Saudi Arabia Introduces Amendments to its Labour Law

Saudi Arabia published new labour law amendments on 23 August 2024, which will take effect in 180 days, on 19 February 2025. The amendment includes new definitions, provisions, and penalties related to labour law. The changes will require all employers to review their employment contracts and adjust their policies and procedures accordingly.

According to Saudi’s Ministry of Human Resources and Social Development (MHRSD), the amendments aim to create “an attractive and distinctive labour market in line with the best international practices.” The Ministry added that they “are also designed to increase job opportunities for citizens, encourage foreign investment, and attract the skilled foreign talent needed by the labour market.”

Outlined below are the key changes to the labour law concerning migrant workers.

Jump to a summary table.

Definitions (Article 2 of the labour law)

The amendment introduces two new definitions to the labour law, these include:

1. Resignation is defined as “the employee’s written expression of his/her desire, without coercion, to terminate a fixed-term employment contract without any condition or restriction, and the employer’s acceptance of it.” 
2. Outsourcing is defined as “the provision of a worker to perform work for someone other than the employer through a licensed establishment.”

Resignation was not clearly defined in the labour law, but this amendment now provides clarity. Likewise, the law did not define the practice of outsourcing through manpower agencies, despite its widespread use by companies in Saudi Arabia for their workforce needs. The company outsourcing its employees will be responsible for contractual obligations.

Many businesses in Saudi Arabia, particularly the larger ones, use manpower supply agencies to meet their needs. Employers use this strategy to avoid responsibility for Saudisation quotas, wages, benefits, work and living conditions, to more easily dismiss workers, and to bypass visa restrictions, thereby reducing labour costs. As MR previously reported, these practices have led to severe labour abuses. Labour outsourcing has also resulted in deceptive hiring, where some recruitment firms advertise large companies as the employers, only for workers to end up working for contracting companies instead. While the amendment defines this practice, the ministerial decision to regulate outsourcing is still to be issued.

Exemptions (Article 7 of the labour law)

Sea workers working on board vessels with a load of less than 500 tonnes are no longer exempt from the labour law, which includes all fishermen in the country (see below for more on new provisions for sea workers).

The amendment stipulates that for workers excluded from the labour law (domestic workers, agricultural workers, private shepherds, and those in similar positions), procedures and mechanisms shall be implemented to regulate their movement and determine the responsibilities and duties of employers, as well the offices that will be involved in recruiting them. The amendment also states that the penalties outlined in Article 229 of the Labour Law (see below) for recruiting without proper permits from the MHRSD will apply to the exempted categories mentioned above.

Work Permits and Saudisation (Article 35 of the labour law)

The amendment allows the Ministry to decline the renewal of a migrant worker’s permit if the employer fails to meet job localisation (Saudisation) requirements. However, it adds that workers will not be penalised for their employer’s non-compliance, and may have the option to transfer their employment to a new employer without needing approval from the non-compliant employer.

This amendment is a positive step since migrant workers have been penalised for non-compliance by employers, including by being deported if caught working in jobs designated for Saudi citizens.

Contracts (Article 37 of the labour law)

Contracts for non-Saudi workers that do not specify a duration are now automatically considered to be one year in duration from the actual start date of employment. If the work continues beyond this period, the contract automatically rolls over for an additional year. Previously, if a contract did not specify a duration, the work permit’s validity was treated as the length of the contract.

Article 52 of the labour law, which outlines the required elements of a contract, now stipulates that the Ministry shall establish a standard contract. This contract must include the employer’s name and location, the worker’s name and nationality, proof of the worker’s identity, their residential address, the agreed-upon wage with benefits and allowances, the type and location of the work, the start date, the duration if the contract is fixed-term, and the basic rights and obligations of each party. Though not specified in the law, this contract is likely to be an e-contract.

Probation (Article 53)

The amendment requires that the probation period be explicitly stated in the employment contract and not exceed 180 days. The implementing regulations will outline the specific provisions related to probation, including which types of leave are excluded from the calculation of the period. Previously the labour law required the probation period to be 90 days with the possibility of extension. 

The amendment also explicitly states that either party has the right to terminate the contract during the probation period. Previously, the labour law allowed this right to be granted to only one party if agreed upon in the contract.

Employers’ Obligations (Article 61 of the labour law)

The amendment introduces provisions regarding the employer’s obligations. Employers must either provide accommodation and suitable transportation or offer allowances in lieu of as part of the employment offer. While these provisions are commendable in the absence of specific regulations defining what constitutes a “reasonable allowance” employers usually provide substandard housing or inadequate food and housing allowances. Furthermore, the zoning issues that make it difficult for workers to find decent housing may result in them renting bed space in crowded accommodation or live in remote areas.

