The Kingdom of Saudi Arabia's (KSA) employment environment has witnessed extensive development in the first six months of 2024. A summary of these recent developments, with insight into changes that may affect both employers and employees, is discussed below. This alert aims to provide a comprehensive overview of the evolving legal landscape impacting employment relationships in KSA this year and includes updates in amicable settlement procedures, as well as broader initiatives promoting inclusivity and equality in the workplace. The alert includes overviews on:

• Schedule of violations and penalties
• Amicable settlement procedures
• Job transfer service via the Masar platform
• Amendments to Flexible Work Regulation
• Inclusivity and equality in the workplace
• Enhancement of social security pension benefits
• Salary delays
• E-documentation for operation and maintenance contracts
• Salary allocation as a percentage now available on the QIWA platform
• Localisation

Please see below for further details on each of the above topics.

Schedule of violations and penalties

Based on Ministerial Resolution No. 75913 of 19/5/1445H (corresponding to 3 December 2023), a comprehensive schedule of violations and penalties related to employer and employee conduct under the KSA Labour Law has been released and is now in force in 2024. The resolution, referencing Royal Decree No. M/51 and subsequent amendments, specifies fines for various violations, such as non-compliance with occupational safety regulations, failure to provide safety instructions, employing children under the legal working age and not providing medical insurance as per the KSA Cooperative Health Law. Penalties have also been outlined for employing non-Saudi employees without the required permits, wage discrimination and not adhering to Saudisation percentages for certain professions. Employers are now obligated to pay fines within 60 days of notification and objections to penalties for violations must be filed within the same timeframe. This update supersedes conflicting resolutions outlining violations and penalties under KSA Labour Law.

Amicable settlement procedures

The Ministry of Human Resources and Social Development (MHRSD) has issued Ministerial Resolution No. 91285 dated 20/6/1445H (corresponding to 2 January 2024) adopting rules and procedures for the amicable settlement of labour disputes, thereby replacing the rules previously issued on 20/3/1440H (corresponding to 28 November 2018), under Ministerial Resolution No. 57167. Pursuant to this resolution, a dedicated Amicable Settlement Department (ASD) will be established within KSA labour offices, serving as the initial point of contact for resolving disputes before resorting to formal litigation. The resolution stipulates that the ASD is to review all disputes related to employment contracts, wages, rights, work injuries, termination, disciplinary penalties and employees under KSA Labour Law.¹ The qualifications of mediators has also now been stipulated, as well as the process for confidential settlement procedures which may be conducted electronically, with the Arabic language as the official language for proceedings. Settlement records from such procedures are also confirmed as enforceable in KSA. This update encompasses 27 articles and the most notable areas are as follows:

Dispute resolution timeline

Settlement sessions shall be held within 10 working days from the date the claim is filed (Article 12). The dispute shall be resolved by the ASD within 21 working days from the date of the first settlement session. However, where the dispute has not been settled within the designated period, the claimant may file a lawsuit to the KSA Labour Court in accordance with the procedures stipulated by the Ministry of Justice (MoJ).

Mediators may arrange for a second session, provided both settlement parties attended the first session and showed willingness to resolve the dispute amicably (Article 16).

Failing to attend the sessions

If a claimant fails to attend a scheduled settlement session, the claim shall be archived for the remainder of the 21 days from the date of the first settlement session. The claimant may now request the resumption of the case file within this timeframe despite their absence. However, after the lapse of the specified period, the claim will be as though it never existed (Article 15).

Despite being notified of the appointment, if a claimant fails to attend the session without a valid excuse, the ASD may in its own discretion announce that the dispute is incapable of being resolved amicably (Article 16).

Settlement Record

The Settlement Record is a document prepared by the mediator demonstrating an amicable resolution between the settlement parties. Once an amicable resolution between the parties to the dispute has been reached, a Settlement Record shall be prepared by the mediator and signed by:

• the settlement parties;
• the mediator; and
• the office of General Administration for Amicable Settlement of Disputes.

