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Saudi Arabia reduces penalties for employers’ labour law violations

Small businesses to face smaller fines for wage theft, overwork, and passport confiscation

On February 9, 2024

Saudi Arabia has significantly reduced fines levied on employers for various contract violations, including wage theft, failure to provide a weekly day off, and passport confiscation. The Minister of Human Resources and Social Development (MHRSD) issued a ministerial decision on 10 December 2023, amending the schedule of penalties of the labour law and its executive regulations.

The Saudi government has gradually lowered fines and penalties for employers violating labour laws in recent years. In 2019, penalties were imposed on businesses regardless of their size. A subsequent amendment in 2021 introduced size-based disparities, with smaller companies incurring significantly lower penalties. In the latest amendment to the law, fines have been slashed by up to 80% while expanding the size categories eligible for lower penalties. 

Violations are now classified as ‘serious’ or ‘not serious.’ The amendment does not stipulate the criteria for this classification or whether additional penalties are imposed for ‘serious’ violations.

The classification also presents some contradictions. For instance, while confiscating passports is labelled a ‘serious’ violation, the new decision actually reduces the fines for this offence to SAR 1000 (US$ 266) per violation, a significant decrease from the SAR 5000 (US$ 1,333) specified in the previous regulations.

The reduced fines coincide with the Saudi government’s substantial investment in its private sector and large-scale infrastructure projects in recent years.

In its press release, the MHRSD stated that adjusting fines according to the scale of businesses is intended to “support the stability of businesses and ensure their growth.” The rights of workers employed by these smaller businesses appear to be collateral damage in pursuit of business stability.

Saudi Arabia is already grappling with inadequate regulatory and redress mechanisms, especially concerning the rights of migrant workers. The recent amendment might further encourage employers from not adhering to labour regulations, exacerbating an already challenging situation.