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Saudization: a full breakdown
Saudi Arabia, in the past, relied heavily on expatriates to fill the workforce, however, with almost two-thirds of the Saudi population below the age of 35, the Saudi government are looking to increase the number of nationals in the workforce.
The Saudization program aims to lower the current unemployment rate of 12% to 7%. However, many companies struggle to understand the Saudization program and how it affects their business. Below we unpack Saudization and how it applies to businesses in the Kingdom.
What is Saudization?
Saudization is a nationalization scheme to increase the employment of Saudi nationals in the private sector. Saudization aims to give Saudi nationals a fair opportunity in the private market and reduce the reliance on foreign workers.
What is Nitaqat?
Nitaqat is a program of Saudization, to increase employment of Saudi nationals in the private sector. Nitaqat uses a rating system, by classifying companies into four zones; platinum, green (high, mid and low), yellow and red. Platinum and green are compliant zones and non-compliant zones are yellow and red.
How does Nitaqat work?
The compliant zones, obtain benefits the non-compliant zones don’t, including; obtaining and renewing work permits for foreign employees through an expedited online process, they are able to change the profession of a foreign employee and are allowed to hire employees from red and yellow zoned companies without approval from the current employer.
Yellow zoned companies are only able to renew visas for employees that have stayed in Saudi Arabia for less than 2 years. Companies that fall under the yellow zone are not permitted to apply for new work visas or issue new work permits.
Companies in the red zone have the most restrictions; they are unable to hire new expatriate employees, renew work permits, or open a new business or branch in Saudi Arabia until their Nitaqat rating has improved. Yellow and red zoned companies also lose their authority to give permission to employees to change employers in Saudi.
How do we remain compliant with Saudization?
To remain compliant knowing the requirements for your company depending on the industry and size are essential. A list of Saudization requirements can be found here. Other ways to prepare for Saudization and remain compliant are listed below:
Forecasting the number and roles of employees required in the coming 1-3 years is a way for companies to plan who to hire and for what positions, to ensure that it’s aligned with the Saudization requirements.
Workforce gap analysis
A workforce gap analysis requires looking at the roles available in the company and the available candidates in the market, the skills and training they have. This way companies can determine how they can use the available workforce within their organization.
Developing Saudi workforce retention initiatives
To remain compliant, companies need to retain their workforce and they can do this through many ways, to name a few, a competitive salary, challenging work and opportunity for growth are viable tactics.
Operating effectively in Saudi requires companies to be compliant, informed and up-to-date with current regulations. Saudization is an important factor for businesses in Saudi and when compliance is achieved, the incentives that come alongside are beneficial. Your Saudization strategy should be tailored to your company and should position yourself for continued success in the Saudi market.
For support in creating a bespoke Saudization plan for your company or in remaining compliant, contact Proven here