Businesses across the UAE and Kuwait are facing significant challenges in hiring staff as margins tighten, rising costs, and increased competition put pressure on their budgets. According to the latest business sentiment survey, many companies in the UAE have reported declining wages and an inability to afford new hires due to squeezed margins. This issue is further exacerbated by a growing culture of discounting, aimed at maintaining sales in an already saturated market.

Discounting and Static Employment Levels

For three consecutive months, non-oil companies in the UAE have been using discounting as a strategy to support sales amidst heightened market competition, with prices falling despite rising operational costs. However, the approach is being criticized for undermining long-term value, with corporate psychologist Neil Orvay calling it a "race to the bottom." Lucy Bradley, a Dubai-based marketer, shared her concerns that these discounting efforts reflect desperation within an oversupplied market.

With budgets and margins tightening, employment levels in the UAE have remained relatively unchanged. The latest figures from the S&P Global purchase managers' report show that employment remained stagnant at the lowest point in over two years, even as demand for work increased.

Cost of Living and Rising Employment Costs

In line with inflationary pressures, the cost of doing business in the UAE is on the rise. For example, retail rents in Dubai and Abu Dhabi saw increases of 3% and 8% respectively in Q3 2024. The latest reports from the recruitment firm Cooper Fitch indicate that many companies in the UAE are not budgeting for pay raises in 2025. Almost a third of companies surveyed also reported reducing salaries for new recruits.

Lewis Elsey, principal consultant at Alchemy Search, noted that the oversupply of talent in Dubai has contributed to the decline in salaries. Despite this, job seekers are finding it harder to negotiate pay, even for top-tier candidates, as the market remains flooded with talent and hiring processes become more competitive.

Shifting Hiring Strategies and the Role of Flexible Work

Katy Holmes, CEO of the British Chamber of Commerce Dubai, emphasized that while many companies are struggling to adjust compensation in line with the rising cost of living, some have begun offering alternative benefits, such as flexible work arrangements, to retain talent. However, in a candidate-rich market like Dubai, employers and employees alike have little room for negotiation.

Economic Outlook for Kuwait and Employment Challenges

In Kuwait, companies are also grappling with rising operational costs. The country recorded the highest inflation rate among GCC countries in September 2024 at 2.8%. Despite these challenges, the unemployment rate in Kuwait remained relatively low at 2.03% in 2023. However, like the UAE, employment growth remained stagnant in December, impacting business operations and exacerbating staffing shortages.

Looking ahead to 2025, economic experts predict that it may be easier for firms to hire additional staff as growth opportunities begin to materialize. Yet, budget constraints will likely continue to affect hiring practices. Many companies are also turning to offshoring and diversifying their talent reach to lower-cost regions to offset the cost pressures.

The struggles faced by companies in both the UAE and Kuwait highlight the increasingly difficult balance between maintaining profitability and meeting the growing demand for skilled talent. As competition intensifies and operational costs continue to rise, businesses are being forced to adopt innovative strategies, such as flexible work arrangements and talent diversification, to navigate the evolving employment landscape

THA Staffing can help you overcome these hiring challenges in the UAE. With a strong understanding of the local labor market and access to a network of skilled professionals, they provide tailored staffing solutions that address your specific needs. Whether you're seeking flexible work arrangements, top-tier talent, or innovative recruitment strategies, they are here to support your hiring needs. Reach out today to learn how we can help your business thrive in this challenging job market.