Choosing Your Hiring Strategy: the impact of direct employees versus remote contractors for MENA businesses

In the ever-changing business world of the Middle East, companies often face a crucial decision: should they hire direct employees in the UAE or Saudi entity or build out remote teams in nearby markets such as Egypt or Pakistan? This decision can affect everything from legal obligations and compliance to taxation and the long-term business strategy.

We’ve seen how complex this choice can be whilst working closely with our customers’ HR teams across the GCC. Whether it’s a tech startup out of Riyadh or a marketing agency in Dubai, finding the right mix of direct employees and remote team members plays a key role in business success. Talent is everywhere, so why limit yourself?

Direct employees vs. Contractors: understanding the difference

Making informed decisions starts with understanding the difference between these hiring types.

Here's the breakdown:

Direct Employees: building a local team

• Employment agreements: Employment contracts follow local labor laws based on the hiring entity. For example, a mainland UAE entity would require all employees to be registered with and monthly payroll processed via the local Wage Protection System (WPS).

• Protected by law: Labor laws cover direct employees, including work hours, leave, and end-of-service benefits. These benefits offer employees peace of mind.

• Benefits and employer burden: Mandatory benefits like insurance, accrued gratuity, leave and GOSI contributions are the sole responsibility of the employer. The employer also takes on the liability and has the authority to issue letters of confirmation such as No Objection Certificates (NOC), Salary Transfer Letters, etc.

Remote Contractors: talent is everywhere

• Increased flexibility: By opting for contracting over hiring, businesses and contractors retain flexibility in the structure and tenure of the working arrangement. Also, by taking a global approach and contracting team members in different time zones, MENA businesses can expand their working hours.

• Compliant contracts: Remote contracts are often managed through service agreements, so the responsibility for local compliance sits with the contracted individual. This allows MENA businesses to hire team members outside of their home market without the burden of incorporating a compliant local entity for hiring or hiring costly lawyers and payroll outsourcing services.

• Consistent payments: Remote team members are often paid in stable currencies like USD, which helps MENA businesses avoid currency fluctuations in less-stable markets like Pakistan, Egypt and Lebanon. Paying remote contractors in USD also affords MENA businesses the opportunity to simplify budgeting and financial planning. On the contractors’ side, they have the added benefit of knowing exactly how much they’ll receive in a given pay period.

Cercli’s platform allows companies to hire and compliantly manage direct employees’ and contractors’ payroll, as well as the payroll of employees hired through an Employer of Record (EOR), within a single platform. For more information on how Cercli can get your team paid on-time, accurately, and compliantly, reach out today!

Stay tuned for our next article, where we walk-through an example of a company’s hiring journey, the risks of misclassifying remote contractors and how to avoid potential pitfalls.

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