A copy will then be made for each party and one for the records of the ASD. The Settlement Record shall be in accordance with the template produced by the MHRSD (Articles 20 and 24). There are two conditions to produce a valid Settlement Record:

• both the parties have the legal authority to reconcile; and
• the parties verify the Settlement Record through the approved means of verification.

If either of these conditions are not met, the Settlement Record shall be deemed null and void.

Once the Settlement Record has been approved by the ASD, it shall be deemed an enforceable document, as per the KSA Enforcement Law enacted by Royal Decree No. M/53, dated 13/8/1433H (corresponding to 7 March 2012) (Article 26).

In case of ambiguity or confusion related to the Settlement Record, the ASD is now responsible for clearing such uncertainty (Article 24).

Failure to settle the dispute amicably

If the parties fail to resolve the dispute amicably, the mediator now has authority to access the summary of the sessions to seek the reason for failure to do so. Furthermore, the mediator can now also draft a record explaining the result of the sessions. At this point, the claimant has the option to file a claim before the KSA Labour Court (Article 22).

As per this update, if the mediator now discovers that the claim involves a violation of the KSA Labour Law, its implementing regulations or related decisions, the ASD is obliged to notify the MHRSD which will conduct the necessary investigations accordingly. Furthermore, in line with this resolution, the MoJ issued a public consultation for a law reform project reflecting the new amicable settlement procedures in both the KSA Labour Law and the KSA Civil Procedures Law which closed on 29 April 2024, with confirmation of the outcome awaited.

Job transfer service via the Masar platform

The MHRSD has unveiled a new job transfer service for government employees, operational through the Masar platform, as of 14 March 2024. This initiative is designed to optimise human capital investment and to simplify the process of internal and external transfers among government agencies. The service encompasses a variety of options, including direct transfers, promotions and announcement-based transfers, with or without promotion. It is tailored to facilitate the movement of employees on the general government employee ladder, allowing them to apply for transfers and promotions, subject to meeting the established criteria. The service also equips HR specialists within these entities to efficiently manage transfer procedures. This move is aimed at supporting the strategic employment of internal resources, enhancing the transfer system between agencies, and ensuring a governed and efficient transfer process.

Amendments to Flexible Work Regulation

The MHRSD has issued Ministerial Resolution No. 153307 dated 11/11/1444H (corresponding to 19 May 2024) setting out amendments to the Flexible Work Regulation. The main amendment outlined entails the calculation of a full point for the entity in the Nitaqat Saudisation Programme upon completion of a total of 160 hours of flexible work by an employee or a group of employees. In addition, flexible work hours exceeding 95 hours per month will now be deemed additional work, but may be subject to a contract's basic hourly rates, provided the working hours per month do not exceed a total of 160 hours for a single employer. In addition, an employee who is now employed with flexible hours has the right to accept or otherwise reject work requests demanded by the employer at any time. Lastly, a flexible employment contract with a single employer has now been stipulated to be able to exceed a year in duration. Upon reaching one year, the employer may extend or renew the contract with the consent of the employee or otherwise sign a new full-time employment contract with the employee.

Inclusivity and equality in the workplace

Cabinet Decision No. 416 of 1444H is now in force. The policy supports the adoption of a nationwide strategy aimed at fostering equal opportunities and fair treatment within the workforce, spanning the private and public domains. It presents a strategic framework for a 10-year incremental roll-out, emphasising the establishment of anti-discrimination rules, evaluation of outcomes and the increased integration of all into the KSA workforce.

Enhancement of social security pension benefits

As of 2024, the MHRSD has declared a significant uplift in social security pension rates. The monthly disbursement has increased from SAR 1,100 to SAR 1,320, marking a notable 20% escalation. Furthermore, the pension benefits for dependants have also risen, reaching SAR 660 for each qualifying dependant.

