Saudi Arabia: Updates to
2 July 2021
Nitaqat is a nationalisation scheme implemented by the government in Saudi Arabia which requires Saudi companies to fill up their workforce to certain levels with Saudi nationals.
The policy has been introduced as a solution to the challenges that the Saudi labour market have been facing, such as; high Saudi unemployment, key positions being given to foreign labour, low productivity, lack of a female workforce and challenges regarding the mismatch between the qualifications obtained and the job opportunities available.
The programme, also known as ‘Saudization’, aims to increase the employment of Saudi nationals in the private sector. Nitaqat uses a rating system which classifies companies into four zones; platinum, green, yellow and red.
Nitaqat requires employers in the private sector with over nine employees to hire a certain percentage of Saudi nationals, depending on the company’s industry and the number of employees in the company. Companies with less than 10 employees are exempt from the zoning system, but are still required to hire at least one Saudi national.
What are the new features of the revised programme?
The Saudi Ministry of Human Resources and Social Development (MHRSD) has launched a revised version of the Nitaqat programme.
The second version hopes to provide 340,000 jobs by 2024 and simplifies the compliance rules for businesses. Effective 1 December 2021, the latest version of the Nitaqat program contains three new features.
- The first is a localisation plan with a clear and transparent vision for the next three years, with the aim of increasing the organisational stability of private sector institutions. This means employers will be better able to plan and recruit for their workforce, as they will not have to adjust to rapidly changing Saudization ratios without advance notice.
- The second update creates a new linear formula for determining the target Saudization ratio instead of the classification of establishments to certain and fixed sizes. Categories of economic activities based on business sector will be consolidated into 32 categories. With a smaller group of economic activity categories, companies will be better able to categorise their business sector when calculating their Nitaqat tier rating.
- The third update simplifies the design of the programme and improves the client experience by merging activities with similar characteristics into 32 choices instead of 85. In addition, the minimum wage level, first set at $800 (SAR3, 000), was increased to $1,067 (SAR4, 000) in the second quarter of 2021. This will allow the Saudization rate to increase gradually and proportionally with respect to the company’s headcount, instead of rising dramatically when the company becomes subject to a larger headcount tier group (for example, going from 199 to 200 employees, with 200 being the lower threshold for a new category).
The programme was developed in partnership with public bodies and the private sector, the latter of which has been designated as a main partner in the Ministry’s labor market decisions.
Upcoming changes in Saudi Arabia
As well as reforming the Nitaqat programme, the Saudi government is also considering other legislative reforms in the upcoming months, including:
- Changes to the Premium Residency Card Programme, which has opened a path for retirement in Saudi Arabia; and
- NEOM – a cross-border city that is expected to be built by 2025, which will connect Saudi Arabia with neighbouring countries.
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