Amendments to Labour Law
Employment & Incentives / Saudi Arabia
It is important for all KSA companies to review their contracts, employee handbooks and any other employment policies and procedures to ensure compliance with the amendments to the Labour Law.
Law Update: Issue 371 - All Access Pass to Sports and Events Law
Mohsin KhanPartner,Employment & Incentives
Hayat RafiqueSenior Associate,Employment & Incentives
As part of the Saudi Arabian government’s Vision 2030 to improve and create a more attractive labour market in the Kingdom, following extensive consultations, the Ministry of Human Resources and Social Development (“MHRSD”) has announced that the Saudi Council of Ministers has approved the amendments of a number of articles of Labour Law of 2005 (issued by Royal Decree Number M/51 dated 23 Sha’ban 1426), as amended.
The new amendments will come into effect on 18 February 2025.
The amendments make several references to the “Executive Regulations” whose purpose is to supplement, clarify and expand upon various provisions of the amendments. The amended Executive Regulations have not yet been published and we expect these to follow prior to the implementation of the new amendments.
This article provides a summary overview on some of the key amendments made to the Labour Law.
Definitions – The following definitions have been added to Article 2 of the Labour Law:
Manpower activity: “the service of providing labour to work for a non-employer through an establishment licensed for those purposes”.
Resignation: “A written disclosure by a worker, under no coercion, expressing their wish to unconditionally terminate a fixed-term employment contract, with the acceptance of the employer”.
Contract duration for non-Saudi nationals – Article 37 of the Labour Law will be amended to confirm that, if a non-Saudi national is employed on an indefinite term contract, then the contract duration is deemed to be for a one-year fixed-term commencing on the date when employment started and renewed for the same period thereafter. This amendment will change the current position under the Labour Law which provides that the fixed-term is based on the expiration of the employee’s work permit and will likely address the uncertainty that often arises when non-Saudi nationals are employed on indefinite term contracts.
Training policy – Employers must develop and implement a policy for training Saudi nationals to enhance their technical, administrative, vocational and other skills. The Executive Regulations will provide further details regarding the relevant training requirements.
Probation period – The parties can agree that the probation period will be a total of 180 days from the outset of employment instead of the current position of 90 days which may be extended by written consent. Both parties will equally have the right to terminate the contract during the probation period. The Executive Regulations will provide further details regarding the periods of leave that will not be included in the probation period duration.
Accommodation and transportation – Employers must either provide accommodation and transportation or pay a cash allowance in lieu of the accommodation and transportation. This amendment will impose a statutory obligation to provide housing and transport allowances where the employer does not provide accommodation and transport.
Equal opportunities – Employers must ensure equal opportunities and ensure that there is no discrimination on grounds of race, colour, sex, age, disability, marital status or any other form of discrimination. The protection against discrimination will apply to both employees and applicants.
Right to appeal – Article 72 of the Labour Law will be amended to confirm that an employee now has 30 days to internally appeal against a disciplinary sanction. If the employer rejects the appeal or does not make a decision within 15 days of receiving the appeal, then the employee can submit a claim regarding the disciplinary sanction to the Labour Court within 30 days from the date of rejection or expiry of the specified period, whichever comes first. The above timeframes do not include official public holidays. Employers will now need to incorporate an internal appeal process into their disciplinary procedures.
Termination – Bankruptcy has been added to Article 74 of the Labour Law as a lawful reason to terminate the employment contract.
Notice period – Article 75 of the Labour Law will be amended to reduce the notice period for a Saudi national to terminate their indefinite term contract for a valid reason to 30 days’ notice (noting that the notice for an employer to terminate remains at 60 days).
Resignation – As mentioned above, resignation has now been defined in the Labour Law and has been added as a valid reason for termination under Article 74 of the Labour Law.
A new provision has been included in Article 79 of the Labour Law, which provides further details on how a resignation may work in practice:
Acceptance: Following an employee’s resignation, if an employer does not accept or respond within 30 days, then the resignation is automatically deemed accepted.
Right to delay: An employer may delay the acceptance of resignation by 60 days provided that there is a valid reason to do so (i.e., due to the interests of work ) and the employer provides the reasons in writing within the first 30 days of the employee’s resignation.
Right to withdraw: An employee has the right to withdraw the resignation within seven days provided that the employer has not already accepted it.
Deferred resignations: An employee cannot specify a future date for their resignation to take effect.
Effective date of resignation: The employee’s employment ends on the earlier date on which: (i) the resignation is accepted by the employer; (ii) the date 30 days after submission of the resignation if there is no response from the employer; or (iii) upon the expiration of the delay period if a justified delay was issued by the employer.
An employee whose contract ends by resignation will be entitled to all rights stipulated in the Labour Law.
Overtime – Article 107 of the Labour Law will be amended to allow the parties to agree to provide the employee with time off in lieu instead of overtime pay for any approved overtime. The Executive Regulations will provide further details in this regard.
Paternity leave – Article 113 of the Labour Law will be amended to confirm that a male employee is entitled to three days’ paternity leave to be taken within seven days following childbirth. Previously there was no time limit on when employees had to utilize their paternity leave.
Bereavement leaves – Article 113 of the Labour Law will be amended to include three days’ bereavement leave for all employees following the death of a sibling. The current Labour Law only includes ascendents and descendants.
Maternity leave – Article 151 of the Labour Law will be amended to increase the period of paid maternity leave for female employees to 12 weeks. It will remain mandatory to take six weeks of maternity leave following childbirth, and maternity leave can be taken no earlier than four weeks before the expected date of delivery.
Fines – The amendments introduce fines of between SAR 200,000 and SAR 500,000 that may be issued to entities that are providing manpower services without being properly licensed to do so, or bringing non-Saudi nationals into KSA without the proper work authorisations.
In addition to the specific articles mentioned above, amendments will also be made to provisions relating recruitment activities and maritime workers, among others.
Al Tamimi & Company’s dedicated KSA Employment team advise on the full range of employment-related matters and issues, and are available to assist with the changes that employers will need to make in light of the amendments to the Labour Law.
For further information,please contact Mohsin Khan and Hayat Rafique.
Published in October 2024
