Sovereign can assist with new ‘Saudisation’ rules
The Saudi Vision 2030 initiative is designed to boost the Kingdom’s economy by diversifying beyond oil and sets out commitments to other sectors including manufacturing, education and tourism. A key pillar of Vision 2030 is the ‘Saudisation’ programme, which is focused on creating and sustaining jobs for Saudi National citizens.
The Saudisation rules are codified under the ‘Nitiqat’ system, which requires the compulsory hiring of Saudi Nationals by companies in the private sector that are registered in the Kingdom. An entity registered in the Kingdom is authorised to undertake certain business activities. Some activities will attract a higher rate of Saudisation than others.
The Nitaqat framework has now been in place for a decade and required private companies to meet specific Saudisation thresholds. These are based on the sponsoring entity’s total workforce, the industry sector under which it is licensed, and the number of Saudi nationals employed in the company. There have been a series of revisions to the Nitaqat framework in recent years and, in 2017, all Nitaqat categories and applicable percentages were amended across all industries to increase the rate of Saudisation.
This year, the Ministry of Human Resources and Social Development (MHRSD) announced further Nitaqat revisions, which were due to come into force as of 1 December 2021. These are intended to create 340,000 jobs by 2024.
To simplify the system, the number of different economic activities that have similar characteristics is to be consolidated from 85 into 32 categories. It is also expected that Saudisation rates will increase on a year-by-year basis over a three-year period, which will provide greater clarity and assist in planning.
This will allow the Saudisation 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.
Companies under Nitaqat are colour-coded according to their levels of Saudisation, with the highest rating being ‘platinum’ and the lowest and non-compliant rating being ‘red’. In between are three categories of ‘green’ – low, medium and high. Nitiqat compliance kicks in after five employees.
Platinum-rated companies benefit from a variety of immigration-related privileges, such as expedited processing of immigration requests and preferential treatment of quota allocations. Lower-rated companies are restricted from hiring foreign national employees and are therefore compelled to improve their rating. Most companies will aim to maintain ‘High Green’ status, although this may be a challenge for certain activities. Some companies will have a strategic target to maintain ‘Platinum’ status.
Saudisation rates are also gradually being applied to occupations, such that a certain number of Saudi Nationals working in the particular field must be employed. In 2020 and 2021, for instance, special rates were applied to engineers, IT & Communication professionals (25% of jobs to be available to locals under specific job titles) and accountants (30% of jobs to be available to locals in prescribed positions). Minimum salary thresholds have also been set for Saudi nationals occupying a job on an approved list in these sectors. Further changes are anticipated in 2022 in respect of the marketing or translation activities.
The Saudi authorities have also launched a Professional Verification initiative in Saudi Arabia’s private sector to evaluate and verify the skills of foreign nationals. This will impact over 1,000 specialised jobs across 23 sectors and working expats already in the Kingdom may be required to take an examination through appropriate bodies.
To replace the Work Visit and Commercial Visit Visas, which were abolished in 2019 because they were seen as a way to avoid the Nitaqat framework, the Kingdom introduced a Temporary Work Visit Visa (TWVV) this year for foreign nationals conducting work. As a result, employers can again send foreign nationals for short-term work assignments to Saudi Arabia.
The TWVV has not been fully rolled out yet, but it is expected that successful applicants will receive a multiple-entry visa valid for one year, which permits the holder to conduct work for a visa sponsoring entity for up to 90 days in a one-year period.
This will be of real benefit to multinational companies and to skilled foreign nationals who may wish to conduct work in Saudi Arabia but not base themselves permanently in the Kingdom. To qualify for the new visa quota, employers must meet their prescribed Saudization ratios and be classified at least as ‘medium-green’ in the Nitaqat system.
More foreign national-friendly programmes are expected to be introduced in Saudi Arabia because additional foreign expertise will be needed to deliver the vast array of new infrastructure and developments projects, like the NEOM city in northwest Saudi Arabia which is intended to connect the Kingdom with bordering countries and serve as an innovation incubator, tourist destination and a model of sustainable living.
Sovereign can assist with understanding and remaining in compliance with the Nitaqat system, as well
implementing the best strategies to recruit and retain Saudi National staff.
