SMEs struggle as skills shortages drive up Saudi salaries

• More work than can be handled
• ‘Saudisation’ quotas add to problem
• Small firms cannot compete on wages

Wassim Elaify is not short of work. Quite the opposite. Indicators, the accountancy firm he manages in Riyadh, is receiving more requests to be taken on as clients from expanding Saudi companies and newly arrived international groups than it can handle.

Saudi Arabia‘s non-oil economy is expanding at more than four times the rate of the oil sector, with the capital enjoying the lion’s share of that growth. 

What this means for Elaify is that his 12-person team does not have the manpower to manage all the requests from would-be clients for auditing, certification and bookkeeping.

Ideally, the company would bring in new workers to meet this rising demand, but a growing skills shortage, made worse by strict policies about employing more Saudi nationals, makes that easier said than done. 

“There is so much work with everything that’s happening,” Elaify says. “Finding people to do it – experienced people – that’s the hard bit.”

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A poll of CEOs in Saudi Arabia by the British professional services company PwC found that almost all expect to grow their top line this year, a higher proportion of business optimists than just about anywhere else in the world.

Most say they want to hire new staff to tap the additional business they see on its way. The Saudi economy, the largest in the Arab world, is predicted to grow by almost 5 percent this year. 

But with so many fishing in the same limited pool of talent, it has become harder for small and medium-sized companies in particular to attract the employees they need.

Government policies mandating minimum quotas for Saudi workers restrict companies’ abilities to hire from abroad. In turn, Saudi workers can now charge a premium.

Saudis with the right skills are in shortage, says Ali Nasir, a managing director at the recruitment firm GRG. “Everyone is looking for them and yet no one can find the right person. The same people are just revolving in the market from one job to another.”

As part of Saudi Arabia’s Vision 2030 economic and social development goals, the country is trying to get more of its citizens into the private sector, particularly into better-paid white collar professions.

Different industries are subject to different so-called Saudisation quotas. These are due to rise over the next five years.

For instance, law firms must ensure that 70 percent of their lawyers are Saudi nationals. With legal services in high demand, this has put pressure on legal advisories that would like to grow their staff numbers but find themselves struggling to keep the people they have.

“Hanging on to your good Saudi lawyers whose phones are ringing off the hook with calls from recruiters is ever more expensive,” says Oliver Clark, a director at the legal recruitment firm Clark Burnell. 

Companies battling the Saudi skills shortage now find themselves paying higher wages, often for poorer results, Clark says.

“On one hand you have comfortable lawyers who can hold employers to ransom. Meanwhile, in order to hit quotas and avoid fines, you also see firms compromising on their typical entry standards, simply because they need to get bodies behind desks.”

Bernd von Jutrczenka/dpa via Reuters Connect

From this October Elaify’s company will need to ensure that 40 percent of its accountancy staff are Saudi nationals. This will rise to 70 percent by 2030. 

Elaify says that the talent to meet this quota is hard to come by. It has forced the company to increase the salaries of Saudis on its payroll so as not to lose them to rivals, leaving it with less money to offer competitive salaries to non-Saudi candidates.

In their search for qualified candidates, SMEs are up against the big hitters: large international firms and companies funded by state institutions with deep pockets, such as the $1 trillion Saudi sovereign wealth fund PIF.

Across the country, government-funded entities are employing tens of thousands of staff developing infrastructure projects worth hundreds of billions of dollars.  

Down the road from Indicators, work is under way on the $10 billion King Salman Park, “the largest urban park in the world”, according to its promotional material. 

Projects like this are routinely able to attract the more talented staff, offering packages far in excess of what companies such as Indicators can afford.

Salaries for project directors at PIF companies typically start at SAR80,000 ($21,000) a month and grow from there. As part of the package, employees also stand to receive generous benefits to cover school fees or a signing-on bonus.

“For smaller companies to compete with PIF, it is not even possible,” Nasir says. “You’re talking about a David versus Goliath situation here.”