Saudi Arabia's recent amendments to its Labour Law mark a shift toward a more structured, transparent employment environment. Set to take effect on February 18, 2025, these changes align with the Kingdom's Vision 2030 goals, aiming for a balanced labor market that encourages fair treatment, Saudisation, and improved work conditions. Here, we break down the core changes, their legal and practical impact, and key actions for businesses to ensure compliance.
Heightened Regulations for Staffing and Outsourcing
The amendments bring significant changes to staffing and outsourcing regulations. As the Ministry of Human Resources and Social Development (MHRSD) places a new emphasis on regulating companies that supply temporary labor, these businesses face stricter licensing requirements and hefty fines (SAR 200,000 to SAR 500,000) for non-compliance. The sectors most impacted include construction, logistics, manufacturing, and tech, where temporary labor is heavily relied upon. Employers need to verify that staffing providers hold the correct licenses and that all contract terms comply with the new regulations.
This shift pushes companies to reconsider their approach to workforce management and emphasize hiring through official, licensed channels. It aligns with Vision 2030's focus on Saudisation, which encourages employing Saudi nationals by making alternative hiring routes and government-backed platforms more prominent. Failure to comply not only risks operational disruption but can also lead to substantial reputational damage.
Expanded Employee Rights: Enhanced Leave Provisions
The new amendments also expand leave entitlements, granting 12 weeks of maternity leave (six of which are mandatory post-birth), three days of paternity leave, and an additional three days of bereavement leave for the death of a sibling. These changes reflect a progressive shift toward global labor standards, focusing on work-life balance and family support.
Employers should review current leave policies and update employee handbooks to reflect these entitlements, ensuring smooth implementation and avoiding potential conflicts. Detailed documentation and clear communication of these policies are essential, allowing employees to understand their rights and promoting a supportive workplace culture that aligns with the new legal framework.
Reinforced Anti-Discrimination and Equal Opportunity Mandates
The amendments introduce stringent anti-discrimination policies, emphasizing equal opportunity across hiring and employment. The law now prohibits discrimination based on race, gender, disability, or age, requiring employers to adjust hiring practices and HR policies accordingly. In sectors historically prone to disparities—such as recruitment, promotion, and compensation—companies are now legally obligated to enforce equitable treatment.
This mandate calls for concrete action, including standardized hiring criteria, regular audits of recruitment practices, and clear job descriptions. These steps are critical in aligning with the Kingdom's vision for a fair, inclusive labor market and avoiding potential legal repercussions associated with discriminatory practices.
Streamlined Probation and Termination Processes
The amendments provide clarity on probationary terms, now allowing a maximum period of 180 days without needing renewal agreements. Additionally, specified-term contracts can now be resigned from before their term, with resignation becoming effective after 30 days without an employer's response. For indefinite-term contracts, the notice period stands at 30 days for employees and 60 days for employers, providing a structured approach to notice periods and minimizing administrative back-and-forth.
These changes simplify contract management, reducing the administrative load for HR teams and ensuring transparency in the employer-employee relationship. For effective compliance, employers should update contract templates and adjust HR policies to align with these new standards, making sure all procedures are documented to prevent future disputes.
Obligations for Housing, Transportation, and Training
The new amendments impose additional responsibilities on employers, specifically concerning housing and transportation allowances, which can either be provided directly or as cash equivalents. This mandate is particularly impactful for organizations employing a significant number of expatriates, as it aligns with the government's goal of improving living standards for foreign workers.
Further, employers with 50 or more employees are now required to establish training programs focused on Saudi nationals. This aligns with Vision 2030's Saudisation goal, pushing companies to invest in upskilling local talent and reducing dependence on foreign labor. Companies across all sectors will need to integrate formal training plans and track their effectiveness as part of this localization effort.
Practical Steps for Business Compliance and Continuity
These amendments reflect a deeper commitment to regulatory alignment, presenting challenges and requiring proactive measures from employers. Key steps for businesses include:
- Review Staffing Contracts: Companies should ensure staffing partners comply with the new licensing requirements to avoid penalties and operational disruptions.
- Update Policies and Communicate with Employees: Employers must update employee handbooks and internal policies to align with the new leave entitlements, anti-discrimination standards, and probation terms, ensuring these changes are effectively communicated to avoid misunderstandings.
- Develop Saudi-Focused Training Programs: Meeting the new training requirements for Saudi employees is essential for compliance and can contribute positively to talent development within the organization. Companies should also consider leveraging government incentives available for Saudisation programs.
- Maintain Thorough Documentation: Keeping detailed records of training sessions, leave entitlements, and any contract updates is essential for meeting the regulatory requirements and ensuring smooth audits or reviews by authorities.
Conclusion: Navigating a New Employment Landscape
The 2025 amendments mark a substantial shift in Saudi Arabia's approach to labor regulation, aligning closely with Vision 2030's inclusive goals. These changes underscore the importance of proactive compliance for businesses, from tightening staffing arrangements to implementing local training programs. As organizations adjust, the new policies present an opportunity to foster a more transparent and fair workplace that ultimately benefits both employers and employees.
For companies navigating this evolving landscape, compliance isn't just about avoiding penalties—it's a strategic move that supports long-term sustainability and alignment with the Kingdom's ambitious vision for economic diversification and workforce inclusion.
This article was originally published on The National
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