UK: Nitaqat: 18 Months On

Last Updated: 18 January 2013
Article by Sara Khoja and Nouf Aljoaid

An employer's obligation to recruit and employ KSA nationals has existed for some time. The policy of Saudization has however, been significantly developed with the introduction of the Nitaqat system in August 2011 and subsequent measures are changing the landscape of managing a workforce in KSA.

It is now almost 18 months since the Ministry of Labour (MOL) in the Kingdom of Saudi Arabia (KSA) announced the introduction of a new system called Nitaqat which is designed to enhance the employment of KSA nationals in the private sector. The MOL in KSA has recently stated that in its first year, this programme resulted in the employment of 380,000 KSA nationals achieving a greater employment rate for KSA nationals than the five years preceding its introduction. The programme has also resulted in the employment of 50,000 women. This legal update examines the development of the Nitaqat system since it was introduced around August 2011 and the way it is expected to develop in the coming year.

Nitaqat translate as "points" and every employer in KSA registered with the Ministry of Labour is awarded a number of points based on various factors and allocated into a category. The categories are red, yellow, green and premium. The higher the category an employer falls into the greater flexibility it has with regard to labour matters generally. The table below sets out the advantages of being in the higher categories of green and premium.

Green

  • Receiving visa applications in accordance with the rules of the Guide issued by the MOL (Guide) on the recruitment of new labour (provided that the employer does not thereafter fall below the green category). This shall exclude applications supported by letters of recommendation from the government in accordance with the exclusions set out in article 4.4.2 of the Guide.
  • The grant of a new visa to an employer for every two employees who leave its employ permanently, provided that the employer does not fall below green after the grant and the application for the new visa is made within one year following the departure of the first employee.
  • The ability to amend the profession of expatriate employees, (provided that the new profession is not one excluded by Cabinet Resolutions or Royal Decree).
  • A grace period of six months during which the MOL will continue to provide the entity with services despite expiry of the time frame for the submission of the Certificate of Zakat and Income Tax.
  • The ability to contract with expatriates working for entities in the yellow or red categories and to transfer their services without needing the consent of the current entity for which they work. This is subject to the employer not falling below the green category following the transfer and taking into consideration the number of visas previously granted to the employer (even those in relation to expatriates who have not yet arrived in KSA).

Premium

  • The issue of new visas for any profession required by the employer, provided that the profession is not one which is excluded by Cabinet Resolutions or Royal Decree and provided that the employer maintains its standing in the premium category after obtaining these visas. In determining the number of visas to be provided, the number of visas previously provided to the employer will be taken into consideration (including those relating to expatriates who have not yet arrived in KSA).
  • Receiving visa applications in accordance with the rules of the Guide on the recruitment of new labour, provided that the employer does not fall below green after the grant. This shall exclude applications supported by letters of recommendation from the government in accordance with the exclusions set out in article 4.4.2 of the Guide.
  • The ability to change the profession of the expatriates working for the employer to any other profession, provided that the new profession is not one which is excluded by Cabinet Resolutions or Royal Decree.
  • The ability to transfer the services of expatriates working for other entities and changing the profession of the expatriate at the same time, provided that the employer maintains its standing in the premium category after the transfer and taking into consideration the number of visas previously granted to it (even those in relation to expatriates who have not yet arrived in KSA).
  • The ability to transfer the services of expatriates working for other entities without having to satisfy the condition of completing two years of service with their current entity, provided that the employer maintains its standing in the premium category after the transfer and taking into consideration the number of visas previously granted to it (even those in relation to expatriates who have not yet arrived in KSA).
  • The ability to contract with expatriates working for entities in the yellow or red category and to transfer their services to it without needing the consent of the entity for which they work, provided that the employer does not fall below green following the transfer and taking into consideration the number of visas previously granted to the employer (even those in relation to expatriates who have not yet arrived in KSA).
  • Receiving a grace period of one year during which the MOL will continue to provide the employer with services despite the expiry of the validity of certain documents required for the MOL to provide services to an employer.
  • The ability to renew the work permits of expatriates, regardless of the length of their residency visas but provided that the remaining period of residency does not exceed 3 months at the time of renewal.

