We all are well familiar with the fact that Gulf countries have been counting significantly on non-natives or expats to flourish in their economic growth for the last few decades. GCC nations, however, have been facing the biggest dilemmas of unemployed nationals within their countries despite their overall growth and development.
Considering the requirement to quickly fix the aforesaid problems, GCC nations, including UAE, KSA, Oman, etc., started nationalization programmes. As a part of nationalization strategies, Saudization, also known as Nitaqat, Emiratization, Omanization, etc., became an essential element of various Middle East countries’ HRM (human resource management).
What is Emiratization & Saudization?
To put it simply, Emiratization and Saudization are the laws and initiatives introduced by the UAE and Saudi Arabia governments to attract employment of country-nationals within the public and private sectors of the economy. Like other nations across the globe, it’s an interventionist approach that primarily aims to increase the employment opportunities for non-native labourers and workers holding residence visas.
The Ministry of Human Resources in UAE; however, launched the Emiratization program in 1980, but it came into full-fledged operation in January 2023 to support the initiative.Whereas, the Saudization, also known as Saudi Nationalization Scheme, is a nationalization policy that the Ministry of Labour and Social Development in KSA established.
According to these policies, UAE and Saudi Governments have set hiring quotas for expat males and females in various industries, which are obligatory to fulfil.
Objectives of UAE & KSA Nationalization Programmes
The primary aims of the above-mentioned nationalization policies of both countries are:
- Decline the heavy dependence on expats for the countries’ growth & development
- Attract foreign workers in the countries’ private and public sector workforce
- To encourage the participation of local women in various sectors of the economy.
- To improve the decreasing unemployment ratio of both nations.
- To emphasize the significant contribution of countries’ nationals to economic growth.
- To increase the fair opportunities for hiring Saudis and Emiratis in countries’ workforce.
- To improve the nationals’ capabilities in the countries’ finance sector.
- To avoid the long-term risks in the countries’ social, political, and economic sectors.
- To improve the professional and career skills of the national workforce.
Emiratization Rules Applicable to Private Sector Companies in UAE
LetEmiratization rules pertaining to the private sector companies in the UAE:
- Private sector establishments in UAE with 50 or more headcounts must hire 1% of Emiratis in their workforces by June 2023, i.e., in the first half of 2023.
- However, the yearly target is 2%, i.e., after June 2023, the private companies with 50 or more headcounts will have to increase the number of Emiratis in their total workforce by an additional 1%.
- The private entities that infringe UAE’s 1% Emiratization increase target for the first half of 2023 will attract a hefty fine of AED 42,000 monthly per non-employed Emirati by the company as per the rule.
- It has also been stated that the penalty and fine will be increased by AED 1000 yearly until 2026, and failure to meet the decided penalty may suspend your work permit applications.
- Non-compliance with the expressed quota may lead a company towards the demotion to the third category as per the Classification law.
- Private companies must follow the calculation of the Emiratization rate as below:
The company needs to hire:
- At least 1 Emirati in case of having 50 or less skilled headcounts
- At least 2 Emiratis in case of having 51-100 skilled headcounts
- At least 3 Emiratis in case of having 101-150 skilled headcounts
- At least 1 Emirati each for 50 or less skilled headcounts in case of having 151 & above skilled headcounts
Saudization Rules Applicable to Private Sector Companies in KSA
- According to the decisions recently taken by the Ministry of Human Resources and Social Development of KSA, the private companies:
- with 3 or more headcounts and working in the project management profession, it will have to achieve a 35% Saudization ratio by 24th December 2023; however, it must be increased by another 5%, i.e., 40% by 12th December 2024.
- with 3 or more headcounts associated with procurement professions will have to maintain a 50% Saudization ratio by 24th December 2023.
- with 5 or more headcounts associated with sales professions, will be required to escalate the Saudization ratio up to 15% by 24th December 2023.
- associated with postal and freight affairs will have to increase its Saudization ratio to 100% by 26th October 2023.
- The women’s tailor and beauty salons with 10 or more expat workers must hire at least one Saudi woman employee by 24th December 2023.
- The non-compliant company will be liable to pay penalties and face the suspension of immigration and employment services.
Importance of Emiratization and Saudization in Business Setup
Hiring local talents in an organization significantly affects company formation in KSA and UAE. Let’s break into the key importance that companies of UAE and KSA can expect after the applicability of the nationalization strategies.
The expat workers hired in managerial positions in a company may build a foundation for robust management. The native employees are more fluent in the local language, i.e., Arabic, making communication easier with the subordinate workers and laborers and understanding their actual needs. It ultimately leads to efficiently managing the workforce.
The local workforce of both countries has a better understanding of their countries’ latest trends and cultural requirements. It allows you to evaluate the current market conditions and what people want. So, the company can streamline its decision-making process in no time.
Convenient Hiring Process
Hiring country-nationals is more convenient than non-natives for business setup in KSA and UAE. Generally, companies outsource the natives’ hiring service to experts who assist them in undertaking the complete hiring process of the local talents within the specified period.
The Saudis and Emiratis are well acquainted with their local language, culture, and economy. So, the companies don’t have to spend much time and money to train them for the same. Ultimately, hiring local talents in the company is a far more cost-effective alternative to hiring expatriate workers and laborers who must be trained immensely.
Emiratization and Saudization will allow companies to build strong relationships with the local community and government authorities. A strong connection, especially in the banking and finance sectors, opens the door for their long-term success. It also allows the company to attain the required licenses and permits to streamline its business operations.
All in all, Emiratization and Saudization are not just nationalization policies that exist for compliance only. If you ponder its brighter side, you will realize how it has been an important aspect of the massive success of your business setup in UAE and Saudi Arabia.
Apart from that, companies can easily contribute towards nations’ economic reforms by hiring native talents instead of costly foreign workers and laborers holding residence visas or work permits.
You can tie up with business setup consultants or PRO services in UAE and KSA, like Business Link, to easily get the complete guide and service of the Emiratization and Saudization quotas your company requires to achieve.