Saudization restrictions eased

The unemployment rate of citizens in Saudi Arabia is a highly political issue. Under Saudi Arabia's Nitaqat program, firms operating in Saudi Arabia are incentivized to employ Saudi Arabian nationals, and face the possibility of penalties for failing to do so. This government policy of encouraging the employment of Saudi Arabian nationals in the private sector is colloquially referred to as “Saudization,” and its underlying rules and regulations experience constant adjustment.

For example, employers previously had to retain a Saudi Arabian national for at least three months in order for the individual to be counted as a full Saudi Arabian national employee under the Nitaqat program. Then, the Ministry of Labor issued new regulations to take effect on 23 December 2014 which would require employers to retain a Saudi Arabian national for at least six months in order for the individual to be counted as a full Saudi Arabian national employee for purposes of the Nitaqat program (Arab News, 2 September 2014).

Now, the Ministry of Labor has eased the above-mentioned restrictions and announced that a Saudi Arabian employee shall be treated as a full Saudi Arabian employee for purposes of the Nitaqat program as soon as the employee has been registered with the General Organization for Social Insurance and his first premium has been paid.

Arab News, 9 February 2015

Wage Protection System to enter sixth phase

Under Saudi Arabia’s Wage Protection System (WPS) implemented by the Ministry of Labor, private sector businesses in Saudi Arabia are required to electronically submit employee wage information to a database maintained by the Ministry of Labor and, further, to pay employee salaries solely through in-Kingdom banks.

The WPS has been implemented in phases, beginning with the largest firms with 3,000 employees or more. On 1 April 2015, the WPS will be implemented in its sixth phase to cover all businesses in Saudi Arabia with 240 employees or more.

Failure to comply with the WPS may result in refusal of all Ministry of Labor services, excluding issuance and renewal of work permits.

Saudi Gazette, 4 February 2015