Changes to the Nitaqat system in Saudi Arabia

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22 January, 2019

In brief

The Saudi Ministry of Labor and Social Development (“MLSD”) is expected to implement a new instant calculation for Saudi and foreign employees as part of its existing Nitaqat System. This change is anticipated to come into effect on 2 February 2019. In this alert, we provide a brief outline of the impact of this change.

In detail

The Nitaqat program was introduced in 2011 in order to increase the employment of Saudi nationals in the private sector. Currently, companies in Saudi Arabia are assigned a unique company-specific Nitaqat status based on the below three factors which in turn determines the type of immigration facilities, incentives and privileges these companies are able to avail when recruiting employees in Saudi Arabia.

  • Entity classification i.e. type of primary activities registered with the MLSD
  • Size of the company i.e. total workforce in the company
  • Saudisation percentage i.e. the number of Saudi nationals employed in the company

Under the current Nitaqat program (and based on the above factors), companies are classified under one of the below four different Nitaqat colour coded statuses:

  1. Platinum
  2. Green – sub-catogorised into:
    i) High Green
    ii) Medium Green
    iii) Low Green
  3. Yellow
  4. Red

On 2 February 2019, the following amendments to the current Nitaqat program are expected to come
into force and will apply to companies that have been classified High Green or Platinum for a period of
at least 13 or more weeks:

  1. Under the terms of the proposed new calculation method, the newly joined Saudi national employee will be deemed to count as part of the company’s overall Nitaqat rating from day 1. Under the current Nitaqat program, it takes 26 weeks for a Saudi national employee to be considered a “full unit” for Nitaqat rating purposes, thereby delaying the company’s overall Saudisation ranking.

    Based on the current Nitaqat calculation method, the employer accumulates 3.84 percentage points each week with respect to one Saudi national employee (or 0.038 of a unit in Nitaqat), receiving a the full 100% accumulation ranking (or full unit reward) at the end of a 26 week designated period (provided the Saudi national is still employed by the firm). The full award is, however, subject to the Saudi national employee still being employed by the company at the relevant time.
  2. Currently, foreign national employees leaving their employer are formally removed from a company’s Nitaqat ranking after the lapse of 26 weeks. Under the new calculation method the Nitaqat calculation will be updated immediately, thus waiving the 26 week period.

The takeaway

Under the proposed new changes to the Nitaqat program, there is a welcome reduction in the overall timeline for Nitaqat calculation purposes, which will be viewed positively by impacted companies operating in Saudi Arabia.

We will continue to monitor these changes and inform you of any developments.

Contact us

Mark Schofield

Mark Schofield

Tax and Legal Services Leader, PwC Middle East

Tel: +971 (0)4 304 3100

Darren Harris

Darren Harris

Legal Leader, PwC Legal Middle East

Tel: +971 (0)56 418 9768

Anir Chatterji

Anir Chatterji

Immigration Leader, PwC Legal Middle East

Tel: +971 (0) 4 304 3922

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