Around 550,000 Omanis will be eligible to join the workforce by the end of 2026, with a workforce participation rate of 67%, according to a report published by the International Monetary Fund (IMF).

To cater to fresh talent and meet the evolving demands of industries, the Sultanate of Oman needs to create around 220,000 new jobs over the next five years, the IMF added.

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The report titled, ‘Labour Market Dynamics in Oman,’ underlines that “while it continues to be a preferred destination for young Omanis, using the public sector as an employment vehicle is no longer a feasible option under current efforts to entrench medium-term fiscal sustainability while reducing reliance on hydrocarbon revenues.” And 56% of Omanis prefer public sector for its benefits including – job security, higher compensation, and more relaxed work arrangement. 

And added that the Sultanate’s non-oil economy continued to grow with availability of cheap, low-skilled workers from South Asia, along with flexible job contracts while still meeting Omanization targets. “The low labor costs associated with these expatriate contracts have increased the competitiveness of nonhydrocarbon sectors and boosted profit margins by driving wages downward, particularly in labor intensive sectors.

As a result, expatriate employment became more responsive to nonhydrocarbon growth than in other GCC economies, rendering expatriate workers the overwhelming majority in the private sector.”

However, for increasing workforce participation of Omanis in the private sector, the Sultanate still relies heavily on rules like hiring quotas. “These quotas are unevenly enforced across countries in the region and tend to be firm-size and occupation specific. They are less stringent for small and medium-sized enterprises (SMEs), as well as in occupations that are less attractive to nationals such as lower-skilled jobs.”

“On the other hand, quota requirements are higher for administrative and managerial occupations. These quota requirements complement wage-subsidy measures, which, although used much less extensively than in neighboring countries, aim to incentivize firms to favor the employment of nationals by reducing cost differentials with expatriates.”

But the challenge is that the Sultanate’s education system is still not well aligned with the needs of economic diversification, leading to a gap between the skills of Omani talent and those needed in the labour market. “..to reap the full benefits of these diversification efforts, enhancing and broadening the skillset of the Omani workforce through upskilling and reskilling measures is critical.”

“Additionally, it is imperative for the government to find a balance between integrating Omanis into the private sector and ensuring the labor market remains flexible enough to draw in foreign investment and skilled expatriate professionals.” the report added. 

Another bottleneck discussed in the report is Omani women’s workforce participation, which is 32%, compared to 89% for men.

“This discrepancy is particularly striking given that women tend to perform much better than men in educational attainment and outperform them in test scores. Omani women also hold much fewer senior and managerial roles, which could discourage them further from entering the labor market,”

The report also underlined some of the key initiatives the Sultanate is implementing to improve the labour market during this shift including – labour laws and social insurance changes that ensure equal pension rights for public and private sector workers and reducing the complexity of the current system. “These efforts also support remote work and add protections for expatriate workers. Insurance benefits now cover maternity and paternity leave, sick leave, and work injuries—even for expatriates.

Starting in 2026, end-of-service payments for expatriates will move to a new Provident Fund, managed by the Social Protection Fund.

Maternity leave has been extended to 98 days, and paternity leave introduced, which should help increase women’s participation in the workforce.

The laws also include new measures for gender equality and support for women, such as survivor benefits and a universal pension for the elderly, helping to fix long-standing inequalities.”

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Some of the additional measures by the Directorate General of Labour in the Dhofar Governorate include plans to intensify support for job seekers and improve worker welfare in the region. These include creating 3,300 new job opportunities in 2025, with a focus on vulnerable job seekers and recipients of job security benefits.

Efforts will also prioritise advancing Omanisation, legal reforms, and strengthening dialogue between employers and employees.