SAUDI ARABIA – Stricter Saudization Targets
Effective 3 September 2017, the Ministry of Labour and Social Development will implement a new version of its Nitaqat grading programme for companies, meaning stricter Saudization requirements for businesses.
The Ministry has also announced that it only approved 37% of work visa applications in 2016 (316,212 out of 849,228).
What is Changing?
Under the new version of the Nitaqat system, which grants firms with higher ratios of Saudi workers preferential treatment, much higher percentages will be needed to receive the top (platinum) category. A list of the industries and percentages has been released on the Nitaqat site, is here.
Oil and gas companies with a large workforce will require a 91% Saudi workforce to be in the platinum category and 35% for to be in the lower green.
Large companies in the pension industry will have to achieve an 85% Saudi workforce to be in the platinum category and 21% for lower green. It is likely that over 60 industries will be affected by the changes in September.
Nitaqat will also apply to businesses with more than six employees (previously it was more than ten) and changes are also being made to the sizing classification of employers with the introduction of more degrees of ‘small’, ‘medium’ and “big” organisations.
What is Nitaqat?
Nitaqat is a program of Saudization, to increase employment of Saudi nationals in the private sector, which was first introduced in 2011. Nitaqat requires employers in the private sector to hire a certain percentage of Saudi nationals, depending on the company’s industry and the number of employees in the company.
In the summer of 2016, it was proposed that a new ‘balanced Nitaqat’ would be introduced where organisations would effectively be given more credit for employing Saudi nationals into senior and well-paid positions and for employing female Saudi nationals. However, implementation of “balanced Nitaqat” has been postponed.
How Does Nitaqat Work?
Nitaqat uses a colour zoning system to categorize companies into compliant zones, platinum and green, and non-compliant zones, yellow and red.
Companies in the compliant zones, platinum and green, obtain certain benefits, that those in the other zones do not. These benefits include; being able to obtain and renew work permits for foreign employees through an expedited online process, they are able to change a foreign employee’s profession and are allowed to hire employees from red and yellow zoned companies without approval from the employer. Yellow and red zoned companies have limitations to their business operations as a result of non-compliance. Yellow zoned companies are only allowed to renew visas for employees that have stayed in Saudi Arabia for less than two years. Companies that fall under the yellow zone are also not permitted to apply for new work visas as well as issue new work permits. Companies in the red zone have the most restrictions; they are unable to hire new expatriate employees, renew work permits, or open a new business or branch in Saudi Arabia until they have improved their Nitaqat rating. Yellow and red zoned companies also forfeit their authority to give permission to their employees to change employers in Saudi.
Employers in Saudi Arabia should check their compliance with the forthcoming new requirements. Employers should consult an immigration specialist for advice on compliance with Nitaqat requirements.