Employee Retention Study in Egypt

Impact of Fixed Term Contracts on Employee Retention in Egypt  

Introduction

The Egyptian government is focusing on attracting foreign investments in the oil and gas sector as one of the major sources of national income. Dina (2018) highlighted that multinational firms committed to invest 10 billion USD in the fiscal year 2018/2019. 64 international services providers are currently operating in Egypt according to Egypt business directory (2018). The presence of such a high number of companies and the direction of the government to attract foreign investment in this sector has dictated a high market mobilization in terms of tendering and bidding activities. Typical contract periods are 2 years with an optional extension period of 1 to 2 years. This type of tendering and bidding activities have caused the companies to employ fixed term contracts as opposed to what the oil and gas market in Egypt has been used to of using long term contracts. Hence, the research question of fixed term contracts and their effect on employee retention is brought up.

As an operations manager, I have always been in the dilemma of either increasing headcount, as a result of increased workload, or paying overtime and getting the current team to handle the extra work activity. The vitality of studying human resources management effects on the performance of organizations was investigated by Becker, and Gerhart (1996). They studied several models concerned with the effects of human resource decisions on the financial performance of companies and concluded that this is a complicated process as it involves several factors such as “psychology, economics, finance, and strategy”.  I have noticed that there are other factors other than the financial aspect of hiring more people as there are several other dimensions associated with overtime. There is a negative effect on service quality according to Oliva, and Sterman (2001) due to working long hours. Other aspects like the capabilities of the current team to handle the extra workload mentally & physically come into question. Those ethical implications and their effects on the employees were analyzed by Dembe (2009).  Furthermore, there are social effects associated with working overtime as highlighted by Geurts et al (2009). They concluded that very long working hours should be prevented to achieve a healthy work-family balance. As managers, we don’t usually consider this dimension while taking business decisions, however if we think about it, we will find out that this is our broader society which we are living in that is getting affected.

Most recently, my organization has decided to go into the hiring route, however the direction is to shift towards fixed term contracts. There are a vast number of challenges associated with different contract types; whether those are fixed or long term. Malhotra, and Murnighan (2002) verified that the previous statement is true. They further investigated the level of trust between the employee and the organization according to contract type through experimental work and concluded that this level of trust drops once the contract is no longer binding. This highlights the importance of understanding the challenges that come with fixed term contracts if the decision is inclined towards this direction, especially if those contracts are through agencies rather than directly with the worker or employee. Encouraging the use of fixed term contracts, Mani, Barua, and Whinston (2013) confirmed, through a study on multiple firms, that better financial performance is achieved when the firm depends on outsourcing to face the dynamic changes in the market. They proved that, on a long term, this type of contracts protects the firm against market uncertainty and pushes the risk away from the organizations.  

Another factor that I usually consider is the long term commitment towards the new hires in terms of sustaining the increased work activity, company benefits, training needs and insurance. The organizational commitment aspect of the problem as well as the relationship between the organization commitment and the supervisor commitment was investigated by Cheng, Jiang, and Riley (2003). The importance of studying organization commitment was discussed by Lambert, and Hogan (2008) where they concluded the high effect that organization commitment towards employees have on employee turnover.

On the other side, I have noticed that the decision to hire an employee under a fixed or a long term contract, varies depending on the function for which I am looking to increase headcount. Adding extra people to support functions is different from increasing repair and maintenance personnel and completely different angles are taken into account when we are thinking of hiring for a field engineering position. The criticality of strategic workforce planning was discussed by Ingham (2011). He highlighted that with current rapid changes in the economy; it is no longer a luxury to implement strategic workforce planning techniques. Briggs, and Keogh (1999) went even further and concluded that this is a main contributor to total quality management thus suggesting in depth analysis of strategic planning of human resources capital at different level of the organization. Hausknecht, Rodda, and Howard (2008) developed and tested a model of 12 retention factors and concluded that different retention strategies need to be considered when dealing with different groups of employees.

Despite facing this problem several times, I have always been handling it based on personal experience or through my colleagues’ experiences. When I also reviewed the current publications on the subject, I was not able to find relevant topics addressing the subject with respect to the Egyptian market.

The recent direction from the Egyptian government of focusing onto oil and gas activities to satisfy the countries’ energy needs as part of the 2030 Egypt vision (2018) indicates the need to study the impact of fixed term contracts on employee retention. It is in Egypt’s best social and economic interest, that its workforce does not suffer high turnover by the organizations. It is also in the best interest of the organizations to enjoy a stable workforce that builds experience through time without suffering the issues of continuous hiring and laying off employees. This was validated by Watrous, Huffman, and Pritchard (2006) when they examined the turnover of different work levels in organizations and its effect on the overall organization performance. Surgi (2013) examined how those negative effects contribute to the overall deterioration of the firm performance as well as to the coworkers who stay in the organization.

This proposal is divided into three sections; the first section is a literature review covering the recent work carried out by researchers in different countries to answer the research question of the impact of fixed term contracts on employee retention.

In the second section, the thesis statement will be investigated through providing the hypothesis of the study and specifically defining the research questions that will be answered.

The third section will explain the research methodology through an overall description of the approach, materials and procedures that will be required to carry out the study. In addition, all the study limitations and assumptions will be discussed in this section.