This information is derived from the State Department's Office of Investment Affairs’ Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov.
Last Published: 7/19/2017
The Ministry of Labor and Social Development along with the Ministry of Interior regulate recruitment and employment of expatriate labor, which makes up a large majority of the private-sector workforce. The government encourages recruitment of Saudi employees through a series of incentives and limits placed on the number of visas for foreign workers available to companies. The largest groups of foreign workers come from Bangladesh, Egypt, India, Pakistan, the Philippines, and Yemen. Westerners compose less than 2 percent of the labor force.

Beginning with the 1969 Labor and Workman Regulations, Saudi Arabia has pursued a number of localization schemes to combat unemployment among Saudis, which the CIA World Factbook estimated at 11.7 percent for Saudi males in 2016, and nearly 33 percent for Saudi women. Other estimates put the unemployment rate at as high as 25 percent, while estimates of youth unemployment among Saudis aged 15-25 approach 30 percent. In 2011, the Ministry of Labor and Social Development laid out a sophisticated plan known as “Nitaqat,” under which companies are divided into sectors, each with a different set of quotas for Saudi employment based on company size. Each company is determined to be in one of four strata based on actual percentage of Saudi employees, with platinum and green strata for companies meeting or exceeding the quota for their sector and size, and yellow and red strata for those failing to meet it. Expatriate employees in red and yellow companies can move freely to green or platinum companies, without the approval of their current employers, and green and platinum companies have greater privileges with regard to securing and renewing work permits for expatriates.

The Ministry of Labor and Social Development has announced the goal of reducing the expatriate population from approximately 30 percent currently to 20 percent of the total population. Over the last year, the SAG has taken additional measures to strengthen the “Nitaqat” program and require the hiring of Saudi nationals. In 2016, the Ministry of Labor and Social Development introduced new rules requiring all mobile phone stores in the Kingdom – which were formerly mostly owned and operated by expatriates – to be fully staffed by Saudi nationals, a policy that resulted in numerous store closures across the country. Likewise, efforts are underway to ensure Saudi employment in retail businesses catering to women.

Many elements of “Nitaqat” have garnered criticism from the private sector, but the SAG claims it has substantially increased the percentage of Saudi nationals working in the private sector over the last several years. In 2013, the Ministry of Labor and Social Development along with Ministry of Interior launched an ongoing campaign to deport illegal and improperly documented workers, which has resulted in higher labor costs for many businesses. In addition, all companies operating in the Kingdom, regardless of sector or size, are now obliged to pay $640 per year for each expatriate employee in excess of the number of the company’s Saudi employees—a fee expected to increase annually. Numerous employers, particularly in construction and other blue-collar services sectors, have vehemently criticized the SAG’s labor policies, but it appears the SAG will continue to enforce them.

Saudi Arabia’s labor law, enacted in 2005, forbids union activity, strikes, and collective bargaining. However, the government allows companies that employ more than 100 Saudis to form “labor committees.” By-laws detailing the functions of the committees were enacted in April 2002. In 2015, the SAG published 38 amendments to the existing labor law with the aim of supporting the “Saudization” of the economy by expanding Saudi employees’ rights and benefits. Domestic workers are not covered under the provisions of the latest labor law, but separate regulations covering domestic workers were issued in 2013, guaranteeing at least nine hours of rest per day, one day off a week, and one month of paid vacation every two years.

Overtime is normally compensated at time-and-a-half rates. The minimum age for employment is 14. The SAG does not adhere to the International Labor Organization’s convention protecting workers’ rights. A July 2004 decree addresses some workers’ rights issues for non-Saudis, who can appeal to specialized committees within the Ministry of Labor and Social Development regarding wage non-payment and other issues. Penalties issued by the ministry include banning infringing employers from recruiting foreign and/or domestic workers for a minimum of five years.

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Saudi Arabia Economic Development and Investment Law