In the first quarter of 2025, many businesses in the United Arab Emirates (UAE) chose to pause their hiring efforts, as rising operational costs and new tax regulations placed significant pressure on profitability. According to a report by recruitment consultancy Cooper Fitch, the job market in the UAE saw only a modest 1.25% increase in hiring activity during the January-March period. This marks a shift from the rapid growth seen in the previous years, with employers now prioritizing efficiency over expansion.
A Maturing Market with Strategic Recruitment Focus
The moderate rise in hiring activity signals a broader shift in the UAE’s labor market from volume hiring to more strategic recruitment. As the market matures, companies are focusing on improving their existing workforce’s efficiency rather than rapidly increasing headcount. Trefor Murphy, CEO of Cooper Fitch, explained that while the overall hiring increase is modest, it is still considered strong given the market’s maturity. This shift highlights a more thoughtful approach to recruitment, with businesses assessing their needs carefully in the face of rising costs.
The Impact of Corporate Tax and Rising Operational Costs
One of the major reasons behind the slowdown in hiring is the financial pressure resulting from the introduction of corporate taxes, surging commercial rents, and the rising cost of services. The era of double-digit profitability for many businesses is coming to an end, particularly in sectors like consulting, supply chain, and manufacturing. With the cost of living driving salary increases and service fees escalating, companies are finding it increasingly difficult to maintain profitability while expanding their workforce.
Businesses are now being more diligent in deciding who to retain and how to keep them. The emphasis is on finding a balance between maintaining a lean workforce and ensuring operational efficiency. This strategy of carefully managing staff numbers and focusing on retention rather than expansion is becoming increasingly common across industries.
Strong Demand for Talent in Certain Sectors
Despite the slowdown in hiring, certain sectors in the UAE, such as real estate, technology, legal services, and private practice, continue to experience strong demand for talent. Dubai, in particular, remains a dominant hiring hub, with ongoing recruitment in these fields. However, more traditional sectors such as consulting, procurement, and human resources are seeing slower growth. This indicates that businesses are adapting to the shifting economic landscape by focusing hiring efforts on sectors that are still growing or are essential to their operations.
Regional Hiring Trends, Saudi Arabia and Beyond
While hiring in the UAE slowed, neighboring countries in the Gulf region, such as Saudi Arabia, experienced stronger growth. In the first quarter of 2025, Saudi Arabia recorded a 3.5% increase in job opportunities, driven by the country’s Vision 2030 initiatives in tourism, infrastructure, and digital economy sectors. The strong demand for talent in technical, commercial, and operational roles highlights the growing strength of the non-oil sector in the kingdom.
However, Trefor Murphy pointed out that the notion of professionals relocating to Saudi Arabia and receiving a significant salary increase is no longer as prevalent. The salary disparity between the UAE and Saudi Arabia is narrowing, with only slight differences for high-level positions, such as chief financial officers. The competitive salaries and benefits in Saudi Arabia continue to attract talent, but the difference from the UAE is less significant than it was a few years ago.
Sector-Specific Adjustments in Saudi Arabia
Despite Saudi Arabia’s robust hiring activity, the country is also undergoing its own set of fiscal adjustments. Public sector organizations are focusing on reducing their wage bills, a process that will likely continue as the government seeks to optimize its spending. The kingdom’s sovereign wealth fund, the Public Investment Fund, is also reviewing its spending patterns, including reducing reliance on external services such as consulting and legal advice. This shift may prompt a reduction in demand for these services, although the public sector remains a strong source of job creation.
Gulf Hiring Landscape, Opportunities and Challenges
Across the wider Gulf region, hiring activity saw mixed results. Qatar experienced a 3% rise in new jobs, driven by the ongoing growth of the liquefied natural gas sector and smart city projects. These developments are generating demand for engineering, logistics, and project management professionals. Meanwhile, Kuwait saw no growth in hiring, reflecting ongoing fiscal caution. Oman experienced a slight dip in hiring, while Bahrain recorded a 3% contraction, particularly in tourism and logistics sectors.
Despite challenges in some areas, the overall hiring trends in the Gulf region remain positive, with strong opportunities in high-growth sectors like energy, infrastructure, and technology. However, businesses are becoming more cautious in their hiring decisions, balancing the need for expansion with the realities of a changing economic environment.
Global Trade Dynamics and Its Impact on Hiring
The impact of global trade tensions, particularly the US tariffs on various goods, is expected to have minimal immediate effects on job creation in the Gulf. While oil exports remain exempt from these tariffs, sectors that rely on exports to the US, such as aluminum and petrochemicals, are reassessing their strategies. The broader global economic slowdown may influence investment sentiment, which could, in turn, affect hiring in energy, logistics, and tourism sectors.
However, the shift in global trade dynamics may also lead to new opportunities within the region. Efforts to strengthen intra-GCC trade and domestic production could open up new employment opportunities in logistics, food production, and advanced manufacturing. The Gulf region’s ability to adapt to these changing trade patterns will be crucial in sustaining job growth and economic stability in the coming years.
A More Strategic and Cautious Approach to Hiring
The first quarter of 2025 marks a period of adjustment for the UAE’s job market, as companies become more selective in their hiring practices. The combination of rising costs, corporate taxes, and evolving business needs has shifted the focus from volume hiring to a more strategic approach. While certain sectors continue to thrive, others are seeing more cautious recruitment activity. As the region adapts to global economic changes, businesses will need to balance their growth ambitions with the realities of a more challenging economic landscape.