Salary delays

The MHRSD has introduced rigorous regulations via the Mudad platform to address the issue of delayed wages. Employers who fail to pay salaries for three successive months will now encounter a suspension of all their services. Affected employees are granted the ability to switch to a different employer without requiring approval from their current employer. Additionally, the timeframe for employers to provide a rationale for delayed salary payments has been shortened to 10 days, while employees will have a three-day window to reply. These measures are designed to strengthen the protection of employee rights and ensure the punctual disbursement of salaries across all employees in KSA.

E-documentation for operation and maintenance contracts

The MHRSD has commenced the initial stage of digital recording for operation and maintenance agreements within public institutions. This project is being implemented through the QIWA platform and is now at an advanced stage. The purpose of this digital shift is to oversee the localisation of such contracts, verify adherence to set localisation quotas and boost the involvement of the Saudi workforce. This measure encompasses agreements with governmental bodies and enterprises predominantly owned by the state, spanning diverse fields such as urban sanitation and information technology upkeep. Employers in KSA now need to ensure all their employee contracts are documented on the QIWA platform to mitigate future risks.

Salary allocation as a percentage now available on the QIWA platform

The MHRSD QIWA platform has introduced a new functionality that permits employers to allocate salaries as a percentage of employer earnings. This addition is designed to offer greater versatility in managing payroll and is especially beneficial for companies where income varies. It affords employers the ability to adjust their wage distribution in line with changing financial circumstances, promoting both the stability of the business and equitable payment for employees.

Localisation

Dental profession

The MHRSD, in partnership with the Ministry of Health (MoH), has launched a strategic initiative to increase employment opportunities for Saudi nationals by localising 35% of jobs in the dental sector. Effective from 10 March 2024, the policy mandates that private dental practices with a workforce of three or more must comply with this localisation ratio. The MoH will oversee the implementation, ensuring it meets the demands of the labour market. Private sector employers will receive incentives and support from the MHRSD, including recruitment and training assistance for Saudi professionals. A detailed manual outlining the localisation requirements is available on the MHRSD's website and adherence to these regulations is strictly enforced to avoid penalties.

Insurance sales profession

The MHRSD declared the nationalisation of all insurance sales positions by 15 April 2024. This directive from the KSA Insurance Authority is a strategic move to promote the employment of Saudi nationals in the insurance field. It also stipulates that individuals in non-sales capacities within the industry are prohibited from obtaining sales-related commissions. The objective of this policy is to cultivate expert local talent and enhance the value of services within the insurance sector.

Engineering profession

The MHRSD issued Ministerial Decision No. 99895 dated 9/7/1445H (corresponding to 23 November 2023) regarding the Saudisation of the engineering profession by 25% as of 15/1/1446H (corresponding to 21 July 2024). The aim of this decision is to empower Saudi nationals to work in the private sector in line with the MHRSD's vision and strategies.

In summary, the first half of 2024 has seen a great deal of activity and updates positively impacting employers and employees in KSA. This is in line with KSA's Vision 2030 and the increasing ease of doing business in KSA. Further updates are expected throughout the remainder of the year, which will provide clarity for foreign investors setting up in KSA and align current practices for employers who have operated in KSA for a number of years.

Dentons' Global Employment and Labor Group includes around 450 lawyers, spread across our offices, who regularly represent management in connection with employment- and benefits-related litigation, corporate and governmental investigations, executive compensation and counselling projects. It has collective, extensive experience assisting employers in all industry sectors. It represents local and multinational businesses with respect to the full range of workforce-related issues and matters.

For further information regarding KSA Employment and Labour Law, please contact our KSA team on: KSAEmploymentTeam@dentons.com

Also see the Dentons Global Quarterly Employment review here quarterly updates on KSA employment and law.

This article is also available in Arabic, click here to download. 

1. All references to KSA Labour Law refer to Royal Decree No. M/51 of 23 Sha’ban 1426AH (corresponding to 27 September 2005), which entered into force on 26 April 2006 with its subsequent amendments, and the Implementing Regulations promulgated by virtue of Ministerial Decision No. 1/693 of 29 Safar 1428AH (corresponding to 19 March 2007) and its subsequent amendments.↩