Hotel budgets hit by new minimum wage for Saudis

Private sector must pay at least SAR 3000 (US$800) per month from Feb

Operators

The move to increase the minimum wage that private sector companies pay Saudi nationals to SAR 3000 (US $800) is forcing some hoteliers to rethink their budgets.

From February, Saudi workers who are paid less than the public-sector minimum wage of SAR 3000 will not be counted fully in the mandated quota of Saudis a company must employ to avoid tough fines, it was reported earlier this month.

“We had a circular from the Ministry of Labour saying there will be a bottom line for Saudi staff salaries of SAR 3000 – around US $800 [per month]. Before we used to hire for $600 or $500,” commented Best Western Orchid Hotel, Riyadh general manager Mohammad Ramadan. “We will just have to adjust our budgets to pay this.”

The move is expected to encourage more Saudi workers to seek employment in the private sector in the Kingdom, where 90% of Saudi workers are still employed by the government.

Under the Saudization programme Nitaqat, introduced in November 2011, private companies, including hotel firms, are required 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.

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”.

However, hotel operators are struggling to attract Saudi nationals.

Abdul Karim Al Atiq, general manager of Coral International Hotel Al Khobar and HMH group general manager told Hotelier in May that 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.

“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.

The Best Western Ochid Hotel opened last month, however GM Ramadan is still to appoint Saudi nationals to the workforce: “For the time being we don’t have any Saudis, but it’s a must now.

“We are on our way to reviewing some candidates and recruiting them… trying to put them in front office and duty manager roles,” he said.

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