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SOVEREIGN CAN ASSIST WITH NEW ‘SAUDISATION’ RULES

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SOVEREIGN CAN ASSIST WITH NEW ‘SAUDISATION’ RULES

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The Saudi Vision 2030 initiative is designed to boost the Kingdom’s economy by diversifying beyond oil and sets out commitments to other sectors including manufacturing, education and tourism. A key pillar of Vision 2030 is the ‘Saudisation’ programme, which is focused on creating and sustaining jobs for Saudi National citizens.

The Saudisation rules are codified under the ‘Nitiqat’ system, which requires the compulsory hiring of Saudi Nationals by companies in the private sector that are registered in the Kingdom. An entity registered in the Kingdom is authorised to undertake certain business activities. Some activities will attract a higher rate of Saudisation than others.

The Nitaqat framework has now been in place for a decade and required private companies to meet specific Saudisation thresholds. These are based on the sponsoring entity’s total workforce, the industry sector under which it is licensed, and the number of Saudi nationals employed in the company. There have been a series of revisions to the Nitaqat framework in recent years and, in 2017, all Nitaqat categories and applicable percentages were amended across all industries to increase the rate of Saudisation.

This year, the Ministry of Human Resources and Social Development (MHRSD) announced further Nitaqat revisions, which were due to come into force as of 1 December 2021. These are intended to create 340,000 jobs by 2024.

To simplify the system, the number of different economic activities that have similar characteristics is to be consolidated from 85 into 32 categories. It is also expected that Saudisation rates will increase on a year-by-year basis over a three-year period, which will provide greater clarity and assist in planning.

This will allow the Saudisation 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.

Companies under Nitaqat are colour-coded according to their levels of Saudisation, with the highest rating being ‘platinum’ and the lowest and non-compliant rating being ‘red’. In between are three categories of ‘green’ – low, medium and high. Nitiqat compliance kicks in after five employees.

Platinum-rated companies benefit from a variety of immigration-related privileges, such as expedited processing of immigration requests and preferential treatment of quota allocations. Lower-rated companies are restricted from hiring foreign national employees and are therefore compelled to improve their rating. Most companies will aim to maintain ‘High Green’ status, although this may be a challenge for certain activities. Some companies will have a strategic target to maintain ‘Platinum’ status.

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