Saudi cuts expat pay premiums as hiring slows / AI-Generated Image
Saudi Arabia is quietly reshaping the way it hires foreign talent, scaling back the hefty salary premiums that once defined expat recruitment as businesses tighten budgets and reassess staffing needs across major sectors. Roles that previously came with automatic double-digit pay bumps are now being benchmarked closer to local market levels, reflecting slower momentum in some mega-projects, stricter financial discipline, and a growing pool of skilled Saudi professionals entering the workforce. Recruiters say the shift marks a noticeable change in the Kingdom’s employment landscape: expat packages are becoming leaner, more performance-linked, and more aligned with the country’s evolving Vision 2030 priorities, especially as investment pivots toward AI, logistics, and mining rather than purely construction-led growth.
Why are expat salary premiums shrinking?
Saudi Arabian companies are dramatically scaling back the massive salary premiums that once defined expat compensation packages. Historically, it was common for high-skilled foreign recruits to negotiate pay that was 40% higher or even double their previous earnings just to relocate to the Kingdom. Recruiters now confirm that these offers are far more restrained and are aligning closely with standard market rates. This shift marks a new era of “measured” compensation, replacing the era of “generous incentives.”The market expects moderate wage growth of only 2% to 5% across most sectors for 2025. Furthermore, the traditional perks like comprehensive allowances for housing, cars, and education are being consolidated into an “all-in salary,” demanding greater financial planning from expatriates.
Why Saudi reduces expat salary?
This pay reset is a direct result of Saudi Arabia’s economic rationalization under the ambitious Vision 2030 plan, driven by its Public Investment Fund (PIF). The Kingdom is reordering its economic priorities. Several massive, infrastructure-heavy megaprojects, such as parts of NEOM and the mountain tourism hub Trojena, have faced execution challenges and delays, prompting a slowdown in project activity. Data shows that Saudi project awards nearly halved in the first nine months of 2025, leading to slower recruitment and stricter budgeting. The PIF is now pivoting investment toward sectors that promise better returns, specifically Artificial Intelligence (AI), Digital technology, Logistics, Mining, and Advanced Manufacturing. Compensation in these “hot jobs” is now increasingly tied to performance metrics rather than upfront premiums. This rationalization is also fueled by financial pressures, as the Kingdom requires oil prices near $100 per barrel to balance its budget amidst curbs on crude production.
Realistic impact on expats living in Saudi
The current adjustments in Saudi Arabia’s job market are creating a tangible and immediate impact on expatriates, marking a departure from the previous decade of guaranteed high earnings. Expats looking for new roles or negotiating contract renewals are now encountering significantly reduced financial incentives, as the generous 40% salary premiums that were once standard have largely disappeared. Offers are now closely tethered to international market rates, narrowing the financial advantage over competing job markets like the UAE. Furthermore, the practice of providing separate allowances for housing, cars, and schooling is diminishing, with companies preferring to offer a single, restrictive “all-in salary,” demanding tighter financial management from foreign workers. This financial crunch is compounded by project delays in large infrastructure and construction sectors, which not only slows down recruitment but also introduces job security anxiety for existing staff. Adding to the challenge, expats in roles without highly specialized skills face intense competition from a rapidly growing and qualified local Saudi workforce.Consequently, the non-financial value proposition—such as providing predictable pay, an excellent family lifestyle, and a clear connection to the Vision 2030 purpose—is becoming just as crucial as the salary in attracting and retaining top international talent.
Regional competition tighten the market
The domestic labor market is maturing rapidly, which contributes significantly to the new expat pay structure. Accelerated Saudization initiatives have successfully boosted the number of Saudi citizens in the private sector by 31% between 2016 and 2025, driving unemployment among Saudis to a historic low. This growing, qualified local workforce is increasing competition for roles in Management, Technical Expertise, and Project Leadership, reducing companies’ reliance on costly foreign talent for these positions. Regionally, the once vast salary gap between Saudi Arabia and the UAE has narrowed dramatically, averaging only a 5% to 8% premium in Saudi Arabia. This tighter differential, combined with the UAE’s more established international school networks, healthcare services, and liberal social environment, makes attracting top talent from cities like Dubai and Abu Dhabi far more challenging. For companies to successfully lure the best global talent now, they must offer competitive, predictable pay combined with a compelling family-friendly lifestyle and a clear connection to the large-scale purpose of Vision 2030. Go to Source