Many companies are trying to reduce their numbers on their payrolls in a bid to cut costs
Suparna Goswami Bhattacharya
March 8, 2016: With oil prices showing no signs of heading up, companies in Oman are pulling all stops to reduce their employee cost.
The reverberations of plummeting oil prices are being felt throughout the Arabian Peninsula. While some states have taken a moderate approach, others are working towards severe cuts in order to address the resulting gap in their budgets.
Experts agree high oil prices contributed to a thriving expat community in the region, but the recent developments have forced Gulf Cooperation Council (GCC) states to commit to reducing their reliance on expat workers over the coming years.
Chris Quy, Client Partner at Pedersen & Partners, based in Dubai, says that austerity measures in Oman range from increase in corporate income tax to adjustments in utilities prices. “These are specifically directed at local businesses and these changes are expected to trickle down so that individual enterprises eventually enact their own cost-cutting measures,” states Quy.
As a result, many companies are forced to reduce the number of expats on their payrolls or reduce benefits received by them.
According to the Omani Centre for Statistics, expatriates constitute 45% of the country’s population. This includes both highly skilled and unskilled expats along with their families.
Many companies have asked members of their middle and top management (mostly expats) to resign so that the management is not top heavy. Additionally, many SAOC and SAOG have been asked to either stop or reduce the yearly bonus, says an HR consultant based in Oman. SAOC and SAOG are companies that are funded fully or partially, or fully controlled by the Ministry of Finance.
The above measures, understandably so, are leading to expat mobility. However, there are challenges as a large percentage of the young Omani workforce is only now starting to take on higher and more complex responsibilities. In the past, these roles were handed over to expats while they simultaneously provided training opportunities to younger employees.
The smaller companies have a bigger challenge as it will be difficult for them to conduct huge training and development programmes for young Omanis. For them, the best option is to merge with bigger companies.
Tonia Gray, MCIPD, General Manager, Competence HR in Oman, says it is essential that companies consider carefully the skills and experience they require to continue to operate and retain them. This can be quite a balancing act, especially in companies where there are many expat specialists and the skills are not available locally. “Where an expat is in post, consideration must be given to whether a national can be trained to competently replace them. Companies may also consider terminating expat contracts with a view to replacing them with expats on lesser packages. This is already occurring across many sectors and not exclusively in the oil and gas sector,” says Gray.
The Oman government recently communicated that all companies owned by the government, or even partly owned (more than 50% share), are to have cuts in employee benefits, irrespective of their contracts. These include withdrawal of school fees, medical insurance, expenses, annual flights, bonuses, pay rises and company cars.
Gray adds that companies may ask employees to undertake more work than they have done in the past and to maybe take on more responsibility without being financially rewarded for doing so.
“These are tough times. The era of big bonuses and lavish pay raises is definitely not happening for the next two years. Till then, one has to be happy with whatever amount one gets,” says an HR consultant based in Oman.
“In the current climate, employee expectations really do need to be managed. This is not the time to be demanding higher salaries and better benefits. Doing more work for less pay (or at least no increase) may be the only way the company can survive and the employee can protect his job. Currently, there are many jobs undertaken by expats that could be undertaken by a national and, frankly, nationals should get priority in any position which they are able to do,” says Gray.