Key Points
- In 2021, MHRSD will implement a labor law to improve transparency and mobility for the private sector
- The reform will make it easier for employees to change Saudi employers, reduce administrative burdens, and change entry and exit requirements for foreign employees
- The employment law will require digitized contracts
- The initiative follows other labor laws introduced in 2020, including the Wages Protection System and self-evaluation compliance review program
- MHRSD’s law intends to attract skilled workers and increase Saudi Arabia’s global competitiveness
Overview
On March 14, 2021, the Ministry of Human Resources and Social Development (MHRSD) will implement a labor law to improve transparency and mobility for private sector employees. The law will make it easier for workers to change employers in Saudi Arabia, reduce administrative burdens, and make the local Saudi labor market more competitive.
What are the Changes?
The initiative will introduce the following changes:
- Under certain conditions, allow private sector employees to change employers without receiving prior permission from their current employers
- Eliminate the requirement for foreign workers to obtain permission from their current employer before entering or exiting Saudi Arabia
- Require digital contracts through an electronic government portal
The first reform concerns transferring sponsors. Currently, employees must receive permission from their current sponsor to change employers in Saudi Arabia. The reform will allow domestic and foreign private sector workers to change sponsors without obtaining permission from their current sponsor when their existing employment contract ends. They may change sponsors under an existing contract, provided: the current company approves the transfer; the current sponsor does not provide a notarized employment contract within three months of the employee’s entry date into Saudi Arabia; the employer does not compensate the employee for three months or more; the employer is absent due to imprisonment, travel, or other reasons; or the employee’s work or residence permit has expired and not been renewed by the employer.
The second reform addresses Saudi entry and exit requirements for foreign workers. Currently, foreign employees must obtain an Exit and Re-Entry Visa when they leave Saudi Arabia through their visa sponsor. Starting in March 2021, foreign employees do not need to obtain permission from their sponsor before leaving Saudi Arabia. Instead, they can file a request for an Exit and Re-Entry Visa through the Saudi government’s online platform. If approved, the sponsor will receive an automatic notification when the employee leaves and re-enters the country.
The third reform regulates the digitization of contracts. Employment contracts in Saudi Arabia are currently subject to digitization through an online registration process implemented by the General Organisation for Social Insurance in November 2018. However, contract digitization has not been strictly enforced. Starting in March 2021, all contracts must be digitized through the government’s Qiwa online platform, which is designed for the private sector. The new requirement gives the government more oversight over employment conditions in Saudi Arabia, which deters fraud and abuse. Additionally, the government may be able to resolve disputes between Saudi and foreign employees.
What Should Employers and Applicants Know?
The new initiative follows a series of labor reforms implemented by the Saudi government throughout 2020 (including the Wages Protection System and the self-evaluation compliance review program) that protect workers’ rights and increase government oversight of Saudi employers.
Collectively, the reforms intend to increase Saudi Arabia’s competitiveness in the global economy by securing workers’ rights for highly skilled employees and creating favorable working conditions designed to diversify and strengthen the Saudi economy.
