Employment
Increasing the number of Saudi nationals participating in paid work is a key driver for many of the changes happening in the Kingdom. The Nitaqat Programme, which promotes the employment of Saudi nationals, is an important initiative of the Ministry of Labour and Social Development.
Essentially, there are minimum requirements for the number of Saudi nationals that should be employed in certain types of businesses. The minimum number depends on the type of company, industry and roles/job titles.
Through the Nitaqat Programme, employers are rewarded - or penalized - depending on the extent to which they achieve ‘Saudization’ targets applicable to them. For example, employers categorized as ‘platinum’ or ‘green’ receive privileges when it comes to employing foreign workers; employers categorized as ‘yellow’ or ‘red’ are subject to various restrictions in relation to visas and work permits, and are unable to prevent their workers from transferring to employers in the ‘platinum’ or ‘green’ categories.
Non-Saudis may work in Saudi Arabia, provided the requisite approvals are obtained. Specifically,
the employee must have entered the country on a valid employment visa issued by the Saudi Embassy in the country for which the employee holds a passport; and
the employer must subsequently obtain a work and residence permit (Iqama) for the employee within 90 days of the employee’s arrival. (The Iqama is required for various practical purposes, including to open a Saudi bank account and to enter into a lease of residential accommodation.)
Non-Saudi GCC nationals are generally not subject to the same requirements and have the right to work in Saudi Arabia without a work visa.
Anecdotally, the process of obtaining Employment visas for foreigners outside the Kingdom can be very time-consuming, and it is important to bear this in mind for business planning purposes. Hiring someone already in-country can be less time-consuming, although not without its own challenges.
A Business Visit visa (rather than an Employment visa) may allow key staff to get on-the-ground in the Kingdom, relatively quickly, as a preliminary step – although this is not a long-term solution, and care should be taken to comply with the requirements of the Business Visit visa.
Originally issued in 2005, the Labour Law is the principal legislation governing the employer - employee relationship in Saudi Arabia, irrespective of whether the parties nominate a foreign law as the governing law of the employment contract. The Labour Law is administered by the Ministry of Labour and Social Development.
Amongst other things, the Labour Law outlines terms for terminating employment, prescribes annual vacation entitlements, establishes a retirement age, provides for end of service benefits and requires a minimum age of 14 for employees.
Some key considerations relevant to employment contracts for companies wishing to do business in Saudi Arabia are as follows:
Probation: Provided it is mentioned in the employment contract, an employer may request an employee to undergo a probationary period of no more than 90 days, with the possibility of an extension by a further period of no more than 90 days. The employee may be dismissed by the employer for any reason during the probationary period.
Social and health insurance: The Social Insurance Regulations require employers to make monthly contributions, calculated as a percentage of an employee’s wage, to the General Organisation for Social Insurance (GOSI) on behalf of such employee. Employers must also provide (usually at the expense of the employer) medical insurance that covers the employee and the employee’s dependents (family) living in Saudi Arabia.
Annual leave: Paid annual leave can vary, but under the Labour Law employees are entitled to 21 days leave on full wages. This increases to a period of not less than 30 days if the worker has spent five consecutive years’ service with the same employer.
End of service benefits: Employees are generally entitled to receive an end-of-service award, commonly known as a ‘gratuity’). The gratuity is typically calculated as half a month’s wage for each of the first five years of service, and one month’s wage for each subsequent year. The amount of gratuity can vary depending on a number of factors, including whether the employee resigned or was terminated (without cause).
Term and termination: Employment contracts may be fixed term or, in the case of Saudi and GCC nationals, unlimited as to term. Unlimited term employment contracts may be terminated, for a valid reason, by written notice. Where the employee is paid monthly, notice of not less than 60 days is required; in other cases, notice must be not less than 30 days. Unfair dismissal may result in an award of monetary compensation.
Visit visas are required by all visitors to Saudi Arabia (except nationals of GCC States), and must be obtained before travelling to the Kingdom. An invitation must be obtained from a Saudi entity (and lodged with the Ministry of Foreign Affairs) in order to apply for the visit visa.
Application for a visit visa is made through an online process, and subject to the specific requirements identified by the Saudi Embassy in the applicant’s country of residence. The maximum permitted stay under a business visit visa is one month. Application for a visit visa should be arranged well in advance.
