Introduction of Expatriate Labor

            In the modern world, globalization is increasing with time. Now countries are supporting the foreign direct investment and free trade agreements in the regions to invite more and more highly skilled and qualified labor in their country in order to improve the performance of the manufacturing and service sectors of the company (Abahussain 2005). Where there are benefits for the expatriate labor there also some negative consequences that encourage the governments to reconsider their decision of the free labor mobility. In this essay, critical analysis for the cost and benefits of expatriate labor is discussed in detail.

Expatriate Labor in Saudi Arabia

        Expatriate labor is a term used to represents the labor and employees who live in other countries (a foreign country for them) for a short time duration. Expatriate labor sometimes migrates in a country with their family or without family to work and have the residence for a five and six month duration. While the employees and workers from the other countries who live for more than the two to five year durations are known as the expat.

        The government of Saudi Arabia is working hard and introducing new rules and regulations in order to maintain the expatriate labor in the country. Saudi Arabia is encouraging foreign labor to cut the cost and bring innovation to the operations of their organizations. There are two major types of contracts and agreement available according to which countries allow labor from other countries to enter their country. Expatriate labor has a direct impact on the economy of Saudi Arabia (Naufal and Genc 2012).

        In Saudi Arabia, more than 4 million expatriate labor is working on various projects.  LMRA is regulating the entry of the expatriate labor. They develop rules and regulations for the rights and obligations of the expatriate labor. While the foreign account tax compliance act is also regulating the tax accountability of the expatriate labor.

Cost and Benefits of Expatriate Labor

        In order to encourage employees from other countries of the world, the government of Saudi Arabia offers discounts, compensations, accommodations, and also exemption from tax liability. The government also provide them medical plans, and retirement benefits provision related benefits that are the major source to make the expatriate labor expensive for the country. However, there are a number of benefits also there that encourage the government to support expatriate labor (Bhuian, Al-Shammari and Jefri 2001).

Major benefits related to the expatriate labor are enlisted below:

Innovation in the organizational operations

New knowledge and better skills

The growth of international business activities

Cover the shortage of the manpower

Increase productivity in the organizations.

        In accordance to the research conducted by Bhuian, Al-Shammari, and Jefri in 2001, companies hire expatriate labor because of lack of available labor, lack of qualified and skilled labor in the relevant field, and to provide innovative ideas to the organization in order to bring efficiency in their operations and processes.

        In accordance with the research studies conducted by the Abahussain in 2005, Saudi Arabia also takes care of the expatriate health and medical issues. The government has also set standards to check the health condition of the employees that increase the cost of the labor rather than cutting labor cost. In accordance with the research, Saudi health authorities check the health conditions of the workers by taking their tests for physical fitness, infections, and viral diseases. Such tests increase the expenses. In such a manner, local labor is cheaper than the expatriate labor.

Major disadvantages and cost for over-depending on the expatriate labor are mentioned below in the list:

Tax exemption decreases government earning and increases the cost of labor.

Increase in the expatriate labor steals the daily bread of the local people as the unemployment rate for local population increases.

Conflicts in the workplace because of diversity

Management issues for the managerial staff.

Influence on the organizational culture.

        The labor from other cultures sometimes causes the problem for the managerial staff as management feel it difficult to develop motivational strategies for them. Cross cultural differences also cause to raise conflicts in the workplace.  Increase in the number of expatriate labor cause to generate a different culture in the organization that can increase or decreases the productivity level of the organization (Al-Jarallah 2004).  The difference in the ethical and moral norms of the expatriates from the local employees also causes the problem for the workforce. Thus the dependence on the expatriate labor also causes to change the culture of the organizations, and the culture of the majority overlaps the culture of the minority group.

        The costs of over dependence on the expatriate labor cannot be considered as a positive sign for the future development of the country (Bhuian, Al-Shammari and Jefri 2001). The government of Saudi Arabia needs to limit the expatriate as because of this the overall un-employment rate of the country is increasing. However, through managing the Expatriate labor efficiently, Saudi Arabia can take a number of benefits.

Free trade agreement of Expatriate Labor

        The free labor mobility is a fourth most important point of the free trade agreement. Free trade agreement allows the transfer of services, capital, goods, and labor between two or more than two countries. Labor mobility related to expat and expatriates is legally allowed by the government of Saudi Arabia by the free labor trade agreement. Free trade agreement supports the movement of the labor and mobility of labor from one country to another country. In accordance with the free trade agreement labor from the foreign countries can enter in Saudi Arabia without paying taxes or additional expenses.

Labor Mobility in regional free trade agreement

        The government of Saudi Arabia should support labor mobility in the regional free trade agreement. In accordance with the analysis and research we can say that labor mobility brings many advantages for the country in their production, manufacturing, trading and service sectors (Fasano-Filho and Goyal 2004). Through encouraging the regional free trade agreement government can provide highly skilled and qualified labor to the country that will definitely support the overall economic development of the country.

        By setting taxes and tariff on the mobility of the labor country will definitely lose the potential of the foreign labor. Foreign labors come in the country that provides those benefits and compensation. Taxes and tariff are the discoursing factors for the mobility of the labor. However on the other side without regional free mobility agreement the country cannot also perform well in the international market.  In the regional free trade agreement government of Saudi Arabia should include the free labor mobility so that they can also increase the opportunity of foreign direct investment in the country that directly improves the economic condition of the country.

Conclusion of Expatriate Labor

        Saudi Arabia is encouraging the foreign labor to work in Saudi Arabia on the short term work contracts as for the five to six-month contracts.  Free labor mobility supports a country by providing a competitive advantage in the market, means to growth, and improving skills and qualification. While Saudi Arabia is also facing issues because of the excessive expatriate labor in the organizations. Other than conflicts, diversity related issues and managerial difficulties expatriate labor is also causing the problem for the local employment opportunities.