Major Amendments in the Saudi Labor Law

The Kingdom of Saudi Arabia has recently introduced significant amendments to its Labor Law, impacting employers, employees, and businesses across various sectors. These reforms aim to enhance labor market efficiency, ensure employee rights, and align with Saudi Vision 2030. Consulting a reputable law firm in Saudi Arabia is crucial for understanding these changes and ensuring compliance. By improving job security, streamlining dispute resolution and ensuring fair workplace treatment, these reforms help build a more transparent and competitive labor market for both Saudi and expatriate workers.

Fixed-Term Contracts for Non-Saudi Employees 

• In Saudi Arabia, non-Saudi employees are generally required to work under fixed-term contracts, which are tied to the duration of their work permits (Iqama).

• If the contract does not specify a term, it is automatically considered fixed-term and expires upon the expiration of the work permit. Employers must renew contracts in line with residency and labor regulations to ensure compliance.

Resignation For Definite-Term and Indefinite-Term

Employees on definite-term (fixed-term) contracts in Saudi Arabia must follow specific resignation rules under the Saudi Labor Law (SLL):

• Written Notice: Employees can resign by submitting a written request, which takes effect after 30 days if the employer does not respond.

• Employer’s Right to Delay: Employers may postpone acceptance for up to 60 days for valid business reasons, provided they notify the employee with written justification before the initial 30-day notice expires.

Employees on indefinite-term contracts in Saudi Arabia can resign by providing a written notice, ensuring compliance with the Saudi Labor Law (SLL).

• Notice Period: Employees must give a 60-day notice if paid monthly and a 30-day notice for other pay structures. Employers may waive this period or compensate accordingly.

• Employer’s Right to Delay: Under the recent amendments, employers in Saudi Arabia have the right to delay termination of indefinite-term contracts under specific conditions, such as business restructuring or financial constraints.

Leave Policies

• Maternity leave has been increased to 12 weeks, allowing mothers more time for recovery and childcare.

• Paternity leave grants male employees three days off within seven days of childbirth, ensuring they can support their families during this critical period.

• Employees are entitled to grievance leave, providing time off to mourn the loss of an immediate family member.

Workplace Dispute Policy

• A workplace Dispute Policy ensures employees can raise concerns about unfair treatment, conflicts, or policy violations in a structured and confidential manner.

• Employers must provide a clear framework for filing complaints, conducting impartial investigations and ensuring fair resolutions.

• This policy promotes a transparent and respectful work environment, safeguarding employee rights and organizational integrity.

Enhanced Probationary Peroid

• The probation period in Saudi Arabia has been extended to up to 180 days (previously 90 days), giving employers more time to assess new hires.

• Additionally, specific leave types, such as Eid holidays and sick leave, are no longer automatically excluded from the probation period calculation.

• This change provides greater flexibility, allowing employers and employees to clearly define which types of leave will count toward the probation period in their contracts.

Over Time Pay

• Under the Saudi Labor Law (SLL), employees are entitled to overtime compensation for work exceeding 8 hours per day or 48 hours per week.

• Overtime pay is calculated at 150% of the regular hourly wage, ensuring fair compensation for extra work.

• Employers must comply with these regulations to protect employee rights and maintain a balanced work environment.

Skills Development and Saudization Regulations

• Employers in Saudi Arabia must implement workforce training programs to develop Saudi talent in line with Vision 2030 goals.

• Saudization (Nitaqat) regulations require businesses to meet local hiring quotas, with non-compliance leading to fines, restrictions, or limits on expatriate work permits.

• The government supports Saudization through training initiatives, wage subsidies, and career development programs to boost Saudi employment.

Consequences of Saudization Violations

• Companies that fail to meet Saudization requirements may face fines, business restrictions, or suspension of work visas for expatriates.

• Non-compliance can also lead to difficulties in obtaining government contracts, renewing licenses, or expanding operations.

• Ensuring compliance not only avoids penalties but also enhances business sustainability and access to government incentives.

The Importance of Seeking Expert Legal Advice

Understanding and complying with these amendments can be complex and failing to do so may lead to legal consequences. Collaborating with a best law firm in Saudi Arabia can help businesses interpret and implement the new regulations effectively, minimizing risks and ensuring smooth operations.

How an International Law Firm in Saudi Arabia Can Help?

• Legal Consultation: A law firm in Saudi Arabia can provide expert insights into how the amendments affect specific industries, helping businesses navigate the evolving regulatory landscape.

• Contract Review & Compliance: Ensuring that employment contracts and HR policies align with the new labor law is essential. A reputable law firm in Saudi Arabia can assist in drafting and reviewing contracts to maintain compliance.

• Dispute Resolution: In case of labor disputes or contract terminations, a lawyer in Saudi Arabia offers legal representation and mediation services to protect business interests and ensure fair resolutions.

Final Thoughts..

The major amendments in the Saudi Labor Law reflect the Kingdom’s commitment to creating a fair, transparent, and competitive labor market in line with Vision 2030. Key changes in probation periods, leave entitlements, Saudization compliance and employee rights aim to enhance workplace regulations and protect both employers and employees. To navigate these evolving legal requirements, businesses can benefit from expert guidance provided by a law firm in Saudi Arabia. Staying informed and compliant not only avoids penalties but also strengthens business sustainability and workforce stability in the Kingdom.

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FAQs

1. How has Saudization compliance changed?

Ans: Companies must meet stricter Saudization quotas, with non-compliance resulting in fines, operational restrictions, and visa limitations for expatriate workers.

2. Who can help businesses stay compliant?

Ans: A law firm in Saudi Arabia can assist companies with labor law compliance, contract structuring, and dispute resolution to ensure adherence to legal updates.

3. What modifications have been introduced for employment contracts?

Ans: Saudi labor law amendments require fixed-term contracts for expatriates, with automatic renewal unless specified otherwise. Employers must clearly define probation periods, termination terms, and Saudization compliance. Resignation now requires a 30-day notice. Consulting a law firm in Saudi Arabia ensures proper contract structuring and compliance with these updates.

4. How has the annual leave policy changed under Saudi labor law?

Ans: Under the updated Saudi labor law, employees are entitled to at least 21 days of paid annual leave, increasing to 30 days after five years with the same employer. Employers cannot deny leave without a valid reason, and employees may carry forward unused leave with mutual agreement. Legal consultation ensures compliance.