Reimbursement of and Exclusion from Foreign Worker Fee Announced for Select Employers

The situation

The Ministry of Labor and Social Development (MLSD) has announced that select employers will be eligible for reimbursement of or exemption from the monthly fee paid for each foreign worker under their sponsorship.

A closer look

• Eligible employers. Employers who have held a Nitaqat rating of low-green, medium-green, high-green and platinum for the past 52 weeks will be eligible for a fee refund if they already paid their fee for the year, or for an exemption if they have not yet paid their fee.
• Future eligibility. Employers classified as yellow and red will be eligible for the refund only if they improve their Nitaqat rating to at least low-green within 12 months of the start date of the initiative, presumed to be February 7, 2019.

Impact

Eligible employers will be able to reallocate the funds and potentially improve their Saudization ratios by hiring more local workers. In turn with an improved Nitaqat classification, employers would be able to hire more foreign workers.

Background

Most employers in Saudi Arabia have been subject to a monthly fee for each foreign employee under their sponsorship since January 2018. The fee increases annually and the amount depends on whether the employer has more foreign workers than Saudi workers.

In general, employers must pay their bill as a lump-sum payment at the beginning of the year, although the MLSD also allows for quarterly installments.

The imposition of the fee was strongly criticized by private sector employers, especially in the construction industry and by owners of small- and medium-sized companies. This led to some further exemptions implemented in March 2018.

Looking ahead

The additional fee exemptions are part of the continued easing of restrictions on employers hiring foreign workers in Saudi Arabia to attract more investment in the country. Other examples include allowing companies with lower Nitaqat ratings to be eligible for block visa approvals and increasing the validity period of block visas. Fragomen will continue to report on any further developments related to the reduction of costs related to foreign workers.

This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to mideast@fragomen.com.