Private sector employers in Saudi Arabia are struggling to keep up with the pace of reform as they grapple with the implementation of Nitaqat, the country's Saudisation jobs policy, according to a new report.
Global recruitment giant, Hay Group, said the private sector felt it was "bearing the brunt of the pain".
Chance Wilson, general manager at Hay Group in Saudi Arabia, said one of the key themes to emerge from the report was the need for greater alignment between stakeholders.
"Everyone aspires for the same end result but different approaches leave the private sector with a strong sense that they are bearing the brunt of the pain. In the short term this is bad for business and is ultimately unsustainable," Wilson said in a statement issued on Tuesday.
Wilson added that one of the biggest issues was the creation of artificial salary expectations in the market.
"The current approach is resulting in upward pressure on salaries that is caused by a programme which by design, inflates the worth of individuals through national identity, rather than skills and experience. This in turn distorts the market norms," he said.
He added: "The other big influencing factor on upward pay movements is that of government itself. With perceived more attractive compensation and benefits on offer in the public sector, private sector employers feel the need to bridge a significant gap in order to compete.
"The two factors combined have a potentially critical impact, leaving private sector employers divided."
The Hay Group research, which took place between August 2011 and January 2012, recognised a need for more effective dialogue between the government and employers, Wilson said.
Specifically, it recommends greater collaboration and better communication, planning, and resolution surrounding the implementation of the Nitaqat programme.
The Hay Group report also highlighted the need for greater education of the private sector on the benefits Nitaqat can offer to businesses, as well as more practical support and guidance for employers and their expatriate employees.
Wilson said: "There is strong evidence that expatriate professionals both embrace the reform agenda and want to contribute in a positive way. Knowledge transfer and succession planning are key to creating a sustainable national workforce, and more practical action by all parties is required in order to make this happen."
Under the country's new Nitaqat system, companies are to be labelled “green”, “yellow” or “red” depending on the number of Saudis working for them.
Companies in the “yellow” category will not be able to extend their foreign employees’ work visas beyond six years while “red” companies will not be able to renew their foreign workers’ visas at all.
“Green” companies will be entitled to a number of benefits, such as expedited services for foreign workers’ visas and the ability to change the job categories of foreign workers into job categories reserved for Saudis.
Hay Group's research covered more than 150 CEOs, general managers and senior managers in Saudi Arabia, with 57 percent of respondents having worked in the kingdom for five years or more.