What Are the Main Costs of Hiring in the Middle East?

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 Feb 17, 2020  Blueback Global

What Are the Main Costs of Hiring in the Middle East?

The costs of hiring in the Middle East vary greatly, because it includes many nations. Generally, it refers to Arab speaking countries, but Greater Middle East, or Middle East and North Africa (MENA), includes all contiguously connected countries between Morocco in the west to Pakistan in South Asia.

Currently, MENA includes 22 countries: Algeria, Bahrain, the Comoros Islands, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Mauritania, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the United Arab Emirates and Yemen. Each country defines its own laws that govern hiring practices and each has varying economic, cultural and political conditions.

Unfortunately, recruiting, accounting, patrol, taxes and compliance in the Middle East vary greatly from your host country too. Additionally, some Middle Eastern countries offer relatively straightforward hiring processes, while others present considerable challenges.

Fortunately, Blueback Global can provide your business with accurate, current advice if your business wants to expand into this region. Here are just a few considerations when hiring in the Middle East.

Recruitment Costs

Sourcing, recruiting, and filling positions takes time and money. Your business will incur internal costs for hiring in the Middle East such as overhead, hardware and software for tracking applicants and contract or employment costs for a recruiter.

Additionally, you’ll either need to advertise, sort through applications, perform reference and background checks, and you may incur travel expenses too. A SHRM survey estimated the average cost per hire was $4,425, but that could easily increase when hiring abroad.

According to a study published in the Asia Pacific Journal of Management, the Middle East can present more challenges than other parts of the world. Many regions have an intensified demand for talent. Businesses may face many additional cultural, societal, institutional, legal and regulatory problems too.

Luckily, your company has many options available to reduce the costs of hiring in the Middle East.

Compliance Expenses for Labor Laws

As mentioned, every country establishes its own laws and consequently compliance requirements differ greatly.

For instance, labor laws are governed by the Ministry of Labor in the United Arab Emirates. The country requires employment contracts and employers must provide employees with 30 days’ notice to terminate an individual’s employment. The UAE also requires a 15% employer contribution for pensions.

Compliance Expenses for Labor Laws

Saudi Arabia’s employment laws are governed under the Labor and Workmen’s Law. These regulations focus on employing a minimum percentage of nationals in all private companies.

Employers must provide indefinite or fixed-term contracts, but after 180 days fixed-term contracts become legally-enforceable indefinite ones. They must give an individual 60 days’ notice and a valid reason for termination. They must also contribute 9% to a pension fund.

Egypt’s Labor Law allows for three types of contracts, but probation periods can’t exceed three months. Notice of termination varies based on the length of service. Employers contribute 10% to a pension fund.

As you’ve read, labor laws vary greatly. They also change frequently and quickly. Nevertheless, foreign businesses must adhere to local and regional labor laws. This can challenge small and medium-sized business unless they partner with an experienced Middle Eastern compliance leader.

Bureaucratic Costs

Some Middle Eastern countries encourage foreign business and offer straightforward processes and procedures. Others make it very difficult, and expensive, to establish and operate a company within their borders.

Saudi Arabia isn’t the only country focused on reducing foreign workers in their region. Qatar, Kuwait, Oman and the United Arab Emirates are all pursuing nationalization/localization programs which can impact hiring.

Some countries simplify starting a business, while others are more difficult and ill-advised. According to Forbes’ Best Countries for Business, the United Arab Emirates has an open, diversified their economy and offers many incentives to attract foreign investment.

Compare that to war-torn Yemen, ranked 153rd. The Yemeni Civil War started in 2015 and has curtailed the country’s exports, severely limited food and fuel imports, damaged infrastructure and negatively impacted the economy.

While some Middle Eastern countries offer tremendous potential, others are best avoided. Companies should be aware of all the factors involved in international expansion. Let our experts minimize your risk and costs of hiring in the Middle East. You have options for expansion, even if the country limits foreign workers.

Tax Rates & Compliance

Some countries in the Middle East offer tax-free havens or reduced rates, while other countries impose a significant tax burden.

The United Arab Emirates does not charge corporate or income tax, unless the company operates in the oil and gas sector or banking. Bahrain does not charge income or corporate tax either, while Qatar imposes a 10 % corporate tax.

Tax Rates & Compliance

However, Turkey, Iran and Syria’s tax rates are significantly higher than the worldwide average statutory corporate income tax rate of 23.03%.

Additionally, some countries make it simple to pay taxes, while others do not. The 2020 Doing Business report ranked the UAE highly and mentioned Saudi Arabia, Jordan, and Bahrain had made significant improvements.

Let Blueback Global recommend regions that best suit your company. Our in-country experts have their fingers on the pulse of the nation’s tax regulations to reduce your costs of hiring in the Middle East.

Cultural Costs

Many business owners don’t consider the financial implications of operating in a very different culture than their own. Red tape and the tendency to bypass laws to favor certain individuals are not uncommon in some Middle Eastern countries. Without in-country expertise, companies can spend plenty of capital, but achieve little.

As well, Islam may influence workplace behavior. Weekends fall on Friday and Saturday, and there’s great emphasis on hierarchical structures, consultative decision-making and Arab traditions such as male-dominance in the workplace.

Companies may be affected by religious traditions such as Ramadan which can severely reduce or halt business operations. Ramadan follows the lunar calendar and varies between years and countries.

Trade Connections

The commonalities between Arab-speaking countries have drawn many of them together to form political and economic alliances. When countries work well together it costs a business less.

The Gulf Cooperation Council (GCC) in the Arabian Peninsula between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates provides a common market and customs union. All GCC residents can travel between countries without a visa, except for Qatar.

The Greater Arab Free Trade Area Agreement (GAFTA) also eliminates most tariffs between the 17 member states of Algeria, Bahrain, Egypt, Iraq, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen.

Clearly, choosing a country for international expansion must include a careful analysis of the trade alliances and opportunities each region offers. Let Blueback Global find an appropriate region that increases mobility and lowers labor and materials costs for your international operation.

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Blueback Global is your international business expansion expert. We offer Middle East expansion advice and services including business set up, global payroll, accounting and reporting, statutory compliance, immigration support, recruitment and hiring and more.

With a network of professionals throughout the Middle Eastern region, we can provide you with the knowledge and local business savvy needed to reduce risk and improve returns. Contact us for a free consultation and cut through the complications of your business expansion into the Middle East.

Contact Blueback Global Today!