Saudi Arabia Rethinks High Salary Strategy for Foreign Workers

Economic Transformation Drives Change

Companies in Saudi Arabia are significantly altering their compensation strategies for foreign workers. The kingdom's efforts to diversify its economy and reduce dependence on oil revenue are driving this change. As part of its Vision 2030 transformation plan, Saudi Arabia is focusing on developing various sectors including tourism, real estate, mining, and financial services.

Shift in Recruitment Practices

The change in compensation strategy reflects a broader economic recalibration. While Saudi Arabia continues to invest heavily in multi-billion dollar megaprojects that attract high-skilled foreign workers, the private sector is facing challenges in maintaining previous salary levels. Foreign workers can no longer expect to negotiate salaries that are 40% higher than typical market rates, a common practice earlier in the decade.

Market Dynamics and Future Prospects

According to Magdy Al Zein, managing director at Boyden, "On one hand, the largest economy in the region is rationalizing itself, and on the other, there is a huge supply of candidates very open to coming to the region. So what is happening is that companies are rethinking their employment packages. That's clearly happening." This shift indicates a significant change in how companies approach talent acquisition and compensation in the region.

Economic Context and Implications

The salary adjustments are part of Saudi Arabia's efforts to control spending and restructure its economic priorities. The kingdom is halfway through implementing its economic transformation blueprint by 2030, aiming to create jobs and diversify its economy. While this move might make Saudi Arabia less competitive in terms of salary offerings, it reflects a strategic decision to manage economic resources more effectively.