The goal of Saudi Arabia’s Nitaqat (Saudization) system is simple: encourage KSA companies to maintain specific national-to-expat employment ratios. The program (first introduced in 2011) works to temper the current unemployment problem within Saudi Arabia, a nation where 11.4 percent of the national population is unemployed.
Understanding Nitaqat’s regulations is of particular importance to restaurants in the KSA – an industry where 73 percent of the current workforce is made up of expats. By 2020, the KSA’s travel and tourism industry will employ 1.7 million individuals. If the KSA’s booming hospitality market does not find a way to sustainably comply with Saudization standards (and fast), the restaurant industry will soon be faced with exorbitant labor costs and steeply falling profits.
Under Nitaqat, companies are classified as:
- Platinum: companies with at least a 40 percent national workforce.
- Green: companies with a 10 percent national workforce.
- Yellow: companies with less than a 10 percent national workforce.
- Red: companies that do not employ any Saudi nationals.
With new methods for calculating Saudization ratios, Saudi employees are counted as workers from the point their employment is finalized (as opposed to the previous 13 week window). While this does make it easier to quickly adjust Saudization levels, this system also means that, as soon as a Saudi employee exits the company, they are no longer counted towards Nitaqat scores.
THE CHALLENGES OF SAUDIZATION
1. TENSION BETWEEN NATIONALITIES
According to the Saudi Gazette, 85 percent of all expat workers come from eight countries: India, Pakistan, Bangladesh, Egypt, the Philippines, Yemen, Indonesia and Sudan. With nearly two thirds of the KSA restaurant industry’s workforce consisting of expats, however, it isn’t uncommon for companies to have as many 20 nationalities on payroll. Naturally, all of these individuals come from diverse cultural backgrounds, and many have left their families to work grueling hours in a foreign land in the hopes of earning more money than would be possible at home.
Along with cultural tensions between expat nationalities, Saudi Arabia is faced with the often-frustrating HR fact that Saudi nationals do not want to hold the same position as what they perceive as a less educated expat.
2. ‘FIGURE-HEAD’ SAUDI POSITIONS
For some companies, finding jobs where Saudis can actively contribute is too much of a burden. For many, it is easier to simply “hire” a Saudi national (keeping the individual on company payroll) to not work. For other companies, Saudis are hired and brought to work at the office not necessarily because they are qualified, but because of their nationality. The result here is essentially the same – employees are paid to only sit at their desks simply to meet Nitaqat requirements.
3. WOMEN IN THE WORKFORCE
In Saudi Arabia, gender segregation laws require men and women to occupy entirely separate workspaces. The number of women employed in Saudi Arabia has increased by 48 percent since 2010, according to the Central Department of Statistics Information. Much of this increase can be attributed to gender reforms introduced in 2013 by the late King Abdullah Abdulaziz now permit women to work in the retail and hospitality industries.
With that said, women only account for about 16 percent of the total Saudi workforce, and 60.3 percent of Saudi women are still unemployed. To put this into perspective, according to the U.S. Bureau of Labor Statistics, women account for 47 percent of total employment in the States.
4. FLUCTUATING NITAQAT SCORES LEAD TO FLUCTUATING EXPAT TOTALS
Due to Nitaqat regulations, the loss of one Saudi employee for a company with Green standing can also mean the loss of nine expat workers. This level of turnover can have significant impacts on a company’s productivity and profitability, as, on average, it costs one and a half month’s salary to train a restaurant employee.
ACTIONABLE SOLUTIONS FOR SAUDIZATION
1. DEVELOP A MERIT-BASED COMPANY CULTURE
By shifting the identifying focus away from nationality and centering it on a unified company culture of shared, measurable objectives and a merit-based rewards system, companies can demonstrate their desire to build a staff of capable, coachable and committed associates, regardless of nationality.
This is more than creating a “warm and fuzzy” work environment. Merit-based systems establish a company culture designed to train team members to operate at peak efficiencies and achieve their highest potentials. It creates a system that easily allows companies to promote from within (rather than recruiting externally, which in our experience working with KSA companies, often produces mixed results). By letting associates know you are willing to recognize, reward and commit to individuals who show promise, you create a company that applicants (both Saudi and expat alike) aspire to work with.
2. CONDUCT A SAUDI-SPECIFIC POSITIONS AUDIT
By analyzing a company’s organizational chart through the lens of positions requiring a higher level of education, companies can create hiring and staffing plans designed to place Saudi nationals in areas where they will be most effective.
The key to this strategy is the creation of detailed job descriptions and positions analysis – documentation that allows for clear job roles (and position needs) to be defined, and for all parties involved to share an understanding of what success in this position looks like. With this level of organizational chart analysis and planning, instances where Saudis are hired to complete busy-work at their desks can be avoided, redundancies can be eliminated and labor costs are reduced.
3. IDENTIFY FEMALE-APPROPRIATE JOBS
Just because Saudi women cannot work directly alongside men does not mean that there aren’t valuable roles they can play in the restaurant and hospitality industry. This is a hugely underutilized segment of the population that is capable, qualified and willing to work.
Forward-thinking companies are those who recognize opportunities for female employment in areas like social media and digital brand management (mobile penetration rates in the KSA are at an astounding 167.5 percent) – positions that do not necessarily require the creation of a female-only workspace, but can rather be completed remotely, meeting all KSA gender separation laws.
4. DEVELOP ROCK-SOLID TRAINING PROGRAMS AND MATERIALS
While many companies see the creation of in-depth training materials – documents that detail every step of prep work down to how thick back-of-house staff should slice each tomato – as an unnecessary expense. Investments in the creation of this level of documentation, however, has the potential to generate millions in savings through more efficient practices (as well as dramatically improving quality standards, helping to reinforce a merit-based company culture and allowing operations to scale with efficiency).
By creating these programs and materials, companies do not start from scratch every time a team member is brought on. Instead, they are assured that every individual is taught (and held to) the same standards of quality, safety and service – and they do so without reinventing the wheel with every new employee. This level of documentation also allows for detailed skills assessments that support merit-based company cultures.
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Saudization and Nitaqat standards are a fact of life in the KSA. Attempting to work around the system does little to solve the underlying issues of an underutilized Saudi workforce or correct the low perception of individuals currently serving the restaurant industry. At best, Nitaqat workarounds allow a company to work harder to spend more – practices that are neither sustainable nor profitable.
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Is your restaurant having troubles coping with the impact of Saudization? We can help – click here to start a conversation.