The Saudi MHRSD launches labour reforms for private sector workers has been saved
The Saudi MHRSD launches labour reforms for private sector workers
In November 2020, the Saudi Ministry of Human Resources and Social Development (MHRSD) announced labour reforms. This initiative is due to take effect in March 2021 and will have an impact on professional employees in the private sector. These reforms are aimed at easing the movement of employees between employers, and travel into and out of the country, and come as part of a wider raft of reforms. The changes do, however, mean that employers may need to revisit their strategies around retention, recruitment and policies relevant to managing other potential impacts of the reforms on their workforce.
It should be noted that these reforms are part of the National Transformation Program that is aimed at reforming the Saudi labour market in line with Vision 2030, and so further reforms are to be expected. Finally, it should be anticipated that there may be clarifications or changes to these announcements between now and March, and potentially even after, as the government seeks to ensure a smooth implementation.
Why it matters?
The reforms increase employee mobility by removing employer consent for a number of processes, and sit alongside ancillary reforms, in particular the digitisation of employment contracts. The reforms are explained in summary below:
- Transfers of sponsorship: The reforms, for the first time, allow employees to transfer their employment to another employer after their contract expires without consent from their current employer. This is subject to a number of conditions that are part of the detailed announcement by MHRSD.
- Exit and re-entry: Employees will be able to apply for exit and re-entry permits to travel outside Saudi Arabia without having to obtain their employer’s approval.
- Final exit: Employees will be able to obtain their final exit visas to leave the country after the end of the employment contract without having to obtain permission from their employer.
The aim of these reforms that increase employee mobility is to create a more competitive labour market which aligns with international norms. Indeed, one immediate outcome is that the purported advantage of hiring foreign labour is somewhat reduced, creating a more level playing field between local/Gulf nationals and expatriates, with the latter now granted freedom to change employer.
Recruitment is positively impacted, with firms operating in the Kingdom of Saudi Arabia being able to hire in-country talent, obviating some of the costs and challenges associated with recruiting from overseas.
At the same time, employers are liable to see increased exposure of their foreign talent to being recruited by others and may need to put into place relevant mitigation strategies, including talent retention as well as ensuring compliance across a number of areas, including Saudization rates (Nitaqat), visa and residency compliance, electronic contract registration and the Wage Protection Scheme (WPS).