Taking on staff costs retailers dear

The success of the retail industry in the past year has been fuelled by free-spending tourists as retailers rolled out new stores and big-name brands.

But the market is not all sunshine, smiles and ringing tills.

Despite reporting huge growth in sales and ploughing eye-watering levels of investment into stores, retailers are struggling to manage the soaring recruitment costs triggered by expansion.

"The cost of employment is one of the big debates at the moment," says Hasit Kakkad, the regional retail manager for Matalan, a mass-market UK brand.

"I tell my team that once we recruit a member of staff, you really cannot afford to lose them in three to six months."

A major problem for any industry with high staff turnover, the cost and time involved in hiring has become an even greater obstacle in the past few months because retailers have embarked on an expansion spree across the UAE and wider Gulf.

Bayt.com, the largest online recruitment portal in the Middle East, has reported the number of job-seekers registering each day has risen from 5,000 this time last year to 7,000 at the moment.

Lama Ataya, the chief marketing officer at Bayt, says this trend is being driven by the growth in the retail market, where companies are taking on hundreds of staff.

"Retail is one of the booming sectors and one of the sectors that has buffered the economy," she says.

Mall space is set to increase in the Emirates in the next few years as projects open such as Yas Mall, Emporium at Central Market in Abu Dhabi and Fujairah City Centre.

In Dubai, there are also retail projects underway at Al Ghurair Centre, BurJuman Mall and Dubai Mall.

As well as those shopping centres, brands are adding swathes of stores throughout the GCC, all of which adds up to hundreds of staff.

"We have opened a number of new stores and brands and there's a natural hiring in that sense," says Narain Jashanmal, the general manager for print media and book stores at Jashanmal Group, which has launched LK Bennett and Bally in the UAE and has more brands in the pipeline.

Hypermarkets and supermarkets, such as Spar International, Geant, Carrefour and LuLu are also investing heavily in stores across the country.

"Obviously, because we are on an expansion spree we have recruited a lot in the last six months," says V Nandakumar, the spokesperson for LuLu.

"Retail is definitely a more employee intensive business than other sectors. Right now we have more than 25,000 employees and 29 different nationalities."

Because retailers depend on a high number of employees, hiring staff takes up a bigger percentage of total costs than in other industries.

Added up, the fees for paperwork, visas, health checks and other administration hurdles can be about Dh8,000 (US$2,177) per member of staff hired from overseas.

This figure is a large proportion of a worker's annual salary, which for some stores can be about Dh3,500 per month for a shop assistant. And this makes retailers wary of losing a new member of staff in the first few months.

"Our recruitment costs have almost doubled compared to a few years ago," says Ishwar Chugani, the executive director for Giordano, a clothing brand, in the Middle East.

"We are trying to employ more staff locally because there are lower costs and agent fees."

The time it takes to hire staff can also hinder the rate of expansion for retailers.

"This is quite a big thing and one important point," says Mr Kakkad. "It can take about a month from interview to start, because largely a candidate cannot start until their paperwork is finished."

What has made matters worse for stores are changes to employment laws introduced in January that now mean shop assistants can switch from one retailer to the next without any time lag between.

"People are more opportunistic in moving and recruiters are not doing enough vetting in the interview stage," says Mr Kakkad. He believes that has led to an increase in poor-quality candidates.

Retailers could previously enforce a six-month ban on employment by another retailer if an employee left without obtaining a letter of no obligation.

"It's not as frowned upon any more to change from retailer to retailer," says Ms Ataya.

Tarek Sultani, a brand consultant at Landor Associates, believes the changes in the law have helped greater movement in the jobs market.

"The previous law put the power in the hands of the employer. It's no longer this way and people can move from one place to another."

rjones@thenational.ae

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