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Nationalisation of workforce in Saudi Arabia: an employer's obligation
Source: Clyde & Co , Author: Abdulaziz Al-Bosaily and Sara Khoja
Posted: Thu July 21, 2011 2:38 pm

UAE. In the past two months the Ministry of Labour in the Kingdom of Saudi Arabia (KSA) has announced the introduction of a new regulatory regime called the ‘Nitaqat’ programme. 

Nitaqat is designed to enhance the employment of Saudi nationals in the private sector and employers have been given three months within which to comply with the new system.  Nitaqat is part of a wider programme which will see further regulations regarding recruitment, enforcement of salary payment, health insurance and the establishment of a call centre to provide advice to individuals with employment advice.

At present only 10% of the Saudi workforce is employed in the private sector and two million visas for non nationals were issued in the past year alone.   Legislation introduced since 2005 and Nitaqat are designed to change this and address an increasing need to create jobs for young graduates in a population more than 50% of which consists of individuals less than 25 years of age. A stated aim of the KSA government is the creation of 1.12 million jobs by 2014.

Under the Nitaqat system, employers registered with the Ministry of Labour are categorized into one of four categories, Red, Yellow, Green and Premium (an employer can check its allocated category by logging onto the Ministry of Labour website):

Red: employers in this category are not complying with their obligations to employ Saudi nationals and will therefore not be able to apply for new sponsorships for work permit and residency visas for new recruits or renew sponsorships for existing ones;

Yellow: employers in this category are complying with certain obligations regarding the employment of KSA nationals but are not complying with the quota duty.  These employers will not be able to renew sponsorships for work permit and residency visas for existing employees who accrue six years of service with them; and

Green: employers in this category are complying with their obligations and will not be subject to restrictions in obtaining sponsorship for work permits and residency for new recruits or in renewing existing sponsorships for current employees.

Premium: (this category is reserved for employers with the highest percentage of Saudi national employees) employers in this category are entitled to the same privileges given to the Green category.

Moreover, they are able to recruit foreign employees of whatever profession and transfer these employees’ visas to their organization from other companies without the employees needing to have completed two years with the first employer.

Employers are also classified according to sizes: Small (10-49 employees), Medium (50-499 employees), Large (500 employees and above) and Giant entities which consist of (3000 employees and above).

The size of the entity is based on the total number of Saudis and foreigners working in the entity. Saudis are calculated according to the number of Saudis registered in the database of the General Organization for Social Insurance (GOSI), while the number of foreign employees is calculated according to the Ministry of Interior database.

An employer’s obligation to employ KSA nationals includes the following:

Under the KSA labour law the strict obligation is to have 75% of the workforce consist of Saudi nationals.  However, in practice, the Ministry of Labour has permitted employers to have lower percentages, applying an obligation on employers with 20 employees or more to employ 30% of their workforce from the national KSA labour force.  This practice is now set to change under the Nitaqat system which does not apply to employees with 9 employees or less but which imposes an obligation on all other employers to have 49% of their workforce made up of KSA nationals and to have a KSA national employed to perform visa services; and

Regardless of the number of employees, certain roles are reserved for KSA nationals and these include: security guards, human resource managers, bank tellers, customer service accountants, postmen, data handlers, librarians, debt collection officers, public relations officers, training and purchasing managers, janitors, and booksellers.  There are approximately 40 reserved roles for KSA nationals.
All KSA nationals must be registered with GOSI for pension benefits and monthly employer and employee contributions administered by the employer.

Unlike in the UAE, there are no specific provisions regulating the termination of a KSA national’s employment and no specific procedure or notification to the Ministry of Labour required prior to effecting termination. However, where a KSA national is terminated by reason of redundancy and a non KSA national is retained, a Labour Committee is more likely to find such a termination unfair.  A Labour Committee can also order reinstatement as well as damages for loss of employment.

Another increasing focus in KSA is the desire to encourage female participation in the workforce. By law employers remain obliged to segregate female and male employees and provide entirely separate workforces.  One measure suggested by the Ministry of Labour is the introduction of home working for female employees and the encouragement of women to run their own businesses from home.

Employers permitting part-time, flexible working or working from home would be advised to have specific company policies covering issues such as an employee’s ability to request such a work pattern, the type of work pattern an employee may work depending on his role and the its requirements, as well as performance measurement; for example setting specific performance goals and measurable objectives, or introducing a working time recording system.

The UAE Ministry of Labour also recently revised its employer classification system extensively with two main goals of enabling greater employee mobility between employers and encouraging the employment of UAE nationals.   Clyde and Co has previously written on the new system and this bulletin can be found on our website. 

You can access related articles on the Clyde & Co website at www.clydeco.com and www.clydeco.com/middle-east.

© 2011 Clyde & Co LLP. All rights reserved

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