Most UAE firms pause hiring in first quarter as corporate tax and costs add up

Most companies in the UAE paused hiring in the first quarter of 2025, choosing instead to operate with existing staff, according to recruitment company Cooper Fitch.

The country recorded a 1.25 per cent increase in hiring activity in the January-March period, compared to the previous three months, with employers prioritising efficiency over headcount growth, it said in a report on Wednesday.

This indicates a maturing market shifting from volume hiring to strategic recruitment, the consultancy said.

“The UAE experienced considerable growth in hiring last year. So, to continue to grow by 1.25 per cent is really strong,” said Trefor Murphy, founder and chief executive of Cooper Fitch.

“It’s gone from being a developing market to a developed market to now being a highly developed market. There may be a slight reduction in tiny pockets such as consulting, supply chain, procurement, manufacturing and human resources. But hiring is quite dominant in Dubai in other sectors such as legal private practice, trade, technology, and real estate.”

Mr Murphy attributed the cautious hiring to downward pressure on profits and Ebitda (earnings before interest, taxes, depreciation, and amortisation) rates. With the introduction of corporate tax, surging commercial rents, service fees and salary increases driven by the cost of living, the era of double-digit profitability for businesses, particularly in certain sectors, is reducing, he said.

To remain profitable and expand, organisations are looking at who they want to retain and how to retain them much more diligently.

Hiring on in Saudi Arabia

Regionally, Saudi Arabia led hiring growth, with a 3.5 per cent rise in job opportunities, driven by Vision 2030 activity in tourism, infrastructure, aviation and the digital economy, Cooper Fitch found. Hiring was strong in technical, commercial and operational roles, with the kingdom’s non-oil sector recording its strongest quarterly job creation in years, the research found.

However, Mr Murphy said it was a misconception that professionals who relocate to Saudi Arabia from elsewhere receive a 40 per cent or 50 per cent salary increase.

“There is no parity yet, but we are not far from it. So, there's not much of a difference in salaries for a chief financial officer in Saudi Arabia versus the UAE. There might be a slight salary premium for Saudi, but it's nothing like it would have been up to three or four years ago,” he said.

On whether the kingdom is slowing employment growth as it reins in spending, Mr Murphy said the Saudi government is stress testing all of its spends.

“But that's not a March 2025 story, it’s a May 2024 story. However, the public sector organisations in Saudi Arabia are particularly buoyant about hiring, making new hires and creating new jobs,” he added.

“At the same time, they'll have to go through a process of reducing the public sector wage bill in Saudi Arabia. There's still too many people working in the public sector.”

The kingdom's sovereign wealth fund, the Public Investment Fund, has been asked to look at its spending patterns, and the “first step of that is reducing the services they're buying, in terms of consulting, strategy, project management, financial advisers, HR, recruitment and legal”.

“Instead of buying these services, public sector firms are looking at building it themselves and managing more things internally,” Mr Murphy said.

Across the wider Gulf region, hiring activity rose by 1.5 per cent. Qatar experienced a 3 per cent gain in new jobs, supported by hiring in the liquefied natural gas sector and continued investment in smart city development. These projects are generating demand for engineering, logistics and project management talent, Cooper Fitch said.

Job growth in Kuwait remained flat, reflecting cautious recruitment amid continuing fiscal planning. Hiring in Oman dipped 1 per cent in the first quarter as companies reassessed staffing needs. Bahrain experienced a 3 per cent contraction in job creation, the region's largest, particularly in tourism and logistics.

Mr Murphy said the net impact of US tariffs will be very limited on jobs in the Gulf.

“While oil exports remain exempt from new US tariffs and immediate labour market disruption is expected to be minimal, sectors with US-bound exports, such as aluminium and petrochemicals, are now reassessing hiring and production strategies. Continued trade negotiations and broader sentiment may still influence hiring decisions in the months ahead,” the Cooper Fitch report said.

Escalating trade tensions between the US and China have heightened fears of a global slowdown, and although the Gulf is not directly involved, the potential impact on oil demand, trade routes, and investment sentiment could affect employment in energy, logistics and tourism sectors, it said.

“On the other hand, these shifts may accelerate efforts to strengthen intra-GCC trade, domestic production and high-value sector growth, potentially unlocking new employment opportunities in logistics, food production and advanced manufacturing.”