Saudi Arabia: Saudisation In The KSA Construction Industry

Last Updated: 1 March 2016
Article by Sara Khoja

Despite the on-going volatility in the oil price and the increasingly apparent onset of a slowdown in 2016, the KSA Government is pushing ahead with an ambitious development agenda at the forefront of which is completion of extensive infrastructure projects. Resourcing such projects has become a key consideration within the KSA labour market and one that both employers and the authorities are grappling with.

Analysing the Market

The Human Resources Development Fund (HRDF) is currently carrying out an online construction employment survey in conjunction with the national contractors committee. The survey will be shared with participants and is aimed at identifying the key issues employers within the sector are facing, including skills shortages, costs of resourcing and meeting Nitiqat requirements.  Industry stakeholders are able to take part in the survey by accessing it on line on the HRDF website.

This survey builds on the Ministry of Labour's commissioned study announced on 30 November 2014 and started in March 2015. Amongst those surveyed were employers, government entities, education providers, college students, high school students, and the unemployed.  The study to date has identified a training and skills mismatch against market requirements, a potential lack of strategic direction and governance as there is no single overarching trade body for the sector or public procurement law and a significant increase in overhead costs due to the policy of workforce nationalization (including minimum salaries for KSA nationals (SR 3,000 month), the monthly levey of SR 200 payable yearly and the link between work visas and recruitment of nationals).  KSA nationals were also identified as preferring to have roles in back office support such as within HR or IT over core construction trades.

Saudisation

Given the extent of infrastructure projects it is not surprising that twenty-two percent of the workforce in KSA (whether national or foreign) is engaged within the construction industry. Eight-five percent of engineers are said to be foreign and the attrition rate for KSA nationals is around eighteen percent. The difficulties in resourcing are already identified as the key cause of project delays, potential application of liquidated damages clauses on contractors and overall costs.

In order to address the difficulties, the Ministry of Labour and the HRDF have already put in place a number of measures to assist employers; including enabling contractors to reclaim visa costs through an on line portal provided the contractors are engaged on Government projects. The HRDF also offers a number of programmes to facilitate the recruitment and retention of KSA nationals, including providing access to training funds to employers and also subsidizing employee salaries for up to two years if the individuals are employed following the completion of training. The HRDF runs a summer internship programme known as 'my summer' and has been extremely active in campaigning through social media for young Saudi nationals to register with them and access their programmes. It is possible for private sector employers to enter into a cooperation agreement with the HRDF pursuant to one of their programmes thereby accessing funds, salary subsidies and meeting Nitiqat targets more readily; students registered as 'coop' students on training programs are given additional weighting under Nitiqat. The HRDF also has a fund to assist private sector employers generally and in 2015 it gave a total of SR 1.2 billion to assist employers hire nationals and also increase their salaries.

Staff leasing

Due to the cyclical nature of the industry and the inability of SMEs to fund training, there is growing recognition by the Ministry of Labour and the HRDF for a need to establish a construction leasing company which can employ individuals, develop and train them and reallocate them across projects as necessary. Setting up such a venture will clearly take significant investment and time. In the meantime, the Ajeer system permitting secondments may provide some assistance. However, in essence the authorities are expecting all operators within the industry to invest in training and development.

The Future

The Ministry of Labour recently announced that it calculates that 250,000 Saudi nationals will enter the work force each year for the foreseeable future with the number of nationals of working age standing at 13.8 million. Job creation will therefore remain firmly on the agenda and Nitiqat will be further developed to promote workforce nationalization. The most recent proposal on which the Ministry of Labour is currently requesting feedback through its on line portal "Maan" is to provide additional weighting under Nitiqat for KSA nationals employed for more than three years (with a potential 20% increase in weighting for each of the following three years) and the ability of that individual to carry that weighting into a new job. Such an individual would clearly be attractive within the market and would represent the implementation of a long proposed intention of classifying nationals and not only employers under Nitiqat. In any case, no individual under this proposal will count for more than four nationals and an individual will be able to obtain a certificate confirming his standing within this system.

Labour law reform is also likely in the near future, the Shoura Council recently confirming its recommendation to reduce the working week from 48 hours over 6 days to 40 hours over 5 days and referring the proposal to the Council of Ministers for implementation.

Saudisation In The KSA Construction Industry

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Sara Khoja
 
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