Policy Challenges Every Contract Staffing Firm Should Know in Saudi Arabia

Saudi Arabia's demand for skilled labour is exceeding its supply from the talent pool. Large local companies become more demanding, and the need for top internationally experienced talent remains high. In addition, Saudi Arabia has a dynamic market that attracts talent open to adapting to cultural changes.

Saudi Arabia's Human Resources and Social Development department had initiated a Labour Reform Initiative (LRI) that swaps the existing sponsorship system (Kafala). This law regulates the movement of foreign workers under sponsorship in Saudi Arabia. Before this law, foreign workers required the employer's permission for many activities related to their employment, such as changing jobs, opening bank accounts, leaving the country, and performing other administrative tasks. After implementing the Labour Reform Initiative, millions of foreign workers will flock to the private sector because of ease and mobility in changing their employment. In addition, this law will significantly impact the contractual relationship between the employer and their foreign employee.

Challenges in contract staffing in Saudi Arabia

In 1950, the Saudi government developed a sponsorship system (Kafala) to regulate relationships between migrant workers and employers. The contracting service companies recruit foreign workers known as sponsors or Kafeel under their sponsorship. The challenges faced by a migrant/ foreign worker were as follows:

• The contracts in Saudi Arabia follow the Islamic calendar. The other industries around the world follow the Gregorian calendar for contracts. Therefore, according to the Hijri calendar, the duration of the contracts or documents must change.
• The language is another problem faced by the migrant workers. Not only Arabic language is used in the workplace, but the contacts also must be in Arabic.
• Saudi Arabia provides no minimum wage; the agreements decide the fixed wages between the parties.
• The migrant workers are not allowed to terminate the fixed contact without the employer's permission.
• The employer's permission is needed for migrants to open a bank account, leave or move from the country.
• Workers coming from low-wage countries such as the Philippines, India, or Sri Lanka may have lower wages than Arabs doing the same job.
• Workers from western regions face significant frustration due to the cultural norms of worker protection in labour law. For example: if an employee sleeps on duty (more than four times in a year), the employee can be dismissed.

What are recent policy changes?

The new policy changes will change the working dynamics for the foreign workers in Saudi Arabia. Contract staffing services like TASC provide recruitment and HR solutions and help businesses better understand the policies and any changes in Saudi Labour Laws.

After implementing the Labour Reform Initiative (LRI) in March 2021, the policies have changed.This reform permits expats to leave their employment without the consent of the employer. They can leave upon or before the expiration of their contracts (the worker must give 3 months' notice). In addition, LRI allows expat workers to change jobs and select other job offers. Before the LRI law, the entry and exit, along with visa rules for foreign workers, was difficult to navigate. This initiative has eased the entry and exit of expat workers as they don't need the employer's permission anymore. In addition, after LRI, a "final exit visa" with an employer's signature is not required for migrant workers that immigrate to their home country.

What should you consider when thinking about working in Saudi Arabia?

Expats wishing to work in Saudi Arabia need to be aware of the policy changes to the Labour Law and the possible limitations in its reach.

The employment of expats is affected by Labour Law and the Nitaqat or the Saudization system. Under this policy, the government encourages Saudi nationals to be employed by both public and private companies. As a result, employers in the private sector need to hire a percentage of Saudi nationals, which may result in fewer opportunities for migrant workers. In addition, the Ministry of Interior needs to be furnished with a NOC certificate of the current employer when a migrant worker wants to transfer their sponsorship to another employer.

Another essential point to note is that the Labour Law does not apply to all categories of employees. For example, workers in domestic and agricultural areas, sea workers, players, and trainers in sports unions are not under this law.

What is the main motive for policy change?

• Labour Reform Initiative policy will bring to modernize the working conditions for foreign workers in Saudi Arabia.
• To improve the transparency among employers and employees.
• To improve the movement/ mobility for foreign workers and ease the working conditions in the private sector.
• In addition, the government thinks the LRI policy will effectively tackle the black market and minimize the risk of trafficking and exploitation of workers.

Overall, Saudi Arabia has a vast market for skilled talent professionals across industries. Stable political relations and attractive compensation packages attract a pool of global talent. Get in touch with TASC outsourcing for 100% GRO & outsourcing services in Saudi Arabia.