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5 Must-Know Facts About the Labour Law in Saudi Arabia

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To this day, the Kingdom of Saudi Arabia or KSA remains one of the top economic powerhouses not only in the Middle East, but also in the whole world. Its biggest and most lucrative sector is petroleum. Saudi Arabia has the world’s second largest petroleum reserve and is also currently the largest exporter of this product.

Due to its bustling economy, Saudi Arabia is a popular destination among foreign workers. The government has also introduced recent changes encouraging the growth of the private sector in order to diversify its economy. The government’s labour policy is aimed at promoting employment opportunities for Saudi nationals.

An Overview of Saudi Arabia’s Important Employment Laws

Thanks to the recent changes introduced in Saudi’s policies, one report reveals that foreign investments in Saudi Arabia more than doubled in 2018. As such, there is no better time than now to consider starting or expanding your business in this country.

Deciding which type of business to set up and where in the country to do it are two important points you have to get out of the way first. Since you will need employees to run your company, having knowledge of the important labour laws is also a good start in ensuring that your business plan will proceed smoothly.

The top Middle East law firms share five facts about Saudi Arabia’s labour laws that foreign investors should know about:

  1. All employers must have at least one Saudi national employee.

Whether you plan to open a startup, a small business, or a multinational company, under the Nitaqat program, you need to have at least one Saudi national under your employ.   

Another key rule that you also need to remember is that certain functions or positions may only be undertaken by Saudi nationals.

This is a crucial policy that you have to take note of. Before you start making plans to bring in employees from other countries, focus on finding a Saudi national to hire first.

  1. Foreign workers need a work permit.

Like most MENA countries, Saudi has a sponsorship system. This means workers from other countries can work in the country, but they need to have a work permit issued by he Ministry of Labour.

To acquire this permit, an expat worker must have a sponsor who can either be a Saudi Arabian national or an international company.

In addition, you have to ensure that the foreign workers you will be hiring possess the professional and academic qualifications which are not possessed by a sufficient number of Saudi nationals.

Lastly, foreign workers can only be employed by an individual or company for a fixed term. Where a foreign worker is, instead, employed under an indefinite term contract, their fixed employment term will correspond to the duration of the issued work permit.

These are important facts that you should know about as a foreign investor. Since it is highly likely that you will be bringing in employees from your home country or other nations, it is important that you (or your company) have the capability to legally sponsor qualified foreign workers first.

  1. Internal regulations have to be set in place for companies with 10 or more employees.

Article 12 of Saudi’s Labour Law requires employers to have internal regulations that the company will be bound by.

These regulations should include work organization policies and provisions regarding salaries, benefits, and disciplinary penalties and procedures.

These internal regulations must be based on the draft regulations provided by the Ministry of Labour. Also, they should not contradict the provisions of the labour law.

Once completed, you need to have these regulations approved by the Ministry of Labour.

  1. Female workers enjoy certain privileges.

Employers in Saudi Arabia can hire female employees. However, women are restricted from working in certain fields and are prohibited from working in hazardous jobs or industries.  

In addition, female employees have to work separately from male employees and must have distinct facilities. This means they need to work in partitioned offices or have a separate work area. They must have separate bathrooms, kitchen, and worship areas, too.

Keep in mind that there are specific regulations regarding women working in certain sectors as well, such as in retail and kitchens. You can consult an employment attorney to find out how best to proceed with hiring female employees in Saudi’s unique work environment.

  1. Amendments to the Labour Law

Lastly, recent amendments to the Saudi Labour Law include:

  • Providing training to Saudi national employees to enhance their technical, administrative, vocational, and other skills. Companies with 50 or more employees must train 12 percent of their Saudi national workers.
  • The maximum probation period has been increased from 90 to 180 days.
  • The maximum permitted duration for fixed-term contracts has been extended from three years to four years. In addition, fixed-term contracts will be converted into indefinite contracts on the third renewal (for Saudi nationals only).

It is also worth adding here that there are no definite statutory provisions or regulations for managerial or executive-level employees as well, except in relation to working hours and rest periods. However, there are differences in terms of benefits and privileges between Saudi and non-Saudi employees.

By being aware of the important labour laws shared above, you will face fewer challenges as you start building your business and team in Saudi Arabia.

AUTHOR BIO

Sharon Danso-Missah is the Head of Marketing at Al Tamimi & Company, the largest law firm in the Middle East, with 17 offices across nine countries. Established in 1989, they are a full-service commercial firm combining knowledge, experience, and expertise to ensure all clients have access to the best legal solutions that are commercially sound and cost-effective.