizations as a screening tool for job applicants, to ultimately aid in achieving nationalization quotas.

Programs like the one at Bahrain Polytechnic create an opportunity for employers to “try before they buy.” Screening creates a win-win-win situation for employers, local colleges and the national government. As long as Bahrainis are able to demonstrate the required work ethic, good attitude and basic skills, employers will not have a cost incentive to hire expats. In other words, employers will hire locals because it makes good business sense, rather than because they are forced to by the government.

Jamil Monahan, SPHR, is an instructor of HR management at Bahrain Polytechnic, located in Isa Town, Bahrain.

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