What kind of affect has the policy to incentivise employers to recruit KSA employees had? And has the support package helped ease the skills shortage?

Saudi Arabia’s Vision 2030 objectives and starting point is at developing human capital for the development of the citizens and their professions. The Saudi Arabia's localization policy, "Saudization," aims to increase the employment of Saudi nationals, especially in the private sector by incentivizing employers to recruit Saudi employees.

According to a research paper published on Research Gate, Saudization has shown more success in private sectors than the public sector. However, the impact of the policy has been studied in several industries and is still continuing. The findings of the research show that it has an impact on several aspects of recruitment and retention in the banking sector, in particular, as banks must provide specific training to Saudi recruits. This has benefitted the employees by increasing their skills and potential growth while reducing the employers’ reliance on expatriate workers.

In effort to promote the principle of investing in human capital, the government has provided a number of incentives for employers to hire Saudi nationals. Several programs financed by the government have been launched for training and skills improvement for the goal of support and facilitation to fulfil both the market demands and the ambitious vision. Tamheer, for instance, is a support program designed for employers of the public sector to temporarily contract Saudis and train them at the cost of the Human Resources Development Fund (HRDF). Policies such as Saudization results in skill improvement and high self-esteem. These combined with efforts to sustain growth and investment, facilitate job platforms, and support recruitment processes can lead to more and better jobs enhancing higher economic productivity.

Has the new salary scale had a positive effect on recruitment or has it put pressure on margins?

Despite of the still occurring global pandemic affecting the outcome of employment numbers, according to the Cooper Fitch Salary Guide for the Kingdom of Saudi Arabia, the Kingdom’s economy and job market saw a significant jump in recruitment demand for all sectors in 2022.

A survey conducted by Cooper Fitch found that in 2021, 71% of the companies made either no changes or increased the number of employees while in 2022, 68% of local firms planned to increase their headcount and only 19% intent to reduce it. The survey also shows that 68% of companies paid bonuses with 4% increase from 2020. This indicates stable employment processes and provides the minimum requirement for healthy entries and reentries in the job market.

Sustained government investments especially for startup companies has also increased recruitment activities within project management as well as incorporation and development sectors. In fact, the growing non-oil sector has been experiencing healthy competition to participate in mega projects like NEOM, which requires a level of skilled individuals waiting to be discovered.

Dedicated government support along with the growing non-oil sectors’ eager to be leading competitors in the market have affected recruitment positively in 2022 and is likely to continue in 2023 as the Kingdom is expected to be one of the top recruitment leagues globally by the end of the year (Saudi Arabia Salary Guide 2023).

Have government initiatives increased the size of the SME sector in the last year? Are SMES still a growth area for local accounting firms?

According to the SME Digital Enabling Portal (ESCWA), Saudi Arabia has started initiatives to support the development of SMEs in the kingdom. These initiatives include taxes reimbursement paid by SMEs businesses paid to government and Kafalah program which is designed to support SMEs by covering a percentage risk of failed investments.

According to Global Business Outlook, Saudi Arabia had more than 890,000 SMEs by June of 2022, a nearly 25.6% increase from Q4 of 2021 (SMEs new engine of economic growth in Saudi Arabia).

By Q1, 2022 SME’s reached more than 99% of all registered businesses in Saudi Arabia, which creates a significant market opportunity for local accounting firms to benefit from (Monshaat, 2022). This to a great degree is due to serious and still changing financial regulations from authorities such as SOCPA and ZATCA to meet annual and periodic obligations. This, if not more than ever, stresses the demand for more CPA’s and the expansion of established accounting firms.

How would you describe the health of the accounting industry in KSA in terms of customer demand, fee pressure, and staff recruitment and retention?

The accounting industry appears to be not only healthy for the past three years, but also growing as investments and startup companies rise. Startup companies alone have increased by 72% to $987 million in 2022, which requires more bookkeeping and tax services to be exploited (FY2022 KSA Venture Investment Report). It seems that the demand for more accounting services is expected to be sustained for the upcoming years as entrepreneurs are motivated to develop and diversify their portfolio in the hopes of becoming one of the leading influencers and businessmen by 2030.

Today, we are seeing many college students choosing accounting to be a career and their ambitious does not stop at being employed, but extends to establishing their own business and competing against top accounting firms. Ultimately, this could result in a challenge to attract and retain exceptional talents with a high number of applicants. High inflation rates are also expected to affect the recruitment process for all industries.

Has there been any significant consolidation or merger activity in the accounting profession?

There has not been any major consolidation or merger activities in the accounting profession, nor is it a practiced trend recently.

Have there been any significant regulatory developments in the KSA over the last 12 months?

Many regulatory developments have been improved this year and further changes are yet to come as plans to enhance the regulatory framework and services provided are being studied by the Saudi Arabia's National Transformation Program. An example of such developments include judicial services, transforming healthcare, enhancing the urban landscape, infrastructure, expanding digital services and more. Other significant regulatory developments in relationship to accounting include The Ministry of Commerce’s Companies Law, Courts and Litigation, Foreign Investments, labor and Saudization Law.

Are there any services areas where demand has grown over the last 12 months?

There have been several industries where demand has grown recently. For example, the automotive industry, retail, and online one-time and subscription services. The food service industry is also high in demand and is being expanded after many shut-downs and lock-downs during the pandemic. Saudi Arabia has also been requiring more individuals in the tourism and hospitality sector especially during the season which indicates many opportunities for investments in this field. This, coupled up with the goal of facilitating local and foreign investments in the Kingdom as well as supporting start-ups and small family businesses is expected to make a quantum leap in operations and growth.

What are your expectations for the next 12 months - are there any potentially significant developments in the pipeline?

For the next 12 months, small businesses are expected to fully adopt e-invoicing systems and create more detectable transactions. An increase in the industries of incorporation and advisory services is also expected as public and private projects are under construction and development. There are several predictions for the accounting profession in 2023 and beyond discussed in a report published by CPA Practice Advisor (Kepczyk, 2022). These include a continued shift towards Fintech and cloud-based accounting software, an increased focus on data analytics and automation, and a greater emphasis on cybersecurity.