The amendment also prohibits employers from engaging in actions that would undermine or weaken equal opportunities or treatment in employment. This includes any exclusion, differentiation, or preference between job applicants or employees based on race, colour, gender, age, disability, social status, or any other form of discrimination. However, without a national minimum wage, and wages decided bilaterally in many cases, nationality-based discrimination is ingrained in the labour market system.

Last year, the MHRSD issued a memo defining discrimination and equal opportunities, mirroring the definition in the recent amendment. However, the Ministry highlighted that discrimination between nationals and foreign citizens are exceptions to the discrimination regulations and are not considered discriminatory.

Disciplinary actions (Article 72 of the labour law)

The amendment extends the period for a worker to object to disciplinary action taken by an employer from 15 to 30 days, excluding official holidays. It also specifies that if a worker’s grievance is rejected or not addressed in writing within 15 days of submission, the worker has the right to appeal to the labour courts within 30 days from either the date of rejection or the expiration of the decision period, whichever comes first.

Termination of Contract (Article 74 of the Labour Law)

The amendment adds employer bankruptcy as a lawful reason for terminating an employment contract. It also adds resignation as one of the reasons for terminating an employment contract.

Notably, Article 196 of Saudi Arabia’s current Bankruptcy Law places workers’ wages among the lowest-priority debts in insolvency proceedings.

Resignation Procedures (Article 79 repeated of the labour law)

The amendment adds new provisions to regulate the resignation process for workers employed on limited-term employment contracts:

• Submitted resignation requests by workers shall be deemed accepted if 30 days have passed since its submission without a response from the employer.
• The employer may postpone accepting the resignation request for a period not exceeding 60 days “if the interest of work so requires,” and by a “written reasoned explanation” submitted to the worker, provided that the postponement of acceptance is before the end of the 30-day period noted above.
• The worker’s employment will end on the earlier date of the above-mentioned time periods.
• The worker may withdraw their resignation request within a period not exceeding 7 days from the date of submission, unless the employer accepts it before the withdrawal.
• Resignation requests cannot include a future effective date. During the period following the resignation request, the employment contract remains in effect, and both parties must fulfil all obligations outlined in the contract.
• A worker whose contract ends due to resignation is entitled to all rights specified under labour law. Previously, workers who resigned after two to nine years would only receive a portion of their dues, while those who resigned before two years would receive none.

Compensatory Leave Instead of Overtime Pay (Article 107 of the labour law)

The amendment allows employers to offer compensatory leave instead of overtime pay, provided they have the worker’s consent. The specifics of this arrangement will be outlined in the Implementing Regulations.

Maternal and Other Leave Benefits (Articles 113 and 151 of the labour law)

The amendment extends maternity leave to 12 weeks of full pay. This includes six weeks to be taken immediately after delivery and the remaining six weeks to be taken starting no earlier than four weeks before the expected delivery date. Previously, maternity leave was 10 weeks. 

Married male workers are entitled to three days of paternity leave, to be taken within seven days of the newborn’s delivery. All workers are also entitled to three days of bereavement leave in the event of a sibling’s death. Previously, the law did not specify when paternity leave could be taken after birth and only provided bereavement leave for the death of a spouse, ascendants, or descendants. Employers may request supporting documents for these leave entitlements.

Sea Workers (Articles 168, 178 and 182 of the labour law)

The amendment revises Article 168 to specify that the terms ‘ship,’ ‘ship’s outfitter,’ ‘captain,’ ‘sailor,’ and ‘maritime employment contract,’ as used in the relevant chapter of the labour law, will have the meanings defined in the Commercial Maritime Law.

According to the amendment, the Minister, in coordination with the General Authority for Transport, will issue regulations governing maritime employment contracts. These regulations will address the rights and obligations of both parties, as well as provisions related to living conditions, safety, food, sleep, and entertainment on board. They will also cover measures to prevent occupational injuries and diseases, health care, working hours, rest and vacations, skill training and development for seafarers, repatriation, certification of the ship’s compliance with the system, inspection and monitoring mechanisms, violation determination and penalties, and provisions for amicable resolution of complaints.

The amendment also removes a previous provision that allowed employers to terminate sea workers’ contracts without notice or compensation if the vessel sank, was seized, went missing, or became unseaworthy.

Penalties (Article 229 of the labour law)

The amendment introduces an article that imposes fines between SAR 200,000 (US$ 53,302) and SAR 500,000 (US$ 133,255) for violations of Article 30 of the labour law related to providing recruitment and manpower services without proper certification from the MHRSD. This fine was not explicitly mentioned in the labour law, although the MHRSD’s ministerial orders on penalties have previously imposed fines for practices similar to those described in Article 30 of the labour law.