Legal Developments

Saudization in the Kingdom

Saudization is a colloquial term used to refer to the Kingdom’s official government policy of ensuring the hiring, training, and development of Saudi Arabian nationals over expatriate employees in the Kingdom. The policy of Saudization is implemented in several ways, with each government ministry playing a role to implement the policy.

With the continuing decrease in oil prices, economic uncertainty, and global instability affecting the Kingdom, companies in Saudi Arabia are facing continually increasing pressure to comply with Saudization objectives. This month in particular witnessed some major developments and examples:

As we described in previous Updates, beginning this month the Ministry of Finance (MOF) has instituted a new fee for the dependents of expatriate workers for the months remaining on their iqamas (residency permits) as part of the Fiscal Balance Program. The fees came into effect on 1 July 2017, and expatriates are required to clear the fees before they are able to obtain exit / re-entry visas for their family members and domestic employees. The fee schedule is as follows for the ensuing years:

  • 2017: SAR 100 per month per dependent
  • 2018: SAR 200 per month per dependent
  • 2019: SAR 300 per month per dependent
  • 2020: SAR 400 per month per dependent

Fees will be greater for companies where expatriate and Saudi workers are present in equal number and will be even more for companies that employ a greater number of expatriates than Saudis.

Saudi Gazette – 3 July 2017; 5 July 2017

An unnamed company reportedly terminated the employment of several Saudi nationals in order to pay the fees for its expatriate employees and their dependents. The Ministry of Labor and Social Development (MOL) has requested that Saudi nationals report any private company showing preference for expatriate employees. This action is in line with a recent Cabinet decision placing greater restrictions on the firing of Saudi employees, along with accompanying penalties.

Companies doing business in Saudi Arabia should be careful to avoid even the appearance of any activity that could be perceived as anti-Saudization, as MOL investigations and anonymous tips may affect the flow of business.

Saudi Gazette – 11 July 2017

The Saudi Arabian Monetary Authority (SAMA), the Kingdom's central bank and insurance regulator, has stated that it will not extend the deadline for the Saudization of administrative and customer service jobs at insurance companies, despite requests to do so by some companies. Any company in violation of the directive will face penalties. SAMA has stated that the Saudization requirement will soon be applied to technical and leadership jobs as well. In the past year, insurance companies have reached sixty (60) per cent Saudization in 2016.

Saudi Gazette – 4 July 2017

The General Authority for Zakat and Tax (GAZT) launched an open discussion regarding the draft law instituting a VAT throughout the Kingdom. The VAT, which was ratified by the GCC, is set to come into effect on 1 January 2018. The VAT law is set to be approved domestically in Saudi Arabia in the third quarter of 2017.

Saudi Gazette – 1 June 2017

Legal violators in the medical sector to face fines and imprisonment

A maximum fine of SAR 5 million and up to five (5) years' imprisonment will be imposed upon individuals in the medical field who violate applicable laws. Such violations include the importation or selling of counterfeit, expired, or unregistered medical, herbal, or pharmaceutical supplies; working as or employing an unqualified healthcare practitioner; and refusing to treat patients without a legal justification. The previous fine for engaging in such activities was set at SAR 100,000.

Saudi Gazette – 4 July 2017

The Ministry of Justice (MOJ) has instituted a program reporting to the public on the performance of Saudi courts and notaries. The report will be posted on the MOJ's public portal in order to ensure maximum transparency of legal and judicial activities. The report is set to contain statistics on the number of cases and verdicts received and issued, statistical analysis of enforcement rulings, the amount of documents executed by notaries, as well as a statistical analysis of marriages and divorces.

Arab News – 11 June 2017