Stricter rules on Saudi-to-foreign worker ratios to be introduced

IMPACT – HIGH

What is the change? Saudi labor authorities are tightening the Saudization program that requires employers to hire and retain a certain number of Saudi citizens in their workforces.

What does the change mean? Employers will need to meet higher thresholds of Saudi employees than currently required in order to be considered compliant and thus be eligible for certain privileges, including access to block visas for foreign workers, expedited immigration services, and flexibility in renewing or transferring work visas.

• Implementation time frame: Sept. 3.
• Visas/permits affected: Work visas.
• Who is affected: Saudi companies in the private sector.
• Business impact: Businesses of all sizes across most industries in the private sector will have to meet higher Saudization targets.
• Next steps: Employers should work with their BAL professional to assess their color rating and how the new rules affect their future hiring plans

Background: The Saudization program was launched in 2011 to increase the employment of Saudi citizens in the private sector and reduce overall unemployment. Employers are graded on a range of six color-coded tiers: Platinum (most compliant), High Green, Green, Low Green, Yellow and Red (non-compliant). Employers must meet certain ratios in the hiring of Saudis to foreigners, depending on their industry sector and company size. The overall impact of the new quota thresholds will differ significantly from company to company, depending on industry, company size, and current standing.

Key changes to Saudization rules include:

2.  Changes to Definitions on Company Size.

Companies are subject to Saudization based on their size, defined as follows:

One of the most notable changes to company definitions is that small employers with less than six employees are exempt from Saudization requirements (instead of 10 or fewer under current rules).

2.  Changes to Nitaqat Quota Thresholds.

The government will apply stricter quota thresholds for 70 industries across all company sizes, for example:

• Small IT companies, employing from six to 49 employees must have a 56 percent Saudi workforce in order to be in the Platinum tier. This is a significant increase from the current 30 percent Saudization requirement.
• In the oil and gas sector, small companies (six to 49 employees) must have a 66 percent Saudi workforce to reach Platinum status (instead of the current 56 percent), while all medium-sized companies must meet an 81 percent Saudization and large companies 91 percent for Platinum status.

The Ministry of Labor and Social Affairs announced that employers can review detailed lists of their industry quota requirements by accessing the Saudi government Nitaqat portal. A detailed list of industry quota requirements is available in Arabic here. Contact BAL if you are in need of translations or for additional information.

3.  Changes to Privileges

The new regulations will change privileges associated with processing and sponsorship across all the different color ratings:

• Block Visas
  • Platinum and High Green: Only employers in these top two tiers will be eligible for block visas, a prerequisite for work visa applications. Under current rules, block visas are available to employers in the Green, High Green, and Platinum tiers.
• Expedited processing
  • Platinum tier will have a one week wait for job postings in the national jobsite system, the Taqat portal.
  • High Green tier will have a one-week wait for job postings in the national jobsite system, the Taqat portal.
• Transfer of sponsorship
  • Platinum, High Green, Green: Only employers in these top three tiers will be eligible to receive a transferred foreign employee.
  • Yellow: Can transfer employees to a company with higher Nitaqat category but cannot receive new employee.
  • Red: Can transfer employees to a company with higher Nitaqat category but cannot receive new employee.
• Renewal of work permits
  • Platinum, High Green, Green: Only employers in these top three tiers will be eligible to renew a foreign employee’s visa without limitation.
  • Yellow: Cannot renew work permits of employees who have completed two years of service.
  • Red: Cannot renew work permits of any employees.

BAL Analysis: The stricter Saudization rules are consistent with the 2030 Vision plan and a renewed push to lower unemployment rates for Saudi nationals, in part by tightening requirements for hiring foreign nationals. While the new rules are currently causing a great deal of concern for global HR mobility staff, the rules will not immediately affect short-term hiring and talent retention for many companies. Block visas issued before Sept. 3 will remain valid, and companies will continue to have the ability to apply for work visas for foreign employees. Additionally, companies will continue to be able to apply for work visit visas for short-term assignments. Most companies, depending on industry, size, and the validity of block visas, will not be significantly impacted by the changes for several months.

For longer-term planning, companies should start to gather information and begin to revise strategies for talent acquisition, including:

HR mobility should find out what their company color rating is now and track how it changes after Sept. 3. The Nitaqat status will automatically be updated online Sept. 3.

New quota thresholds will differ significantly from company to company, depending on industry, company size and current standing. Understand what the new quotas are for your company.

• Assess when your company’s block visas expire. Block visas are generally valid for one year from issuance.
• Assess how hiring new foreign nationals on existing block visas will impact your company’s revised color rating.
• Assess training programs for Saudi talent and retention strategies.
• Advertise in the Taqat national jobsite system as far in advance as possible, even if your company is Platinum rated.

The Saudi government has recently released a number of changes quite suddenly, without significant advance communication, including this summer’s dependents’ levy. The government seems to be taking an approach of implementing change and adjusting regulations depending on employer reactions. BAL urges companies to take a methodical approach to the stricter Nitaqat quota thresholds and to expect additional changes and adjustments in future months, as the impact of these changes on companies and critical industries becomes clearer.

This alert has been provided by the BAL Global Practice group. For additional information, please contact your BAL attorney.

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