Hiring and managing staff is one of the most important tasks for businesses. In Saudi Arabia, companies are increasingly looking at two main approaches: outsourcing staff and traditional hiring. Each method has its pros and cons, and the choice between them depends on the company’s goals, resources, and needs.
With the country’s labour market evolving rapidly, let’s explore how these two methods compare, along with the trends shaping Saudi Arabia’s staffing landscape.
What is Staff Outsourcing?
Staff outsourcing means hiring employees through a third-party agency or company. These employees work for your business but are employed and managed by the outsourcing company. Outsourcing can include tasks like customer support, IT services, administration, and even human resources.
This method is especially popular in industries like IT, business process outsourcing (BPO), and customer services. According to Statista, the BPO market in Saudi Arabia is growing at a steady rate of 3.45% annually and is expected to reach a market size of US$0.71 billion by 2029. This shows that many businesses in Saudi Arabia are turning to outsourcing to handle essential tasks more efficiently.
What is Traditional Hiring?
Traditional hiring involves directly employing people in your company. These employees become a part of your organisation, and you are responsible for their salaries, benefits, and management. This method works well for businesses that want full control over their staff and prefer to build long-term relationships with employees.
While traditional hiring has its advantages, it can also be costly and time-consuming. For example, companies need to advertise job openings, review applications, conduct interviews, and train new employees.
Why is Outsourcing Growing in Saudi Arabia?
Saudi Arabia is seeing rapid growth in outsourcing. Let’s look at the most commonly cited reasons behind this shift:
Cost Savings
Outsourcing allows businesses to save money. Instead of spending heavily on recruitment, training, and employee benefits, companies can focus on their core operations. The manpower outsourcing market in Saudi Arabia is expected to grow from US$2.69 billion in 2021 to US$5.49 billion by 2028, at an impressive growth rate of 10.7% (Research and Markets).
Government Support
The Saudi government is encouraging outsourcing to diversify the economy and attract foreign investment. According to Markntel Advisors, the HR outsourcing services market in Saudi Arabia is growing by 7.2% annually, thanks to these initiatives.
Demand for Skilled Labour
With businesses increasingly looking for expertise in IT, finance, and customer services, outsourcing offers an easy way to access skilled professionals. The administration outsourcing market alone is expected to reach US$123.60 million by 2025, with steady annual growth.
Flexible Work Options
Flexibility is becoming a key focus for Saudi businesses. The country now ranks 14th globally in the flexible work arrangements index (Human Resources and Social Development). This ranking shows how businesses are embracing new work models, including outsourcing.
How Outsourcing Benefits Companies
Given that companies are shifting to outsourcing by droves, it is worth studying what benefits a company choosing this path is entitled to. Here are the three common ways outsourcing has been beneficial to businesses:
- Access to Talent: Outsourcing agencies often have large talent pools, allowing businesses to quickly hire skilled professionals.
- Cost-Effective: By outsourcing, businesses avoid costs like office space, equipment, and long-term benefits.
- Focus on Core Work: With non-core tasks outsourced, businesses can concentrate on strategic activities.
Why Some Businesses Prefer Traditional Hiring
While outsourcing is gaining popularity, traditional hiring remains the go-to choice for many companies in Saudi Arabia. Some reasons include:
- Company Culture: Direct employees are easier to align with the company’s vision and goals.
- Long-Term Relationships: Permanent employees tend to build stronger relationships with the organisation.
- Full Control: Companies have greater oversight of their operations with in-house staff.
Challenges with Traditional Hiring
But outsourcing still continues to be a favourite, and one must look at the challenges of traditional hiring to understand this change. Here are some common roadblocks that make businesses hesitant to move ahead with traditional hiring:
- Higher Costs: Recruiting and retaining employees can be expensive, especially when factoring in training and benefits.
- High Turnover: Saudi Arabia has a high employee turnover rate, with the average job tenure being just 2.2 years, much lower than the 10-year average in the EU (Growth Lab).
- Time-Consuming: The recruitment process can take months, delaying projects and operations.
Online Recruitment Gaining Popularity
A growing trend in Saudi Arabia is the use of online platforms for hiring. Both employers and job seekers now prefer digital methods over traditional approaches. A study published in the ESR Groups Journal highlighted that a high percentage of recruitment in Saudi Arabia now happens through online platforms. This shift reduces the time and costs associated with traditional hiring processes.
Comparing Costs of Outsourcing vs. Traditional Hiring
One of the key factors in choosing between outsourcing and traditional hiring is cost. Outsourcing tends to be more affordable, especially for businesses looking to scale quickly.
For example, outsourcing in IT and HR allows companies to pay for services only when needed. This approach avoids the long-term costs of full-time employees, such as benefits, holiday pay, and pensions. In the administration outsourcing market, spending per employee is expected to reach US$7.30 in 2025, showing businesses’ readiness to invest in outsourcing where it counts.
The Rise of Hybrid Work Models
Saudi businesses are not only outsourcing more but are also adopting hybrid work models. Hybrid setups combine office work with remote work, offering flexibility to both employers and employees. This trend aligns with global changes, where hybrid work is becoming the norm in many industries.
By combining outsourcing and hybrid work, businesses can reduce operational costs while maintaining productivity. This shift reflects Saudi Arabia’s focus on building a modern, competitive workforce.
Outsourcing in IT and HR
The IT sector in Saudi Arabia is a prime example of outsourcing’s benefits. The market is growing steadily, with companies increasingly outsourcing IT services such as cybersecurity, cloud computing, and software development.
In the HR sector, outsourcing helps businesses manage recruitment, payroll, and employee relations more efficiently. This approach allows smaller companies to compete with larger organisations by accessing high-quality HR services at affordable rates.
What’s Best for Your Business?
Choosing between staff outsourcing and traditional hiring depends on your company’s goals and resources. Outsourcing is ideal for businesses looking to save money, access specialised talent, and adapt to changing market conditions. On the other hand, traditional hiring suits companies that prioritise long-term employee relationships and want full control over their operations.
With Saudi Arabia’s outsourcing market set to grow significantly in the coming years, businesses have more opportunities than ever to explore flexible staffing solutions. Whether you choose outsourcing or traditional hiring, aligning your staffing strategy with your business needs is key.
Saudi Arabia’s evolving labour market offers plenty of options. By understanding the benefits and challenges of both methods, your business can make informed decisions that support its growth and success.
Related Also: 2025 Trends: Bahrain’s Hybrid & Remote Work Outsourcing