On August 6, 2024, the Saudi Council of Ministers approved significant changes to the Saudi Labor Law, which will become effective on February 18, 2025. These amendments follow the Ministry of Human Resources and Social Development’s (MHRSD) efforts to gather public opinion, with input from over 1,300 participants from various sectors.
The new amendments to the Labor Law aim to support Vision 2030 by improving the work environment, promoting job security, and expanding training and development opportunities. Key updates include changes to 38 articles, removal of 7 articles, and the addition of 2 new articles. Below is an in-depth look at the most critical changes impacting employers and employees.
Saudi Labor Law – Key Definitions and Terms
New Definitions
The amendments bring two new terms into the law:
- Resignation: Defined as an employee’s written declaration to end a fixed-term contract without outside pressure, accepted by the employer.
- Manpower Activity: Defined as a licensed agency service that recruits employees and provides them to employers on a contractual basis.
These definitions clarify employer and employee rights and responsibilities, helping to reduce legal conflicts and confusion.
Wage and Compensation Regulations
Changes to wage and compensation policies address overtime, accommodation, and transportation:
- Overtime: Employers can now offer compensatory leave instead of overtime pay if the employee agrees.
- Accommodation and Transport: Employers must provide accommodation and transportation or offer equivalent allowances.
These changes promote flexibility for employers while ensuring employees receive fair compensation.
Resignation Procedures
The new amendments define how resignations should be handled for employees on fixed-term contracts. Here’s what’s new:
- Automatic Acceptance: If an employer does not respond within 30 days, a resignation is automatically accepted.
- Employer’s Right to Delay: Employers can delay acceptance by up to 60 days if it serves the company’s interests, provided they communicate their reasons in writing.
- Right to Withdraw: Employees can withdraw their resignation within seven days if the employer has not yet accepted it.
- No Postdated Resignations: Resignations cannot specify a future effective date.
These provisions bring clarity to the resignation process, protecting both employer and employee interests.
Probation Period
The amendments introduce new guidelines for probation periods, extending the potential duration to 180 days with mutual consent. Key updates include:
- Probation Period Duration: Now 180 days from the start of employment, up from the previous 90 days with an option to extend with written consent.
- Right to Terminate: Both employer and employee retain the right to terminate the contract during the probation period.
This extended probation period gives employers more time to evaluate new hires, benefiting both parties by promoting informed employment decisions.
Non-Saudi Contract Duration
For non-Saudi nationals, employment contracts are now automatically set as one-year fixed terms, starting from the date of hire. This provision is intended to reduce confusion related to indefinite-term contracts and aligns with the duration of work permit.
Holiday and Leave Policies
Maternity Leave
Female employees are now entitled to 12 weeks of paid maternity leave, with six weeks mandated after childbirth. This leave can start up to four weeks before the expected delivery date.
Parental Leave
The law introduces three days of parental leave for male employees, to be taken within seven days of childbirth.
Bereavement Leave
Employees will receive three days of paid bereavement leave in the event of a sibling’s death. This adds to the current bereavement leave for the passing of parents or children.
These changes reflect a move toward better work-life balance, supporting family obligations for both male and female employees.
Termination of Employment
Lawful Termination
The updated law now includes bankruptcy as a lawful reason for terminating an employment contract. This aligns with common global practices, protecting companies during insolvency situations.
Notice Period Adjustments
The notice period for Saudi nationals to terminate an indefinite-term contract has been shortened to 30 days, while employers must still provide a 60-day notice period. This adjustment brings consistency to notice periods for both employees and employers.
Training and Development Policies
The amendments place a stronger emphasis on training Saudi nationals. Employers are now required to develop training policies to help Saudi employees build technical, administrative, and vocational skills. This aligns with Vision 2030’s goal to improve the local workforce and support national talent.
Equal Opportunities and Anti-Discrimination
Employers must now ensure equal opportunities without discrimination based on race, color, gender, age, disability, or marital status. These protections extend to both current employees and job applicants, reflecting global best practices for workplace equality.
Right to Appeal Disciplinary Actions
Under Article 72, employees now have 30 days to appeal a disciplinary action. If the employer does not respond within 15 days or rejects the appeal, employees can take the matter to the Labor Court within the following 30 days.
This new process helps ensure that employees have a fair chance to challenge any disciplinary action they believe to be unjust.
Accommodation and Transportation Allowances
Employers must now either provide accommodation and transportation or pay a cash allowance if these are not available. This statutory obligation aims to improve employee welfare, especially for lower-wage workers who rely on employer-provided amenities.
New Fines for Unlicensed Manpower Services
Companies providing manpower services without the appropriate licenses may face fines between SAR 200,000 and SAR 500,000. This measure is designed to curb unregulated recruitment practices and enhance compliance across the labor market.
Additional Amendments to Articles
Article 2
New definitions were added to provide clarity on “manpower activity” and “resignation.” These terms help to standardize the language of the Labor Law, making it more accessible for all parties.
Article 37
For non-Saudi nationals, the fixed-term contract is now deemed to be a one-year term, aligning with work permit durations and reducing ambiguity around contract renewals.
Article 72
The right to appeal disciplinary sanctions now includes a 30-day window for internal appeals, providing employees with more avenues for resolving disputes.
Article 74
Bankruptcy is now an acceptable reason for lawful termination, giving employers a legal path to terminate contracts during insolvency proceedings.
Article 75
Notice period requirements have been revised, with Saudi nationals able to resign with a 30-day notice period.
Article 107
Employees and employers can now agree to compensatory time off in lieu of overtime pay, offering more flexible options for both parties.
Article 113
Paternity leave has been introduced, with three days allocated to new fathers within seven days of childbirth.
Article 151
The amendments extend maternity leave to 12 weeks, reinforcing support for working mothers.
Conclusion
These amendments mark a significant step toward modernizing Saudi Arabia’s labor laws. Employers should review their employee contracts, policies, and handbooks to ensure compliance with the new regulations. By preparing in advance, organizations can support a smooth transition and continue to provide a compliant, fair work environment.
For assistance with implementing these changes, the recruitment agencies in Pakistan for Saudi Arabia offers a comprehensive range of employment-related services to meet Saudi labor law requirements. For more details, contact our dedicated team at Alahad Group Pakistan, and our experts will be happy to guide you through each step of compliance and policy adaptation.
Saudi Labor Law FAQs
What is the new labor law in Saudi Arabia?
The new labor law introduces changes across 38 articles, including updates to resignation processes, leave entitlements, contract terms, and employee rights. It goes into effect on February 18, 2025.
What are the rules for resignation under the new labor law?
Resignation is now clearly defined and can be automatically accepted after 30 days if the employer does not respond. Employees also have the right to withdraw their resignation within seven days if it hasn’t yet been accepted.
What is Article 81 of the Saudi Labor Law?
Article 81 allows employees to terminate their contract without notice if the employer fails to meet its contractual obligations, among other valid reasons.
What is Article 70 of the Saudi Labor Law?
Article 70 sets out rules for disciplinary procedures, outlining the rights of employees to fair treatment during disciplinary actions.
