Saudi Arabia introduces several changes to localisation policies, labour market testing, and the Nitaqat framework

Oct 04, 2017

In brief

With​ ​Saudisation​ ​percentages​ ​being​ ​increased​ ​under​ ​the​ ​revised​ ​Nitaqat​ ​framework,​ ​Saudi​ ​Arabia’s Ministry​ ​of​ ​Labour​ ​and​ ​Social​ ​Affairs​ ​(MOLSA)​ ​have​ ​also​ ​introduced​ ​several​ ​other​ ​initiatives​ ​to​ ​aid implementation.​ ​Key​ ​changes​ ​include​ ​the​ ​implementation​ ​of​ ​a​ ​“Parallel​ ​Saudisation”​ ​mechanism,​ ​changes to​ ​company​ ​classification,​ ​and​ ​updates​ ​to​ ​sponsorship​ ​privileges.

In detail

With​ ​Saudisation​ ​percentages​ ​being​ ​increased​ ​under​ ​the​ ​revised​ ​Nitaqat​ ​framework,​ ​Saudi​ ​Arabia’s Ministry​ ​of​ ​Labour​ ​and​ ​Social​ ​Affairs​ ​(MOLSA)​ ​have​ ​also​ ​introduced​ ​several​ ​other​ ​initiatives​ ​to​ ​aid implementation.​ ​Key​ ​changes​ ​include:

“Parallel​ ​Saudisation”

A​ ​new​ ​system,​ ​referred​ ​to​ ​as​ ​“Parallel​ ​Saudisation,”​ ​allows​ ​entities​ ​that​ ​do​ ​not​ ​currently​ ​meet​ ​the​ ​relevant Saudisation​ ​requirements​ ​to​ ​still​ ​apply​ ​for​ ​a​ ​block​ ​visa​ ​by​ ​paying​ ​a​ ​penalty.​ ​The​ ​penalty​ ​is​ ​calculated​ ​on​ ​the basis​ ​of​ ​a​ ​formula​ ​that​ ​takes​ ​into​ ​consideration​ ​the​ ​entity’s​ ​current​ ​Saudisation,​ ​the​ ​required​ ​Saudisation (as​ ​per​ ​the​ ​entity’s​ ​industry​ ​and​ ​headcount),​ ​and​ ​other​ ​factors​ ​pertaining​ ​to​ ​the​ ​availability​ ​of​ ​local​ ​Saudi resources​ ​suitable​ ​for​ ​the​ ​role;​ ​however,​ ​the​ ​exact​ ​calculation​ ​methodology​ ​has​ ​not​ ​been​ ​released​ ​to​ ​the public​ ​as​ ​of​ ​yet.

Changes​ ​to​ ​definitions​ ​of​ ​company​ ​size

Saudisation​ ​requirements​ ​are​ ​based​ ​on​ ​company​ ​industry​ ​and​ ​number​ ​of​ ​employees.​ ​Larger​ ​companies must​ ​adhere​ ​to​ ​higher​ ​Saudisation​ ​percentages.​ ​Companies​ ​will​ ​now​ ​be​ ​classified​ ​as​ ​follows​ ​for​ ​Nitaqat purposes:

Company​ ​size
Number​ ​of​ ​employees
Small
6 - 49
Medium​ ​A
50 - 99
Medium​ ​B
100 - 199
Medium​ ​C
200 - 499
Large
500 - 2999
Giant
3000+

Companies​ ​with​ ​less​ ​than​ ​six​ ​employees​ ​are​ ​not​ ​subject​ ​to​ ​Nitaqat,​ ​but​ ​must​ ​still​ ​employ​ ​at​ ​least​ ​one​ ​Saudi national​ ​employee​ ​to​ ​avoid​ ​any​ ​restrictions​ ​on​ ​sponsorship​ ​privileges​ ​(previously​ ​companies​ ​that​ ​employed 10​ ​or​ ​less​ ​individuals​ ​were​ ​not​ ​subject​ ​to​ ​Nitaqat).

Changes​ ​to​ ​sponsorship​ ​privileges

  • Only​ ​entities​ ​that​ ​are​ ​ranked​ ​“platinum”​ ​and​ ​“high​ ​green”​ ​will​ ​be​ ​able​ ​to​ ​apply​ ​for​ ​block​ ​visas​ ​– previously​ ​entities​ ​ranked​ ​“green”​ ​could​ ​apply​ ​as​ ​well.
  • “Platinum”​ ​and​ ​“high​ ​green”​ ​entities​ ​will​ ​only​ ​have​ ​to​ ​advertise​ ​jobs​ ​locally​ ​(through​ ​the​ ​Taqat portal)​ ​for​ ​one​ ​week​ ​(previously​ ​jobs​ ​had​ ​to​ ​be​ ​posted​ ​for​ ​as​ ​long​ ​as​ ​45​ ​days).
  • Only​ ​“platinum”,​ ​“high​ ​green”​ ​and​ ​“green”​ ​entities​ ​will​ ​be​ ​able​ ​to​ ​“receive”​ ​transferred​ ​employees. “Yellow”​ ​and​ ​“red”​ ​entities​ ​can​ ​“send”​ ​employees​ ​to​ ​higher-ranked​ ​entities,​ ​but​ ​cannot​ ​transfer employees​ ​to​ ​their​ ​headcount.
  • “Platinum”,​ ​“high​ ​green”,​ ​and​ ​“green”​ ​entities​ ​can​ ​renew​ ​employees’​ ​work​ ​permits​ ​without limitation.​ ​“Yellow”​ ​entities​ ​will​ ​be​ ​prevented​ ​from​ ​renewing​ ​work​ ​permits​ ​beyond​ ​two​ ​years,​ ​and “red”​ ​entities​ ​cannot​ ​renew​ ​work​ ​permits​ ​at​ ​all.

The takeaway

We​ ​believe​ ​it​ ​is​ ​more​ ​prudent​ ​for​ ​companies​ ​to​ ​continue​ ​to​ ​build​ ​their​ ​Saudi​ ​headcount​ ​to​ ​improve their​ ​Nitaqat​ ​ranking​ ​and​ ​not​ ​solely​ ​rely​ ​on​ ​the​ ​Parallel​ ​Saudisation​ ​mechanism.​ ​The​ ​decision​ ​to introduce​ ​this​ ​mechanism​ ​will​ ​likely​ ​have​ ​an​ ​impact​ ​on​ ​mobility​ ​in​ ​the​ ​region.​ ​It​ ​should​ ​be​ ​noted​ ​that the​ ​Parallel​ ​Saudisation​ ​mechanism​ ​does​ ​not​ ​override​ ​any​ ​other​ ​requirements​ ​for​ ​obtaining sponsorship​ ​privileges,​ ​key​ ​among​ ​which​ ​is​ ​the​ ​presence​ ​of​ ​a​ ​valid​ ​local​ ​business​ ​contract​ ​to​ ​support​ ​a block​ ​visa​ ​application.

Companies​ ​operating​ ​in​ ​the​ ​region​ ​should​ ​also​ ​be​ ​mindful​ ​of​ ​their​ ​revised​ ​Saudisation​ ​rating​ ​(if​ ​any) and​ ​make​ ​note​ ​of​ ​the​ ​above​ ​changes​ ​when​ ​planning​ ​for​ ​their​ ​mobility​ ​and​ ​HR​ ​needs.

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