Saudi Arabia introduces Labor Reform Initiative

Significant changes you need to know about

Saudi Arabian Ministry of Human Resources and Social Development has introduced the Labor Reform Initiative (LRI) on November 4. It is set to replace the existing sponsorship program (Kafalah in Arabic) in the Kingdom of Saudi Arabia from March 14, 2021. 

Goal

The vision of the LRI is to create an attractive labor market in the Kingdom that offers flexible working conditions for the contractual workers and helps to empower and improve human resources. Prior to the reforms, sponsored foreign workers needed to take permission from their current employer to change their job. They also required approval before traveling outside the country or undertaking their administrative tasks. 

A brief background

In the 1950s, the sponsorship program (Kafalah in Arabic) emerged to regulate contractors’ and workers’ relationships. Under Kafalah, a migrant worker’s immigration status was bound to a sponsor (Kafeel in Arabic) for a certain period. Over the period, the employer was given extensive rights regarding the mobility of migrant workers. The expat was permitted to work within the Kingdom as per the agreement with the sponsoring employer. However, they could not transfer or change the employer or leave the country without obtaining written permission from their current employer.  

Besides the government, only the sponsor had the authority to secure the worker’s residency and work permits and cancel such permits. The employer was expected to report to the immigration authorities if the migrant worker had quit his/her job to confirm that they had returned to their home country after the employment period’s termination. If a worker was reported as absconding to the authorities, the worker might get deported to their home country. 

Overview of the Labor Reform Initiative

The ministry emphasizes reforms in three categories; 

  • Employee Mobility
  • Exit and Return visa 
  • Final Exit visa 

The reform: an in-depth analysis 

Employee Mobility

Employee mobility is one of the significant reforms in effect as of March 14, 2021. 

  • An expat can change their job or the current employer once the contract period expires without the current employer’s consent. 
  • It will allow the expat to request the transfer from their current employer after a year, even if their contract remains. However, in that case, the new employer must raise a job request to the current employer on behalf of the employee. If the employer approves the request, the employee will require to serve a maximum of 90-day notice period according to their employment contract as per the Saudi Labor Law. 
  • Under certain conditions, a worker can also change the job within a year. 
  • If the employer fails to show any signed contract or is unable to provide a salary for three consecutive months to a worker, they can transfer the job without any conditions. 
  • The ministry has also set up an online platform where the current employer, new employer, and the worker may get notifications, raise transfer requests, accept/reject job requests. Previously, only an employer was provided with that option.  

Exit and Return visa 

The Labor Reform Initiative also addresses the Automatic Exit and Return visa requirements of a migrant worker in the Kingdom. Prior to reforms, a worker could only exit the country after obtaining an Exit and Re-entry visa through their employer. After the LRI, an employee is no longer required to obtain a permit through their employer. Instead, they can apply for the visa through the online portal of the Saudi government. Upon approval, the employer will receive a notification when the employee leaves and re-enters in the Kingdom. 

Meanwhile, the employer can only object to the employee’s Exit and Return visa if they are left with no annual leave. The worker also needs to pay the visa fee and declare the terms and conditions in order to receive the visa. 

Final Exit visa 

As per Saudi immigration policy, the employer is required to sign the Final Exit visa for the migrant worker before the LRI. After the LRI, the employer’s consent is no longer needed when a worker wants to leave the country permanently. It is important to note that the visa can be denied if they have any fines or fees to pay to the government. The worker also requires to ensure that they are left with no liabilities in the Kingdom. For example, if they have certain obligations like cars or apartments in their name, they cannot apply for this visa.

What employers need to keep in mind 

The employment of foreign workers is subject to the Saudization (Nitaqat) scheme in addition to the Labor Law. Nitaqat program’s goal was to reduce unemployment by employing a certain percentage of Saudi nationals to the foreign workers and boosting the private sector. The monthly minimum wages are set to increase for the full-time Saudi residents from 3000 SAR to 4000 SAR under the Labor Reform Initiative (LRI), as announced by the Human Resource Ministry, which will be in effect from March 2021.

Nitaqat program calculation; 

  • Saudi workers earn 4000 riyals or more = One Saudi national 
  • Saudi workers earn from 3000 to 4000 = Half Saudi national 
  • Part-time Saudi workers making 3000 or more = Half Saudi national
  • Saudi workers who earn hourly = One-third Saudi national 

Main takeaways of the LRI 

  • Grant more rights to expat workers 
  • Secure and agile work environment 
  • Digitalization of contracts to increase transparency between employers and employees
  • Mitigate the risks of exploitation 
  • Create an efficient global market

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