UAE and Kuwait companies struggling to hire staff

Alamy via Reuters

• Wages down as orders increase
• Employment levels static
• Discounting criticised

Companies in the UAE and Kuwait are struggling to afford new staff as a result of squeezed margins, according to the latest business sentiment survey.

For the third successive month, non-oil companies operating in the UAE highlighted a reduction in prices charged, with discounting used to support sales amid a highly competitive market.

This was despite rising costs, leaving little left over to fund the extra staff needed to meet the rise in new orders.

The discounting culture was criticised by Neil Orvay, a corporate psychologist and behavioural consultant and managing director and founder of Evolution U Consulting, who describes it as a “price race to the bottom”.

Lucy Bradley, a Dubai-based marketer, says: “I feel the companies that are discounting, it is almost an act of desperation. We are in saturated challenging market conditions where there is too much of everything in a tiny market.”

As a result of tightened budgets and margins, employment levels have remained relatively static.

The pace of employment in December in the UAE was on a par with November’s 31-month low, according to the S&P Global purchase managers’ latest report. 

UAE economy at a glance

Most recent figures from the World Bank, based on International Labour Organisation (ILO) modelling, show the unemployment rate in the UAE at just over 2.7 percent.

The limited rise in employment levels in December came despite the volume of outstanding work increasing at one of the fastest rates since 2009, placing greater strain on capacity and inventories.

Coupled with lower uptake of new staff, the latest salary survey from the recruitment company Cooper Fitch also showed that companies in the UAE, on average, are not budgeting for pay rises for employees over the next 12 months.

The report consulted 1,000 organisations in the Gulf region and revealed that almost a third of respondents in the UAE reduced salaries for new recruits in 2024.

Lewis Elsey, principal consultant at Dubai-based recruitment firm Alchemy Search, says the huge supply of talent available to the market was also a factor, as there are simply not enough roles. 

“Salaries across all levels are on the decline as a result,” he says.

Kuwait economy at a glance

Katy Holmes, CEO of British Chamber of Commerce Dubai, tells AGBI that companies are struggling to keep up with financially compensating their workforce in line with rising living costs. 

“Those who really care about retention are attempting to provide alternative benefits such as more flexible working arrangements,” she says.

"However, as Dubai is currently such a candidate-rich market, both the employer and employee realise that there isn’t a lot of negotiating room – even for the top performers.”

Costs of doing business in the UAE continue to rise. Real estate consultancy firm CBRE said in its third-quarter report for 2024 that average retail rents in Abu Dhabi increased by over 8 percent year on year, with rents in Dubai up by almost 3 percent across the same period.

Figures from the GCC Statistical Center show that the average inflation rate across the bloc of six countries increased by 1.5 percent in September compared to the same month in 2023.

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According to the report, Kuwait had the highest inflation rate among the GCC countries during last September, compared to the same month in 2023, reaching 2.8 percent.

Global headline inflation is projected to average 4.3 percent in 2025, as per the International Monetary Fund's World Economic Outlook released in October. This is compared to UAE inflation, which is expected at 2.1 percent this year.

Employment in Kuwait was also stifled in December, which had a knock-on impact of adding to the stockpile of outstanding business.

“Firms will hopefully find it easier to hire additional staff in 2025 to help them take advantage of the growth opportunities on offer,” says Andrew Parker, economics director at S&P.

Kuwait’s 2023 unemployment rate stood at 2.03 percent.

Albert Kahlow, global business director at Dubai-based recruitment company WTS Energy, said staffing budgets were "definitely" getting squeezed due to the increasing competitiveness in the market.

"Trends we see to counter this include companies diversifying their talent reach to explore regions and countries where skilled talent resides but is more cost-effective than some traditional markets.

"Offshoring functional positions to lower-cost countries is also increasing as this can dramatically reduce staffing costs and benefits."