Saudi Labour Law Updates - August 2024

The Saudi Arabian Ministry of Human Resources and Social Development (MHRSD) has recently announced significant amendments to the Kingdom’s Labour Law. These changes aim to modernize the labour market, enhance worker rights, and streamline employer responsibilities. This guide will break down the key changes and their implications for both employers and employees. Also, offering practical guidance for compliance.

Key Changes and Their Impact

1. Resignation Procedures

2. New definition of resignation: The Labour Law now explicitly defines resignation as a voluntary termination of a fixed-term contract by the employee with the employer’s acceptance.
3. Resignation process: Employers have a 30-day window to respond to a resignation, after which it is considered accepted. However, they can request a 60-day delay under specific conditions.
4. Employee rights: Employees can withdraw their resignation within seven days and have the right to know the reasons for a delayed acceptance.

Impact on employers: Employers need to establish clear procedures for handling resignations and ensure timely responses.

Impact on employees: Employees have more clarity on the resignation process and can make informed decisions.

2. Probation Period

• Extended probation period: The maximum probation period has increased from 90 to 180 days.

• Termination rights: Both employers and employees can terminate the contract during the probation period.

Impact on employers: This change provides more flexibility in evaluating new hires but also increases termination risks during the probation period.

Impact on employees: Employees should be aware of their rights and responsibilities during the probation period.

3. Overtime and Compensation

• Compensatory leave option: Employers can now offer compensatory leave instead of overtime pay, with employee consent.
• Mandatory benefits: Employers must provide accommodation or transportation or equivalent allowances.

Impact on employers: This change offers flexibility in managing overtime but also introduces additional costs related to accommodation or transportation.

Impact on employees: Employees may have a choice between overtime pay and compensatory leave, but the quality of provided accommodation or transportation becomes crucial.

4. Termination of Employment Contract

• Expanded termination grounds: Bankruptcy has been added as a lawful reason for termination.

• Disciplinary actions: The timeframe for employees to object to disciplinary actions has increased.

Impact on employers: Employers should update termination procedures to reflect the new grounds and be aware of the extended timeframe for disciplinary actions.

Impact on employees: Employees have more time to respond to disciplinary actions and understand the new grounds for termination

Other Notable Changes

• Manpower activity regulations: Clarification of manpower agency services and potential impact on employer-employee relationships.
• Maternity leave has been extended to 12 weeks.
• Male employees are now entitled to three days of parental leave.
• Maritime labour provisions: New regulations for employees on ships with a load of less than 500 tons.

Practical Implications for Employers

• Review and update employment contracts:

Ensure compliance with the new regulations regarding probation periods, notice periods, and other contract terms.

• Develop clear resignation policies:

Establish procedures for handling resignations, including response timelines and communication protocols.

• Implement overtime management strategies:

Determine whether to opt for compensatory leave or overtime pay, considering employee preferences and operational requirements.

• Assess accommodation and transportation policies:

Evaluate current practices and determine necessary adjustments to comply with the new regulations.

• Strengthen disciplinary procedures:

 Review disciplinary policies and ensure compliance with the revised timelines for employee objections.

• Stay informed about implementing regulations:

Monitor updates from the MHRSD for detailed guidelines on implementing the amendments.

Frequently Asked Questions (FAQs)

• When do the new labour law amendments take effect?

The amendments will take effect 180 days after their publication in the Legal Gazette.

• Can employers still terminate employees without notice during the probation period?

Yes, both employers and employees can terminate the contract during the probation period without notice.

• What happens if an employer fails to respond to an employee's resignation within 30 days?

The resignation is considered accepted after 30 days if the employer doesn't respond.

• Are there any changes to the end-of-service gratuity?

The amendments do not include changes to the end-of-service gratuity calculation.

• What if an employer cannot provide accommodation or transportation?

Employers must pay equivalent allowances to employees in such cases.

Saudi Arabia's labour laws are undergoing significant transformation to align with the nation's economic growth and its commitment to a thriving workforce. These comprehensive reforms encompass a wide range of employment aspects, including contracts, working conditions, leave entitlements, and worker protections. It is imperative for businesses operating in Saudi Arabia to stay abreast of these evolving regulations to maintain compliance, cultivate a positive work environment, and attract top talent.

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