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Saudi Arabia allows businesses to reduce workers wages without consent

On May 7, 2020

Saudi Arabia’s Ministry of Human Resources and Social Development (MHRSD) has enacted a new regulation on 3 May which allows employers to unilaterally cut workers hours and wages during the next six months. 

Employers who are affected by the COVID-19 crisis are allowed to reduce workers wages up to 40% of their total salary as long as they also lower their working hours proportionally. The decision applies to both Saudi and expatriate workers. However, struggling businesses can apply for a government assistance package through the General Organisation for Social Insurance to cover 60% of the wages of nationals, so it is unlikely that they will be adversely affected.

Prior to this decision, employers needed mutual agreement to reduce their working hours and pay. Employers still need workers’ consent to place them on unpaid leave or “exceptional leave,” the duration of which is determined by both parties. 

Amid the COVID-19 crisis, several Gulf countries are allowing businesses to modify or terminate contracts, force unpaid leave or reduce wages of the non-national workforce. The UAE, Oman and Qatar have all done so recently. 

Kuwait’s Cabinet has also recently agreed to amend the labour law to allow businesses to reduce wages and modify contracts. In the face of fierce opposition by Kuwaiti MPs to the proposed amendments and its repercussions on Kuwaiti workforce in the private sector, it is likely that the amendment will be directed at migrant workers only, whoich comprise of 96% of Kuwait’s private sector workforce.