Saudization: how to prepare and remain compliant in 2018

The Kingdom of Saudi Arabia has struggled with high unemployment rates of nationals due to heavy reliance on the foreign workforce and almost two thirds of the Saudi population below the age of 30. This has created an influx of graduates and juniors in a market unable to cater to the numbers and has lead to an increased rate of unemployment. Saudization, a scheme created to combat the high levels of unemployment has been implemented for decades now, however, systematic adjustments have been applied to increase its’ effectiveness.

Saudization aims to increase the representation of Saudi nationals in the workforce, specifically, in the private sector. The scheme, in the past, has taken many forms in terms of its’ implementation, however, the most recent form creates a simpler process for companies to apply with the introduction of technology. Saudization requires companies to reach a certain number of Saudi nationals in the workplace depending on the company size and industry. This is measured through the Nitaqat framework which uses a colour grading system to determine whether a company is compliant or not.

In order to prepare organizations for the changes that will be required with implementing Saudization at a high level of compliance, we have outlined a few strategies below:

Saudization plan

Preparing for Saudization is crucial to success in the market, as non-compliance with Saudization can be costly; legally and financially.  A Saudization plan will help companies choose the projection of their employee ratio as they reach for a higher level of compliance.

The plan will allow companies to establish a recruitment strategy; whether they should renew expatriate visas or let them expire and replace existing employees with Saudi nationals. The plan will determine whether companies should downsize and outsource non-core business activities or use expatriates to train younger Saudi nationals to replace them.

Non-Saudi employee Saudi employee Replacement date
Mr. Smith Mr. Mohammed 11/22/20xx
XYZ ZYX XX/XX/20XX

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Key areas of Saudization plan

When creating a Saudization plan, the key areas to consider are outlined further below:

Setting Saudization Objectives

Setting Saudization objectives allows companies to determine how successful they choose to be in their Saudization execution and therefore, determine the steps required to get there.

Forecast Employees and Company Requirements

Forecasting employee and company requirements will allow HR departments to plan for Saudization and the number of employees required for company operations. Forecasting also encourages companies to pursue the highest level of Saudization as they have sufficient time to set processes in place that allow for full compliance. An example of forecasting is shown below:

 

Job title 2018 2019 2020
Saudi Expat Saudi Expat Saudi Expat
Managers 10 30 20 20 30 10
HR Personnel 30 80 50 90 80 20
Supervisor 30 70 40 80 90 20
Sales 20 60 40 70 90 20
Total 90 240 150 260 290 70
% 27 73 37 63 81 19

Saudi workforce gap analysis

The workforce gap analysis allows companies to analyse the current positions open in their organization and compare it to the current skills, qualifications and experience of Saudi nationals in the market. Considering the skills available in the market, organizations can find suitable employees and adjust positions as required.

Developing Saudi workforce retention initiatives

In order for companies to remain compliant, they must retain their employees and minimize turnover. There are many methods to do this, but essentially, employees must have an engaging work environment, challenging tasks, job performance appraisals, professional development opportunities, a competitive salary, employee benefits and reward management.

Evaluate and adjust

The Saudization plan should be evaluated, at least annually, to ensure that the plan is on course of meeting objectives and compliance. The plan should also be re-evaluated if the organization undergoes any major changes.

Setting up a training academy within the organization

Medium and large enterprises are able to setup internal training facilities to train Saudi nationals who are close to the requirements for the position. Treating employees as long-term assets and training them to reach global industry standards is beneficial for the company and the employees, as they grow and employee retention increases.

Outsourcing

Outsourcing is another viable way for companies to improve their Saudization ratio, by outsourcing non-essential operations completed by expatriates to a shared services provider and have Saudi nationals complete in-house essential roles.

Saudization preparation is essential for compliance and to reap the benefits of the Saudi government incentives. These incentives make it significantly easier for companies in Nitaqat categories platinum and high green when it comes to visa processing of employees, as opposed to those in the lower Nitaqat categories. Developing initiatives will ensure that compliance is achieved in the long term and the benefits received will allow companies to leverage their business efforts in the Kingdom. Essentially, Saudization aims to have companies find suitable employees from the Saudi national population and use expatriates when the required skills are not available in the Kingdom.

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