As Saudi Arabia continues its path towards greater employment of nationals, including women, and its goal of economic diversity, the changing rules around employment need to be carefully watched by all companies operating in the kingdom to stay on the right side of an increasingly fine line.

While the expected changes have not yet been brought into effect, they are imminent. Once in force, it is anticipated that hiring large numbers of expatriate employees will be a far more costly endeavour. Additionally, dependant fees are likely to increase expatriate employee turnover, as they would be encouraged to leave family members in their home country. Now is the time to ensure that provision is made in budgets and recruitment planning, including training and investment in Saudi employees, for the upcoming changes.

Recent developments that are likely to be of particular relevance are the new ‘Balanced Nitaqat’ (Nitaqat Almaozoon) and the introduction of charges for expatriate workers. Once in force, both are likely to have a significant economic impact on employers with a large proportion of expatriate workers, such as in the construction industry.

The Balanced Nitaqat programme will focus more on quality rather than quantity of Saudi hires. Companies will be awarded points, instead of being assessed solely on the basis of the percentage of Saudi employees. Points determine the category of the entity, with companies being divided into red to platinum categories.

Firms will be awarded points based on the following:

  • Overall Saudisation percentage
  • Average salary of Saudi employees
  • Percentage of female Saudi employees
  • Length of service of Saudi employees
  • Percentage of Saudi employees with high salaries and/or holding managerial roles

It is worth noting that Balanced Nitaqat, which was supposed to be effective in December 2015, was postponed by the Ministry of Labour & Social Development until further notice. We anticipate that it will be implemented in the second half of 2017, but this is still to be confirmed by the ministry.

New legislation is also being brought into force that will impose monthly fees on expatriates who sponsor dependants in Saudi Arabia and private sector companies employing expatriates. The fees will be introduced on a phased basis over the course of three years.

The fees for dependants (excluding domestic workers) are due to be implemented from 1 July 2017, with the final phase of implementation – where fees are expected to be SR400 ($106.67) per dependant a month – expected in July 2020.

The fees for expat employees employed in the private sector are due to be implemented from 1 January 2018, with the final phase of implementation expected in January 2020. The fees will be payable by companies employing expats, regardless of the proportion of expat employees in relation to Saudi employees (ie, even if Saudi employees make up the majority of the workforce).

For companies who employ more expatriate employees than Saudi employees, fees are expected to be up to SR800 a month per expatriate employee by 2020. These will be up to SR700 per expatriate employee a month by 2020 for companies that employ greater proportions of Saudi employees.

By Neil Crossley, head of employment, Middle East, at DLA Piper; Ammar al-Zughaiby (Riyadh), senior legal consultant; and Sara Hussein (Riyadh) and Boma Adoki (Dubai), legal consultants