The Nitaqat (New employment rules to shake up Saudi private sector)
Saudi Arabia is unveiling a major overhaul of the long-ineffective plan to nationalize a private sector workforce dominated by foreigners to the tune of nine out of every 10 employees. This month, the government will inform companies which of four categories — ‘excellent’ or Blue, ‘green’, ‘yellow’ and ‘red’ — they fall under based on whether they employ enough Saudi nationals to comply with established quotas. Following a grace period, the new Saudization scheme, known as Nitaqat (or ranges in Arabic), would level severe penalties on violators and offer incentives and rewards to those firms meeting quotas.
The new system is more dynamic, applying 205 categories of quotas that vary based on the line of work and size of the company.
Excellent or Blue:
In many cases, companies achieving more than 30 percent nationalization would be classified as “excellent”.
While ‘green’ companies will be entitled to, for the first time, recruit foreign workers freely from the other two categories & transfer their sponsorship visas without their current employer’s consent.
Small company in the wholesale and retail sector wanting to attain ‘green’ status should have 10 percent – 26 percent nationalization. Medium-sized firm needs 17 percent – 33 percent. While large firm should have 24 percent – 34 percent. Non compliance will have all work permit renewal services suspended according to Ministry of Labor.
However, those who comply will benefit from a streamlined visa approval process that would grant their employees visas within 10 days as the ministry moves toward decentralizing visa issuance. In addition, those falling in the “excellent” and “green” categories will be able to recruit workers from the other categories without having to obtain their employer’s consent.
Firms with a ‘yellow’ label will be able to renew work permits on the condition that employees have not spent more than six years in Saudi Arabia until February 23, 2012, but their rights to new visas and transfers ends by September 10. In other words, the Saudi government will impose a six-year cap on residency visas for expatriate workers, if their employers fail to meet quotas or if their employers fall in “yellow category”.
Companies falling in the ‘red’ category who resist or those who will not heed to “Saudization process” will be unable to get new licenses, renew their licenses, renew their employees’ visas or hire new foreign labor.
Companies falling in the ‘red’ and ‘yellow’ categories, and hence do not employ enough Saudi nationals, will be unable to renew visas of their expatriate staff or issue new visas unless they reach compliance in the number of Saudi employees they hire.
Nitaqat assigns different nationalization rates according to the size and activity of companies – so smaller companies have smaller overall quota requirements than larger ones do. Private sector companies, mainly smaller in size will struggle and possibly be forced to shut down as a result of the policy if it is widely enforced.
Nitaqat could lead to a downturn in remittances to countries that come to rely on them heavily for foreign currency. Non-Saudis population rose sharply, reaching 31 percent of the 27.6 million people living in the country by the end of 2010.
The new Nitaqat scheme could drastically alter this equation by forcing companies to hire nationals, invest more in training and increase wages if they want to stay in business.
By contrast, businesses that have complied with quotas will benefit from incentives and talented expatriates who have been working in the country for years are key beneficiaries of the new system, by encouraging companies to compete in order to retain top talent.
Excerpt taken from Arab News Article titled “New employment rules to shake up Saudi private sector” dated June 15, 2011 by John Sfakianakis, Chief Economist, Banque Saudi Fransi
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