Labour relations between the employees and the employers in the Kingdom of Saudi Arabia are governed by the Labour and Workmen Law issued by the Royal Decree No. M/46 for Year 2005G, and the Ministry of Labour supervises its enforcement. In addition, there are several Royal Orders, Decrees of Council of Ministers, circulars and instructions that are issued from time to time by the competent authorities to be applied and enforced. Labour and Workmen Law applies to all the employment agreements in which the workmen are committed to work with the employers for wages.
Clauses and Provisions of Employment Agreement:
The employer is entitled to consider the first three months of the employment agreement as a probation period, and this should be expressly specified in the employment agreement, otherwise the right to apply it is denied. The employment agreement includes the agreed wage, transportation allowances, annual leave, official holidays, medical insurance, cases of employment agreement termination, end of service reward and cases of compensation for unfair dismissal.
Policy of Saudization and Foreign Workers:
The foreign investor who starts a business in the Kingdom of Saudi Arabia should bear in mind that the Saudization policy adopted by the state obligates him to employ a number of Saudis in his establishment.
The minimum rate of employment depends on the type of company and the sector in which it operates. Usually, the rate of 30% of work force should be Saudi except for the activities of contracting, cleanliness and operation where the rate is within 10%. Also, it is necessary for the foreign worker to obtain a work permit.
Subject to the mutual health insurance scheme, the employers are obliged to submit health insurance coverage to a worker or employee and his family. In usual, such mutual health insurance is borne by the worker or employee.
The Social Insurance Law provides for the right of a worker who reach the age of 60 years or more to an elderly man’s pension. This pension is limited to the Saudi workers and employees who pay their social insurance contributions during their service period.
Social Security & Health Insurance:
The Social Insurance Law obligates the employers who employ one local or foreign worker or more to pay on their behalf a monthly contribution to the General Organization for Social Insurance.
Such contributions are cut as percentages from the salary of worker or employee. The salary from which contributions are cut is the basic salary plus the housing allowance such that it does not exceed forty 45 thousand Saudi riyals per month.
The percentage required for the foreign workers is 2% of the monthly salary to be paid by the employers without cuts form salaries for the coverage of work injuries.
As to the Saudi workers, the employer shall pay 11% of the monthly salary for a worker; 2% out of which for coverage of work injuries and the rest is 9% for the Public Pension Agency.
To the General Organization for Social Insurance, the salary includes the basic salary plus the housing allowance.
Preparation of: Labour Regulation and Approval thereof:
Due to the great development the Kingdom of Saudi Arabia is witnessing in the business sector, industries and trading where this development necessitates the presence of sufficient, specialized and professional laborers from the Saudis and residents to participate into upgrading all the business sectors and investments, expansion of labour relations and diversity of specialties, the Saudi legislator has been keen to issue the laws, regulations and instructions related to labour and workmen to maintain the interests of employers and the rights of laborers. The issuance of labour regulation to every business sector of establishments and companies with all their specialties aims to control the policies of such sectors and their labour relations and raising the labour productivity levels in a manner that points out the rights and obligations of each party in the labour relations and the functioning of facilities. Such regulations should be documented and approved by the Ministry of Labour and Environment. Accordingly, after reviewing the Labour Law issued by the Royal Decree No. M/51 dated 23.08.1426H, amended by the Royal Decree No. M/24 dated 12.05.1434H and amended by the Royal Decree No. M/46 dated 05.06.1436H, after reviewing Article (12) of Labour Law which decides that the Ministry should set control mechanisms for approving the regulations of labour and after reviewing Article (4) of the Executive Regulations of Labour Law and their annexes issued by the Ministerial Decree No. 70273 dated 11.04.1440H, the Saudi legislator has issued a standardized labour regulation. Our firm has become one of the firms accredited with Qiwa Platform due to our extensive expertise in this field where we have drawn several labour regulations and get them approved by the Ministry of Labour and business offices for a large group of companies.
Objectives of Labour Regulations:
- Creation of safe and active business environment through the approval of labour regulations and contents of clauses thereof, doing the best to raise the awareness level and improvement of the business environment.
- Facilitation of measures to approve the labour regulations through the computerization of measures of regulations approval that leads to their speedy and easy approval and identification in a typical form or not.
- Minimization of labour disputes that may arise between the worker and his establishment through permitting the approval of labour regulations that aim to maintain the rights and duties of both parties of labour relation.
- Activation of role of private sector (law offices) through contribution to the preparation of labour regulations and their being reviewed with the employers, then they are filed to Ministry of Human Resources and Social Development in a manner that realizes the desired quality of work.
