On August 6, 2024, the Saudi Council of Ministers approved significant amendments to the Kingdom of Saudi Arabia's (KSA) Labor Law and its Implementing Regulations. These changes, effective February 19, 2025, aim to modernize the labor market, enhance job stability, and attract both employers and employees. Aligning with Saudi Vision 2030, the amendments seek to improve working conditions, increase employment opportunities, especially for women, and bring Saudi labor laws closer to international standards.
Key Amendments and Their Implications
Saudi Arabia's labor market consists of approximately 13.5 million workers, with expatriates making up 10 million (74%) and Saudis accounting for 3.5 million (26%). Women represent around 35% of the total workforce, a number expected to rise under Vision 2030 reforms. The amendments introduce changes across various employment aspects, including wages, benefits, leave policies, probationary periods, training, resignation procedures, contract termination, workplace equality, and compliance penalties.
- Wages and Benefits
- Compensatory Leave: Employers may now offer compensatory leave instead of overtime pay, provided the employee consents.
- Accommodation and Transportation: Employers must provide employees with accommodation and transportation or equivalent monetary compensation, ensuring basic needs are met.
- Leave Policies
- Maternity Leave: Increased from 10 to 12 weeks with full pay. Six weeks are mandatory post-birth, while the remaining six weeks may be taken up to four weeks before delivery.
- Paternity Leave: Remains at three days but must be availed within seven days of childbirth.
- Bereavement Leave: Employees are now entitled to three days of paid leave upon the death of a sibling, in addition to existing provisions for spouse, ascendants, and descendants.
- Probationary Periods and Training
- Probation Extension: Maximum probationary period extended from 90 to 180 days, which must be explicitly stated in the employment contract.
- Employee Training: Employers must establish structured training and qualification programs for Saudi employees, replacing the prior record-keeping requirement of Saudi worker replacements for expatriates.
- Resignation Procedures
- Formal Definition of Resignation: Now defined as a written declaration by an employee expressing the intent to terminate a fixed-term contract without coercion.
- Resignation Processing:
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- If an employer does not respond within 30 days, the resignation is automatically accepted.
- Employers may delay acceptance for up to 60 days if business needs require.
- Employees can withdraw resignation within seven days, provided it has not been accepted.
- Contract Termination
- Revised Notice Periods:
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- If an employee resigns, they must provide a 30-day notice.
- If an employer terminates an employee, a 60-day notice is required for monthly wage earners, while a 30-day notice applies to non-monthly wage earners.
- Bankruptcy Clause: Contracts may now be terminated if a company is declared bankrupt.
- Fixed-Term Contracts for Non-Saudis
- If a contract does not specify a duration, the default term is now one year from the employee's start date. If employment continues beyond this period, the contract is automatically renewed for a similar term.
- Workplace Equality
- The amended law explicitly prohibits discrimination in employment based on race, color, gender, age, disability, marital status, or other factors, ensuring equal opportunities for all employees while adhering to Saudization requirements.
- Penalties for Non-Compliant Recruitment
- Companies engaging in manpower supply activities without a valid license from the Ministry of Human Resources and Social Development (MHRSD) will face penalties ranging from SAR 200,000 to SAR 500,000.
Impact on Employers and Expatriate Workforce
Saudi Arabia hosts 4.1 million Indian expatriates, the largest foreign workforce in the country. The amendments reinforce labor protections and impose stricter compliance requirements, affecting both local and foreign workers. Indian companies sending workers to KSA should carefully review these changes to ensure compliance.
Recommendations for Employers
To align with the new regulations, employers should:
- Review and update employment contracts to reflect changes in wages, benefits, leave policies, and termination procedures.
- Develop structured training programs for Saudi employees.
- Implement clear resignation and contract termination procedures.
- Ensure compliance with updated leave policies.
- Partner with MHRSD-licensed manpower supply firms.
- Monitor future regulations and updates issued by the MHRSD.
By proactively addressing these amendments, businesses can ensure compliance, improve employee satisfaction, and contribute to a more dynamic Saudi labor market in line with Vision 2030.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
