Elimination of Yellow Band from Nitaqat Program

The situation

The Ministry of Labor and Social Development (MLSD) will cancel the yellow band of the Nitaqat program on January 26, 2020. Yellow-rated companies will automatically be moved to the red band and will be considered noncompliant with required Saudization levels until their ratings improve.

Impact

Downgraded companies will not be able to apply for new visas for foreign nationals, change foreign nationals’ occupations or renew work permits until their ratings improve.

Downgraded employers can choose to subscribe to the Parallel Saudization program to upgrade their Nitaqat tier level immediately. Introduced in 2017, the program allows employers to pay a prescribed monthly fee that corresponds to each missing Saudization unit, instead of hiring Saudi national employees. The Parallel Saudization program is primarily meant for companies that need to upgrade their Nitaqat level quickly, for example to become eligible for a block visa quota. It is therefore not recommended for employers that require a long-term solution for their Saudization strategy.

Background

• Nitaqat program. The MLSD introduced the Nitaqat program in 2011. The program requires Saudi companies to employ a certain ratio of Saudi nationals to foreign workers, depending on the company’s industry and size. The program was implemented to reduce the number of unemployed Saudi nationals and to boost the employment of Saudis in the private sector.
• Nitaqat band levels. Based on their compliance with the program, companies are rated at a certain band level, ranging from red (the bottom tier) to platinum (the sixth and highest tier). The higher a company’s rating, the more immigration benefits they are granted; the lower the company’s rating, the more immigration restrictions are imposed. For example, employers with green or platinum ratings are eligible to obtain block visas, which allows them to hire foreign workers. Both the red and yellow categories signify that companies did not achieve the required Saudization rate.
• Easing of Saudization restrictions. Prior to the elimination of the yellow band, the Saudi government had been easing restrictions on employers hiring foreign workers in Saudi Arabia. For example, the MLSD announced that select employers would be eligible for the reimbursement of or exemption from the monthly fee paid for each sponsored worker; allowed companies with lower Nitaqat ratings to be eligible for block visa approvals and increased the validity period of block visas.

 

Looking ahead

Although the government has been easing block visa regulations in order to make it easier for compliant employers to hire foreign nationals in Saudi Arabia, the new regulation signifies that the government is also prioritizing the hiring of Saudi nationals. The government is likely pursuing this measure to reduce current local unemployment levels, which hover around 12%, and are largely the result of high level of university graduates seeking work in the country.

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 [email protected].