Saudization is an important part of operating in the Kingdom and is applicable to all companies. It is the nationalization scheme the government introduced to increase the participation of Saudi nationals in the private sector workforce. The scheme requires companies to meet a quota of national employees depending on the company’s industry and size, including reserving certain positions for Saudi nationals.
Why is Saudization important?
Saudization is important because it is required to be compliant in the Kingdom. The government values Saudization highly and companies that reach high levels of compliance in the Nitaqat system are incentivised. Having high compliance also facilitates better relationships with government ministries and future business partners.
What is Nitaqat system in Saudi Arabia?
The Nitaqat program of Saudization is used as a way to measure whether companies are compliant. The program is divided into colour categories, with compliant companies in the platinum and hi-, medium, and low green categories. Companies in the yellow and red categories are non-compliant.
Companies in the compliant zones have incentives such as being able to obtain and renew work permits for foreign employees expedited, they’re able to change foreign employee’s profession and are able to hire employees from red and yellow zoned companies without prior approval from the employer.
Yellow and red zoned companies have some limitations because of non-compliance such as losing the authority to give permission for their employees to change employers. Yellow zoned companies can renew visas for employees that have stayed in Saudi Arabia for less than 2 years but are not permitted to apply for or issue new work visas.
Companies in the red zones have the most restrictions; unable to hire new expat employees, renew work permits or open a new business or branch in Saudi until they have a compliant Nitaqat rating.
What is the Nitaqat certificate?
Under the Nitaqat scheme, companies will need to provide a Saudization certificate to ensure that they are compliant before taking certain business actions, such as renewing a license, or hiring a new employee. If the company is non-compliant, they will not be able to follow through with the action.