The cost of recruitment in Saudi Arabia is the highest in the Gulf: reasons and solutions

Introduction: The cost of recruitment in Saudi Arabia under scrutiny

In a move reflecting transparency and a commitment to restructuring the labor market, the General Authority for Competition revealed that recruitment costs in Saudi Arabia are among the highest in the Gulf Cooperation Council (GCC) countries. This announcement followed a recent and in-depth analytical study of the recruitment and employment agency market in the Kingdom, which showed that local prices are higher than those in countries such as Kuwait and the UAE, with the exception of Ethiopian labor. Meanwhile, Qatar emerged as the leading country in supporting the improvement of the efficiency and quality of services provided to individuals and businesses.

General context and historical background of the recruitment sector

Historically, Saudi Arabia has been one of the world's largest markets for domestic and professional workers, driven by rapid economic growth and demographic and social development. For decades, the recruitment sector suffered from fragmentation and reliance on small, individual agencies, often leading to price discrepancies, delays in worker arrival, and challenges in guaranteeing the rights of contracting parties. To address these challenges, the Ministry of Human Resources and Social Development began restructuring the sector years ago by licensing large recruitment companies, aiming to transform the market from individual to organized institutional operations. This explains the current transformations in the market.

Market concentration and the dominance of large companies

A study by the General Authority for Competition revealed that there are 1,384 licensed recruitment companies and offices operating in the Kingdom. The vast majority of these establishments are concentrated in three main regions: Riyadh, the Eastern Province, and Makkah, which together account for approximately 77% of the sector's total establishments. Notably, the study observed a gradual increase in the market concentration index, rising from 1,036 points in 2016 to 1,200 points in 2024. During this period, the market share of the four largest recruitment companies increased from 40.2% to 42.6%, confirming the growing influence and power of these major companies and their dominance of the market.

Organizational changes and the grace period for correcting the situation

As part of its ongoing efforts to regulate the sector, the Ministry of Human Resources and Social Development launched the Regulations for Recruitment and Labor Services in March 2021, and has recently made significant amendments to them. These amendments aim to enhance the efficiency of services and protect the rights of all parties, in full alignment with the objectives of Saudi Vision 2030, which focuses on quality of life and improving the work environment.

The new amendments mandate that recruitment agencies transform into closed joint-stock companies, either through upgrading, mergers, or acquisitions. To facilitate this transition, agencies were granted a two-year grace period to adjust their status, which began last Sha'ban. This step is expected to reduce the number of small, uncompetitive entities and increase the influence of larger companies, thereby enhancing the sector's efficiency and raising levels of compliance and transparency.

The importance of the event and its expected impact (locally, regionally, and internationally)

This regulatory shift and official recognition of the high cost of recruitment in Saudi Arabia far-reaching dimensions and implications:

• At the local level, downsizing and merging small entities will create strong financial and administrative bodies capable of providing reliable services, reducing waiting times, and minimizing labor disputes. This will also contribute to labor market stability and support Saudi families and businesses with high-quality services.
• At the regional level: These measures place the Kingdom in a leading Gulf position in terms of governing the recruitment sector, which may prompt other GCC countries to adopt similar models based on closed joint-stock companies to regulate parallel markets.
• At the international level: This institutional organization enhances the Kingdom’s image before international human rights and labor organizations, as the shift to large companies ensures stricter application of human rights standards, provides a safe and stable working environment for expatriate workers, and enables decision-makers to effectively monitor the market without harming fair competition.