Saudization crackdown puts hotels under pressure

Hotels operating in Saudi Arabia are turning to expensive manpower suppliers to sidestep Nitaqat, the government’s latest attempt to nationalise the private sector.

The Nitaqat programme, introduced in November 2011, requires private companies, including hotel firms, to hire a given percentage of Saudi nationals. The quota varies depending on the company activity and size. The firms are divided into categories — excellent, green, yellow or red — based on the number of Saudi national employees making up their workforces.

A service available on the Saudi Arabia Ministry of Labour website enables firms to calculate their ratings by specifying ‘business activity’ and entering numbers of Saudi employees, special needs employees, part-time employees, GCC employees, imprisoned- or released individuals and expatriates.

Eyad Reda, managing partner for international law firm DLA Piper’s Riyadh office explained: “Only companies classified as ‘excellent’ or ‘green’ are permitted to apply for new visas for expatriate employees. If the new employer has been given a ‘yellow’ or ‘red’ grading then its ability to obtain visas for expatriate employees is very much restricted.

“Companies categorised ‘red’ will be unable to apply for new visas for expatriate employees while companies categorised ‘yellow’ are only allowed to renew work permits for foreign employees who have spent less than six years in Saudi.”
Reda added that the Nitaqat system is being “strictly implemented by the KSA authorities”.

Abdul Karim Al Atiq, general manager of Coral International Hotel Al Khobar and HMH group general manager, said Nitaqat is very good for Saudization, but it is particularly difficult for hotels to meet the system’s requirements.

“Unfortunately in hotels, it’s not easy to find the Saudi talented guys with experience or training,” he said.

Moreover, the hospitality industry is not a traditional route for nationals to take: “At one time being an hotelier was out of the question for a Saudi national. We work six-to-seven days a week, that’s the main concern — the long hours and split shifts. Then there are the lower wages in hotels; some of the available nationals are graduates but we don’t count much on education, but rather service skills and experience,” Al Atiq explained.

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Incentivising the workforce
A Saudi national himself, Al Atiq worked his way up the ranks in the hotel industry hoping to pioneer more Saudis in the workforce.

“This has helped because Saudis need Saudi management to adapt them to the roles.

“They are sensitive and unfamiliar with the services industry,” he told Hotelier Middle East.

Al Atiq has set up a training room with training managers offering orientations, on-the-job skills and reviews. He has also trained line managers to train their staff, helping them with basic skills such as “courtesy”.

Furthermore, the hotel has partnered with the government-backed Human Resources Development Fund (HRDF) to help tackle the wage issue. On top of hotel salaries, HRDF pays new starters SAR 500 (US $133) upon joining a private-sector company, and the equivalent of 50% of their monthly wages for two years thereafter, according to Al Atiq.

Coral International Al Khobar hotel has been rated ‘green’ under the Nitaqat system, and has achieved a 32% national workforce nearing its specified quota of 35%.

“We’ve had a tough time to issue visas. For the last four years we did not have any visas available, this year we were fortunate enough to have some because we made an agreement with the authorities that we would localise certain jobs and they gave us around 100 visas under that condition,” he explained.

Awaliv International Hotels GM Ali Moghnieh had also been granted visas under the Nitaqat system.

“To qualify to be in the green band, hotels must employ between 18% and 39% Saudis. The authorities will give you enough visas that you stay within the green band,” he explained. The Awaliv hotel in Taif currently has a 23% Saudi workforce.

Moghnieh said that was one reason why Nitaqat was better than the “old way” when the number of visas granted was “to the discretion of the manager of the labour office and they wouldn’t give us any visas”.

Both hoteliers have had to delegate lower-ranking roles such as bellboys and stewards to expatriates.

“You cannot find Saudis who will do these jobs,” said Al Atiq, adding housekeeping and F&B service to the list of roles nationals will not take.

Another challenge Al Atiq highlights is retention of the nationals: “We have a high staff turnover as the Saudi nationals are wanted in the market, everybody is seeking to employ Saudis. Sometimes we train them, other hotels offer them a higher salary and they leave”.

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Supply solution
But private-sector companies are continuing to sidestep Saudization by using local recruitment companies.

“There are certain companies that can supply employees that are not counted as yours, they’re casuals.

“Most hotels are doing it this way to get over the Nitaqat system. So if you have 100 employees for example, 75 of those are yours and 25 are from outside and therefore not counted as your own labour,” Al Atiq revealed.

Samir Kantaria, who heads up international law firm Al Tamimi and Co’s regional employment practise, commented: “These manpower supply companies are going to be doing a roaring trade.”

These recruitment consultants can be an expensive staffing option for hotels, according to Kantaria, who said “you end up paying more because the firms will charge you an addition on top of salaries and benefits”.

Yet a search for ‘manpower Saudi Arabia’ on Google.com brings up a host of such companies, many of which have marketed themselves as “rapidly expanding” organisations.

“The question we asked is ‘can I hire someone through a recruitment consultant or a manpower supply company so they don’t come under my sponsorship?’ Technically, as long as the supply firm is meeting its obligations, they can,” said Kantaria.

“If a hotel as part of the Nitaqat system didn’t have sufficient visas they could go to one of these companies. You usually find that only Saudi nationals can set up these companies,” he added.

Kantaria said he was uncertain as to whether Nitaqat applied to local business owners: “As far as I know there haven’t been guidelines issued, it’s almost being handled on an ad hoc basis. That’s the biggest problem. Before Nitaqat there was a quota, but it was never really enforced.”

Figures releases in 2011 estimated that 500,000 nationals remained unemployed in the Kingdom despite frequent government efforts to boost local employment in the private sector. Recent unrest across the Arab world is thought to have pushed the government to act quickly in the introduction of Nitaqat.

“With the Arab Spring, they want to ensure their people are looked after and the implementation of this programme is more rigorous than we’ve seen previously in terms of Saudization,” said Kantaria.

When asked what would happen if hotels did not meet quotas, Al Atiq said: “Most probably you won’t be given visas. It’s a big challenge, who knows what will happen in the future.

“We hope that they [the government] will realise that hotels aren’t like every private-sector industry, we depend mostly on expats for the jobs of housekeeping, stewards etc., and you cannot get Saudis easily.”