In view of the requirements of the public interest, the following is decided:
First: Agreement to the participation of the Saudi entities specialized in the field of legal profession (offices & firms) which meet the conditions in reviewing and approving the labour regulations for non-standardized form of the private sector establishments before the Ministry approves them.
Second: conditions to be met by the entities specialized in the field of law practice to share the Ministry in reviewing and approving the labour regulations for non-standardized form of the private sector establishments are as follows:
- The entity specialized in the field of legal profession should obtain a valid licence of law practice certified the Ministry of Justice.
- The owner of the entity should be experienced in Labour Law, either of those who have already worked in the legal departments in the public sector or private sector for a period not less five years, or of those experienced in preparing and discussing the labour regulations for private sector establishments or pleading before the labour judiciary.
- The number of Saudis working with the owner of the entity should not be less than two persons having a legal or Sharia qualifications.
- Opening an account for the entity through the electronic services at the Ministry.
- The owner of the entity should comply with the control mechanisms approved by the Ministry for preparing the labour regulations for the non-standardized form.
- The Ministry Undersecretary for Inspection and Development of Labour Environment may exclude the second and third conditions for non-major regions only.
Third: The Ministry Undersecretary for Inspection and Development of Labour Environment forms a committee of three members under his presidency to approve the participation of entities specialized in field of legal profession to review and certify labour regulations for non-standardized form to whoever meets the conditions.
Fourth: The entity specialized in the field of legal profession shall apply to participate in the review and certification of labor regulations for non-standardized form through the electronic gate of the Ministry.
Fifth: The obligations to be met by the owner of entity to participate in the review and certification of labour regulations to private sector establishments for non-standardized form:
- To receive the applications of private sector establishments wishing to prepare labour regulations for non-standardized form, and to review and certify them in a manner that agrees with the Labour Law, its Executive Regulations and decrees issued in execution thereof. Then, they are forwarded to the Ministry through the electronic gate to get the approval of the regulation.
- To prepare the labour regulations for private sector establishments according to the controls issued by the Ministry.
- To take into account the legal aspects in a way that contributes to maintaining the rights of workers and employers and minimizing the rise of labour disputes.
- To enter contracts with his clients and to get an authorization letter permitting him to prepare, review and certify the regulations as requested by the Ministry.
- The regulations submitted by him should be printed in Arabic on his letterhead or on the letterheads of the entity and accompanied by his seal and signature.
- To forward the regulation to the Ministry after being reviewed with the establishment and certified within a period not exceeding thirty days from doing the above, unless it is due to reasons attributable to the establishment.
- To keep the labour secrets disclosed to him and not to disclose them in all cases even after termination of contractual relations.
- To execute the instructions of the Ministry in regard to the new amendments or instructions.
Sixth: Controls to be observed on preparing the labour regulations for non-standardized form by the owner of the establishment:
- To confirm the non-existence of a certified labour regulation for the establishment.
- In case there is a labour regulation for the establishment already approved and the establishment wishes to amend or cancel it, a letter stating the number of the previous approval is obtained.
- The regulation should comply with the standardized form and it may include additional terms and conditions consistent with the provisions of Labour Law, its Executive Regulations and decrees issued in execution thereof.
- To take into account in the regulation, its division and tabulation and numbering its articles according to the standardized form.
- To take into account in the regulation, clarity of handwriting and the numbering of pages where it does not have blurring or erasing.
- The regulation shall not include – under any name – the legitimate termination other than the cases exclusively mentioned in Articles (74) and (80) of Labour Law.
- To comply with the disciplinary penalties exclusively mentioned in Article (66) of Labour Law.
- To comply with disciplinary rules specified in Labour Law on inflicting the penalty.
- To take into account in the table of offences and penalties the gradation of punishment, and the penalty should be consistent with the kind and gravity of offence committed by the worker.
- To attach a form in which he mentions the amendments added to the regulation.
Seventh: The Ministry is entitled to withdraw the accreditation from its owner in the following cases:
- If the Ministry sees the lack of proper legal drafting of the regulations issued the owner of entity in a way violating the provisions of Labour Law, its Executive Regulations or decrees issued in execution thereof.
- If he violates the control mechanisms for approving the regulations issued by the Ministry.
- If he violates the laws related to the legal profession or in case the licence of law practice is withdrawn by the Ministry of Justice.
- If the Ministry finds a complaint against the owner of the entity due to his failure or getting poor ratings by the establishments.
- The Ministry has the right to exclude the licence holder without justification.
Eighth: The licence holder shall not deserve any compensation for withdrawing the licence.
Ninth: The Deputy Minister shall take the necessary actions to notify, publish and execute this decree.