Middle East construction recruitment market 2017 roundup
In a ConstructionWeekOnline exclusive, Aaron Fletcher, head of construction at Randstad MENA, analyses how the region's construction recruitment market is shaping up
Aaron Fletcher is head of construction for Middle East and North Africa (MENA) at recruitment specialist, Randstad.
In recent years, the Middle East's construction market – like many other industries in the GCC – has felt the direct impact of the gradual decline of oil prices. This familiar cyclical effect has meant countries like the UAE and Saudi Arabia have to re-structure their fiscal strategies in order to achieve their long-term ambitions.
This period of necessary transition has therefore brought fundamental challenges to the core of the construction market, such as cash flow, contractual disputes, and a general level of uncertainty. Continuous political unrest in the region has also hindered growth.
Our obligation is to educate and consult our clients of the trends within the local recruitment market. In challenging periods, there is a definitive switch from an employee- to employer-driven market place, which leads to an obvious knock-on effect with hiring capabilities and salaries. In a buoyant market where there is steady growth through newly awarded contracts and steady cash flow, we have found that candidates previously had the luxury of leveraging competitive salaries and being a lot more selective with their company of choice and projects.
However, immediate shifts in the market mean that we have had to educate candidates on adjusting their expectations to coincide with what prospective employers are able to offer. We find that once candidates are aware of the market conditions, their motivators soon become long-term security, on-time payments, career growth, and a healthy work-life balance, whilst keeping the best interests also for our clients at the forefront of what we do.
A major trend we’ve noticed over the last financial year are the changes in clients' expectations of candidature. Contractors are identifying a different type of candidate that they would like to hire. There seems to be a preference for our candidates' commercial know-how and interpersonal skills, with less onus on their technical expertise – this is consistent with the overall shifts in the current economic climate.
This change in focus of candidature is a deliberate way for companies to manage their profit-and-loss margins as budgets are squeezed. This means that, as a recruitment company, we must be a lot more diligent with our candidate shortlisting, because the key qualities which our customers are looking for are not necessarily presented on a resumé. Therefore more face-to-face interaction with our candidates and in-depth referral strategies have allowed us to meet the demands of our customers
The second change we’ve witnessed is the need for candidates that are experienced in the digital field. The implementation of building information modelling (BIM) has been a big part of the digital revolution, due to its obvious benefits of life cycle insights into the complex nature of the projects in this region. We have also seen an increase in the implementation of Construction Industry Solutions (COINS), SAP, Oracle, Epicor, and CCS Candy enterprise resource planning (ERP) systems for both internal and site reporting.
Finally, there are opportunities for recruiters to provide a more consultative service to customers, and appreciate the immediate challenges that customers face. A good recruitment consultant will be an expert in their field and have the ability to work with their client or candidate, advising them on their approach to recruitment. At Randstad MENA, we take pride in our ability to act as consultants, and hope that our clients and candidates will benefit from our advice on salary surveys, market trends, references, and recommendations.
NEXT PAGE: The impact of VAT on regional recruitment patterns and salaries
In terms of value-added tax (VAT), the initial effect, and one that we are already witnessing, will be the administration costs to employ additional staff with VAT experience. Following that, I predict that we may see a rise in project disputes on long-term contracts that have been under execution since early-2016, and regarding the redesign or re-tender of projects that have also not factored in VAT.
Contractors will be forced to adapt and prepare for VAT urgently, or face the threat of a forecast that was once a profitable project turning into a loss-making one. Once the market has adapted, and the new VAT legislation is in place, I can only see the construction market benefiting from future investment into the infrastructure, residential, healthcare and education sector.
The Middle East often attracts candidates from countries where paying up to 40% income tax and VAT is the norm, so I believe that VAT will have little impact on the number of expats working in the region. The tax-free salaries are a factor that attracts candidates to the market. However, the career opportunities, complex projects, beautiful weather, and local way-of-life certainly outweigh the new tax implications.
Nationalisation programmes will continue to increase as they have been recently, regardless of the number of expats in the region. I work with a number of local and international contractors, and both groups see value in employing young Emirate graduates that have a willingness to progress in the industry.
In the short-term, I do not think that construction salaries will increase as a knock-on effect of VAT implementation. If a company is sufficiently prepared going into 2018, then it will not be swallowing the cost of VAT – only the consumer will. Due to market conditions, salaries have decreased significantly since 2014. I am confident that in the long-term, VAT will be one of the many factors that boosts economies across the globe, and we will see an increase in salaries once again. In regards to employee costs, I also believe that aside from the cost of new employees to administer VAT, there is no reason for added costs to current employees.
We have been approached to recruit staff with VAT experience, but it was not to the volume that we anticipated. Roughly, more than 100 countries have implemented some form of VAT, and with the Middle East being as diverse as it is, this has led to a large number of the finance teams already having some form of VAT experience. The popular method has been to provide in-house training and refresher courses to staff that have experience with VAT in their countries. If the company is not confident that it has a strong-enough team in place, then it comes to us for specialist recruitment.
I have a cautious, but very optimistic, view of the next 12 months. Providing that we do not complicate a simple process, and make an effort to understand my market, clients, and candidates, there will always be opportunities to succeed. You only need to look at the facts to see the opportunities.
Major developments such as Dubai Creek Harbour, Expo 2020 Dubai, Dubai Hills, and Dubai South are still under execution, with further packages to be awarded. There is promising news in the media from major developers; Nakheel expects to announce $3.3bn worth of project awards by the end of the year, Emaar has had 15% growth over 12 months in H1 2017, and Damac announced $435.5m (AED 1.6bn) profits in H1 2017. Let’s not forget that Saudi Arabia, the GCC powerhouse, has already reduced its deficit by 50%.
I am confident that the recruitment market will pick up and offer opportunity in 2018 – but it will only offer the opportunity for the consultants that have a long-term view, and offer quality, professionalism, and integrity.