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Saudi Arabia: New restriction on group terminations aim to support the NTP

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March 29, 2017

With measures such as restricting group employee terminations, Saudi Arabia’s government hopes to accelerate private sector job growth for Saudi nationals.

EMPLOYER ACTION CODE: ACT

The government issued a resolution on the group termination of employees from midsize and large companies, which makes it harder for affected employers to pursue group dismissals involving Saudi nationals.

KEY DETAILS

The resolution applies to all companies with 50 or more employees attempting a group termination after January 30, 2017. Group termination is defined as an employer-triggered downsizing of the greater of 10 Saudi nationals or 1% of the workforce.

Individual Saudi employee terminations in the year prior to the planned group termination must be included in the determination of whether the resolution’s threshold for a group termination is met.

The resolution requires that before issuing written notices of termination, the employer must first provide 60 days’ notice to the local labor office that justifies the dismissal of Saudi nationals and also obtain the government’s consent. This notification must include:

  • Analysis of the company’s financial state, including justification for group termination
  • The number of Saudi nationals to be terminated, including their names, job descriptions and the reason for their selection for termination
  • The number of any foreign workers who are at the same level as the Saudi nationals to be terminated, including their names and job descriptions
  • Any actions taken by the employer to avoid the group termination

The labor office may recommend that the employer replace foreign workers with the Saudi nationals earmarked for dismissal, or relocate the Saudi nationals elsewhere within the company or its subsidiaries. The labor office may also reject the notice and reasons provided for termination. Employers that fail to notify and obtain consent from the labor office before a group termination may be significantly penalized by actions including blocking work permits or the transfer of foreign workers’ sponsorships. Bankruptcy or closure are the only exceptions to the resolution’s requirement.

The resolution does not contain specific provisions for severance or enhancement of end-of-service benefits for group terminations, nor does it address such events at small employers or the group termination of foreign workers in any number.

Group terminations are not presently addressed in the labor law, although it does provide for termination of employment contracts when a company is permanently closed, or when an employee’s business activity, unit or operation is closed or ceases to operate.

EMPLOYER IMPLICATIONS

The government is looking to accelerate private sector job growth for Saudi nationals as part of the National Transformation Program (NTP) announced in 2016. Saudi nationals have long preferred public sector employment. However the NTP also aims to substantially reduce the annual public sector job growth from about 5%, currently, to 1%. The resolution’s enhanced employment protections are intended to support the NTP by preserving Saudi nationals’ jobs if group terminations occur.

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