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Saudi Arabia: Proposed labor reforms for both foreign and local workers

Total Rewards|Future of Work|Health and Benefits
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By Steve Clements | February 15, 2021

Labor reforms would increase paid maternity leave, reduce workweek hours and make other changes to modernize employment regulations.

Employer Action Code: Monitor

The government is considering a variety of changes to the Labor Law and foreign workers regime under a Labor Reform Initiative (LRI) by the Ministry of Human Resources and Social Development (HRSD). The LRI is intended to modernize and improve the functioning of the labor market and the regulatory framework for employment for both local and foreign employees. The package is expected to come into effect March 14, 2021, but the exact elements of the LRI are still to be finalized. The HRSD posted the draft changes to its website for public consultation on January 6, 2021.

Key details

Reforms under consideration include:

  • Increasing employer-paid maternity leave from 10 to 14 weeks
  • Reducing the normal workweek from 48 to 40 hours and from 36 to 30 hours during the month of Ramadan for Muslim employees
  • Allowing employees to accept paid time off in lieu of overtime pay for overtime (subject to employer/employee agreement)
  • Including siblings under the bereavement leave provision of five days paid leave for the death of a close family member
  • Reducing the standard 60-day notice period for termination of indefinite-term employment contracts (which apply only to Saudi employees) to 30 days’ notice of resignation for workers paid monthly (remaining 60 days for the employer) and 30 days for both the employer and employee for workers paid under shorter pay schedules
  • Requiring payment of severance of one months’ pay per year of service in the event of a finding of unlawful dismissal of employees engaged under indefinite-term contracts
  • Allowing foreign workers to end their service with the employer at the expiration of the employment contract or with 90 days’ notice during the term of the agreement if the foreign worker has been resident in Saudi Arabia for at least one year
  • Expanding anti-discrimination employment protections to prohibit employers from discriminating between employees based on ethnicity, color, sex, age, disability, social status or any other basis that would negate/nullify equal opportunities.
  • Ensuring that employers provide appropriate accommodation and transportation to work, or provide an allowance in lieu;
  • Digitizing employment contracts under a national online standard to reduce differences in employment terms and conditions between foreign and local employees by making the terms more transparent and open

Separately, the monthly minimum wage for Saudi employees will increase from 3,000 Saudi riyals to 4,000 Saudi riyals (the effective date still to be determined by the HRSD), which affects Saudization calculations under the Nitaqat system used to increase the employment of Saudi nationals in the private sector.

Employer implications

It is expected that most, if not all, of the proposed changes will be included in the final package under the LRI. Employers should review the changes against their existing policies and practices. For example, 24% of employers in Saudi Arabia surveyed by Willis Towers Watson provide maternity leave in excess of statutory requirements, providing 12 weeks at the median and 14 weeks at the 75th percentile. Thus, the new mandate would exceed existing provisions for all but a handful of those employers.

Contact

Steve Clements
Senior Director Global Services and Solutions CEEMEA

Steve joined Willis Towers Watson (WTW) in 2014 as a Director of the Health & Benefits business, responsible for brokering and consulting across the Middle East. With more than 25 years of experience in health and benefits, he specialises in medical plan design and management, and advises both multinational and local clients on employee benefits plans. Steve also heads WTW's carrier relationship and proposition development across the Central & Eastern Europe, Middle East & Africa (CEEMEA) region. Developing a data-driven consultative brokering proposition and the region's first full flexible benefits programme are at the core of his work, as well as establishing a centre of excellence for employee benefits consulting. Steve travels the globe as a guest speaker on employee benefits.


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