Over the past year, the KSA MOL has developed the Nitaqat system and clarified the way that it operates. Over recent months the MOL has issued Ministerial Resolutions clarifying the following:

  • Part-time employees will be counted as half a point, for the purposes of Nitaqat. No more than 10% of an employer's KSA workforce should consist of part-time employees; although this permitted percentage increases to 50% for employers within the food industry.
  • Credit is given for the employment of female employees.
  • Increased points are awarded for employing students. The ratio of students should be no more than 10% of a KSA workforce. This percentage increases to 25% for employers within the restaurant business.
  • Great encouragement is given for the employment of disabled employees under Nitaqat. One disabled employee will count as four employees under Nitaqat. This enhanced points ratio applies provided disabled employees make up no more than 10% of your KSA workforce.
  • Individuals who do not have KSA citizenship, whose mother's are KSA nationals are counted under the Nitaqat system as KSA nationals.
  • Convicts are counted as two employees for the purposes of Nitaqat, if employed during the two years following their release. Once the two years lapses they are counted as any ordinary employee under the system.These protected groups of former convicts, disabled employees and students in normal circumstances make up no more than 15% of a KSA national workforce in order to be counted under the Nitaqat system. The proportion for restaurants increases to 30%, but 15% of this must be made up of students.
  • A KSA national must be registered with the General Organisation for social and monthly contributions made by the employer for the individuals to be counted under the Nitaqat system.
  • Employees must also be receiving a minimum salary of SAR 3,000 per month, if full time or SAR 1,500 per month, if part-time. This is not a national minimum wage as such, but this is a minimum salary in order for the individual to be counted towards the Nitaqat system and the Saudization target in general.

Hafiz

Alongside Nitaqat the Ministry of Labour has also introduced a system called the Hafiz system. This is a system designed to connect unemployed KSA nationals with employers who have vacancies or recruitment needs. The system requires employers to notify the Human Resources Development Fund (HRDF) within their locality of all vacancies within the organisation, detailing the nature of the role, location, qualification and in a general sense the salary bracket or range which the role attracts. Under the Hafiz system, an employer is obliged to submit yearly reports within the first month of the Islamic calendar (Muharram) setting out the vacancies it had in the past year and which it filled through the national workforce or through foreign employees and the vacancies it expects to have in the coming year. The HRDF is also able to nominate candidates for the employer to consider and interview for the notified vacancies.

Employers are even able to submit details of vacancies electronically through the newly released electronic recruitment website; Taqat, which is jointly sponsored by the MOL and the HRDF. Taqat aims at providing services to both employers and job seekers in the private sector.

Further saudization measures

Over the past few months, the KSA MOL has issued further Ministerial Resolutions and announced the following:

  • An additional fee for renewing expatriate employees' work permits has been imposed on KSA entities employing more than half of their workforce from non KSA nationals. The decision was implemented on the 15th of November 2012 and requires private companies with majority expatriate workforces to pay a fee of SAR 2,400 (approximately USD 640) a year for each foreigner in excess of a 1:1 ratio KSA national to foreign employees. Foreigners with Saudi mothers and citizens of other Gulf Cooperation Council countries are considered as Saudi nationals when implementing this decision. Moreover, as opposed to the calculation method used in the Nitaqat system, disabled employees and convicts are counted as one national employee for the purposes of this decision.
  • A proposal to launch a system similar to Nitaqat but in respect of classifying individuals. This system purports to upgrade Saudi employees' work efficiency and prevent job desertion; it will work on classifying employees with regards to discipline and performance. There will be three categories, namely: red, yellow and green, with green being the highest and red being the lowest. Penalties on red categorised employees will range from being prohibited from obtaining HRDF support to being prohibited from taking up employment.
  • The Wage Protection Program (WPP) is an electronic mechanism developed by the MOL and the Saudi Arabian Monetary Authority (the Saudi Central Bank) to determine the wages of employees in the private sector and ensure that employers pay employees' wages in full and on time. The implementation of WWP will be gradual and based on an entity's workforce size, starting in the middle of this year up to late 2014.
  • The Ajeer system will soon be launched in order to regulate expatriates' work in the KSA. The system aims at limiting the trading of visas, the reduction of abandoned expatriates and the improvement of the quality of expatriate employees.
  • A system called Jahiz has also been announced in the last few months which is designed to link returning graduates studying abroad to employers in the private sector for employment.
  • The appointment of a thousand new labour inspectors to enforce the KSA Labour Law, the system of Nitaqat and Hafiz within the private sector.

In light of the KSA MOL's recent and upcoming changes, it is safe to say that the MOL is on a forceful mission to lower unemployment amongst Saudi citizens and limit labour from abroad. Whilst some of these developments remain untested, it is difficult to ascertain how they will pan out in practice. Employers would be wise to begin examining and developing their strategies for employee training, development and recruitment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Sara Khoja
Nouf Aljoaid
 
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