Reforms to Nitaqat Program Forthcoming
June 29, 2021
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At a Glance
- The Ministry of Human Resources and Social Development published further changes to the Nitaqat program, effective December 1, 2021.
- The changes include a new three-year Saudization plan, consolidation of economic activity categories, and implementation of a new company classification system.
- These changes are expected to improve the performance of the labor market, provide job opportunities and create a more regulated work environment.
The situation
The Ministry of Human Resources and Social Development (MHRSD) published further changes to the Nitaqat program, effective December 1, 2021.
A closer look
Details of the published changes are as follows:
| CHANGE | CURRENT RULE | IMPACT |
|
Currently, Saudization ratios are adjusted on an ad hoc basis. |
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. |
|
Currently, there are 85 existing economic activities. |
With a smaller group of economic activity categories, companies will be better able to categorize their business sector when calculating their Nitaqat tier rating. |
|
Currently, Saudization rates are prescribed based on company size. |
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). |
Background
- Determination for Saudization ratios. A special formula is used to determine the company’s Saudization ratio in all color-coded tier levels, which includes a fixed Saudization number and additional annual numbers for the number of years after the company has begun operations in Saudi Arabia, along with a logarithm of the total workforce. The MHRSD prescribes Saudization values for each economic activity and for each color-coded Nitaqat tier level.
- Nitaqat tier level. Based on a company's color-coded Nitaqat tier level, employers become eligible to obtain block visas to recruit foreign nationals, to renew work permits and amend employees’ job titles, among other benefits.
- Labor market strategy. The changes are part of the Saudi government’s current labor market strategy, which seeks to increase market efficiency and provide over 340,000 new jobs for Saudi nationals by 2024.
Looking ahead
The Saudi government is likely to introduce additional reforms that align with its Vision 2030, a strategic plan to diversify Saudi Arabia’s economy and attract investment and business to the country. The government is also considering other legislative reforms including:
- changes to the Premium Residency Card Program, 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 neighboring countries and serve as an innovation incubator, tourist destination and a model of sustainable and data-driven living for the world.
Fragomen will report on these and other related developments.
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].
