Kiss of death
Egypt's recruitment industry cannot possibly survive if certain problems with the new labour law are not ironed out. Sherif Samy* writes
The People's Assembly has finally approved a new labour law, eight years after it was drafted by a ministerial committee. Law 12 of 2003 addresses a multitude of thorny issues, ranging from employment contracts, termination and minimum wages to the right to strike, collective negotiations and conflict resolution.
The law's drafters, reviewers and legislators failed, however, to notice the unjustifiable hurdles the law places in the way of recruitment firms, which threaten the recruitment industry and its ability to place Egyptians in job vacancies abroad.
Such legal recruitment land-mines have been adopted in a country suffering from over-population and growing unemployment, currently estimated at around 1.9 million Egyptians or 10 per cent of the 19 million-strong workforce. To these, nearly 200,000 people are added annually, from the three quarters of a million Egyptians that enter the job market for the first time every year.
Meanwhile, traditional expatriate employment markets outside the border, namely in the Arab Gulf states, are assimilating less Egyptian workers at all levels compared to the period from the mid-1970s to the mid-1990s. Such a reversal of the tides can be attributed to a number of key factors: the shrinking economies and lower oil revenues of the Gulf states; the completion of all key infrastructure development projects requiring intensive labour; the increase in the level of education of these countries' citizens, rising unemployment among their youth and the tendency to recruit more expatriate workers from Asia (the Indian sub-continent and the Philippines) due to their better command of the English language and technology skills, stricter abidance by work rules and lower cost.
Despite this precarious internal and external employment situation, the new labour law, astonishingly, seems to have one aim for Egypt's recruitment industry: to strangle it. Our claim is supported by key aspects of the regulation law. First, Article 22 of the law stipulates that for a company to be licensed to "enroll Egyptians to work", which we will refer to as recruitment, it must be 100 per cent Egyptian- owned and all its board members and managers must be Egyptians.
Why is such a restriction imposed? Is a foreign entity or individual acting as a middleman between organisations and job seekers a matter that poses significant risk to the country's national security? If we were to adopt the same train of thought, banking, insurance, telecommunications and petroleum activities should be subjected to the same "precautions". Such a nationality constraint will dissuade international recruitment and head-hunting firms from setting up shop in Egypt, whether through branches, fully owned subsidiaries or joint ventures. Similarly, it will deprive us from the services these multinationals could provide in placing Egyptians in areas around the world where technical skills are in short supply or where outsourcing is booming. One should keep in mind how fast India and the Philippines are shipping away their citizens to jobs overseas.
Second, the new labour law seems to ignore the basic principles of overseas recruitment, which is that organisations looking for potential candidates from outside its borders understandably search for the most suitable ones from a host of countries. If a vacancy requires an Arabic speaker, they have a number of Arabic-speaking countries to choose from besides Egypt. So it does no good to make it more difficult for these organisations to recruit people from Egypt, since they will just turn to the next Arabic-speaking country instead. Article 20 of the law mandates that each and every employment request be presented to the Ministry of Labour for review and approval, after it has been vouched for by the concerned embassy or consulate.
Should all this time, effort and cost be borne by a foreign organisation interested in exploring potential employees from Egypt? Why is the law assuming Egyptians are unable to judge by themselves a potential employment opportunity? And, does the Ministry of Labour have the staff that is competent enough to assess the terms and conditions of a vacancy for, for example, an information technology specialist that should be earning tens of thousands of dollars per annum or, for that matter, a corporate lawyer handling multi- million dollar contracts?
Third, the evolution of corporate Egypt and the technology revolution seem to have been overlooked by the new law. The country now has executive search firms, or head- hunters, exclusively dealing with senior executive appointments. These are usually sensitive assignments that do not fall under specific job descriptions and ideal qualifications, hence requiring significant expertise and careful handling.
Also, since 2000, Egyptian Internet portals have emerged that match job seekers, who register free of charge, with interested local and foreign-based employers, who pay a small fee for accessing the online CV database. Those companies cannot possibly fall under the red tape imposed by the Ministry of Labour concerning overseas recruitment, or they would go out of business. The whole purpose of being "online" is to provide fast, convenient, low cost service.
Last year, the entire staff of an online recruitment portal was arrested and its equipment confiscated for allegedly breaching labour laws, although they were released two days later for lack of proof of wrongdoing. Web sites are made to be accessed from anywhere around the globe and such restrictive regulations are not only irrational, but also serve to drive those businesses to other friendlier locations, such as Dubai Internet City or Amman.
One article in the law, although fairly ambiguous, offers a glimmer of hope for recruitment firms. Article 16 states: "An employer can advertise available job vacancies in the media and can assign a consulting office to assess job applications, present recommendations and assist in the selection of the most suitable candidates for these jobs." While this could be a loophole for head-hunters and online portals, the term "consulting offices" in the text is confusing and has raised numerous questions. Is the law referring here to recruitment firms and, if so, why use different terminology? And why then does the law prevent such firms from assessing job applications resulting from advertised vacancies? Would such firms be breaching the law if they maintain large job databases of job seekers' information without resorting to advertised solicitations? Would these firms be operating illegally when advising a corporate client from outside Egypt without going through the Labour Ministry red tape?
Fourth, recruitment is a professional service that does not require any significant financial investment -- a firm could be in business with a handful of staff operating from small and inexpensive premises. The new labour law, however, imposes, in article 22, a minimum capital of LE100,000 for recruitment firms to be licensed. Moreover, these firms must also now provide the Labour Ministry with an LE100,000 irrevocable letter of guarantee. This is another bewildering restriction. It is understandable that a contracting company, for example, be required to provide such guarantees to ensure it does not default on the completion of a major project. But it makes no sense to impose such relatively high financial obligations on professional recruitment firms, when they do not exist for other professions that are prone to serious potential malpractices, such as surgeons' blunders in operating rooms or public auditors signing of misleading financial statements.
The list of misgivings and concerns about the new labour law is clearly long. As Egypt's growing recruitment industry deserves all the support and encouragement it can get, concerned authorities are expected to act promptly to address these concerns.
* The writer is chairman of SKILLRATE Advisors SAE, an executive search firm, and CEO of employment portal: skill- link.com.
