Saudi Arabia: Labor Law Amendments Aim to Boost Hiring of Saudi Nationals

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By Jenny David

Oct. 23—Comprehensive labor law amendments aimed at boosting employment of Saudi citizens and protecting their rights took effect Oct. 18. First approved by Royal Decree D/46 on March 25, the 38 amendments effectively overhaul the Saudi Labor and Workmen's Law.

The changes are an attempt to boost hiring of Saudi nationals by granting employers more contractual flexibility, Amgad Husein, a partner in the Dentons & Co. Riyadh affiliate, the Wael A. Alissa Law Firm, told Bloomberg BNA in an Oct. 19 e-mail.

“More flexibility for the employers (e.g., limitation of liability and expanded probation periods) should translate into more employers being willing to employ Saudis,” Husein said.

Foreign workers currently comprise approximately two-thirds of the Saudi workforce.

Details

According to a review by the firm, the revised legislation increases the advance notice an employer must give to terminate an open-ended employment contract from 30 to 60 days, while at the same time explicitly repealing a former employee's statutory right to seek reinstatement from the Labor Commission for termination without a valid reason. The amendments also limit the amount of severance due the employee for termination without a valid reason. If no amount is specified in the employment contract, the amendments say, a dismissed employee is entitled to 15 days' wages for each year of employment through an open-ended contract or all remaining wages in the case of fixed term contracts with a ceiling of two months of full wages.

The amended law also increases the probationary period at the start of employment from 60 to 90 days, during which either party may terminate the contract without liability, and allows for its extension for another 90 days by mutual written agreement. Additional probation is allowed if the employee's job changes or after a return from a leave of absence of six months or more, provided both parties agree to the extension.

While maintaining the nature and form of noncompete and confidentiality clauses, the revised law greatly increases employer protections by replacing a previous two-year limit on such clauses with a statement that 10-year confidentiality requirements will generally be considered reasonable as long as the period is specified in the employment contract. Under the amendments, a former employee may be sued for violation of a noncompetition clause for up to a year following discovery of the violation provided it took place within the agreed period of confidentiality.

The amended Saudi labor law also makes it easier for employers to transfer employees to another geographic location within Saudi Arabia, as long as the employee approves the transfer in writing and it does not cause him or her “serious damage.” The employer may ask the employee to work elsewhere for any reason and without the employee's approval for up to 30 days per year, as long as the employer assumes all involved costs.

The amendments also increase maternity and bereavement leave for female employees and make the terms of that leave more flexible. Women are now entitled to 10-week paid maternity leave before or after birth, which may be extended by one additional unpaid month. A female employee who gives birth to a sick or special needs child is entitled to an additional month of paid maternity leave and may extend that by an additional unpaid month up to a maximum 18 weeks of paid and unpaid leave, in addition to paid vacation time.

The amendments provide more bereavement leave for Moslem women who are newly widowed to comply with the Islamic tradition of Iddah isolation. Instead of the 15 days of paid leave provided non-Moslem widows, a Moslem widow is now entitled to four months and ten days of paid leave. If she is found to be pregnant during that time, she may extend the leave on an unpaid basis until the birth.

Other Provisions

In addition, the new amendments:

•  expand the acceptable reasons for an employee's dismissal to include closure of the business, termination of the employee's position and any other reason covered by law;

•  more than double compensation for employees who suffer a work-related injury to 60 days of fully paid leave plus 75 percent pay for up to one year of treatment;

•  require employers with 50 or more employees to train at least 12 percent of their Saudi employees annually, up from the previous requirement of 6 percent;

•  formalize a recently implemented wage protection system under which businesses must deposit salaries into domestic bank accounts for all employees; and

•  rescind joint liability for the statutory and contractual entitlements of the employees of a sold or otherwise transferred business, placing responsibility solely on the successor.

 

To contact the reporter on this story, Jenny David at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For more information on Saudi HR law and regulation, see the Saudi Arabia primer.