SAUDI ARABIA: Annual Update – Expected labour law changes in 2016

Wage Protection System

Extension of the existing Wage Protection System to smaller companies: Saudi Arabia operates a wage protection system that requires private sector businesses to submit wage information to a central database at the Ministry of Labour and to pay wages solely through KSA banks. This system has been rolled out progressively depending on the size of the business.

With effect from November 1, 2015 it was applied to all businesses with 100 employees or more.

With effect from February 1, 2016 it will apply to all businesses with 11 or more employees.

Penalty for non-compliance can be SAR 3,000 per employee.
Action required: Employers should understand the system and comply when it applies to them.

Amendments to the Labour Law

Amendments to the Labour Law came into effect on October 18th, 2015. These include the following:

Termination of employment: Employers have been given additional grounds to terminate employment where an establishment closes permanently or where there is a cessation in the work carried out;
Absence from work: The number of days that an employee needs to be absent without a valid reason before he can be dismissed summarily has been increased;
Leave entitlements: Enhanced leave entitlements for employees including an increase in paternity leave from 1 to 3 days and marital leave and bereavement leave from 3 to 5 days;
Maternity leave: Maternity leave rights are also enhanced and there is greater flexibility for women to take their paid maternity leave as it suits them and to take an additional month of leave on an unpaid basis without affecting their entitlement to annual leave;
Increased power of the Ministry of Labour: There are increased powers for the Ministry of Labour including the right not to renew work permits for employers who do not comply with their Saudisation requirements. There are greater powers for inspectors to issue fines of up to 100,000 Riyals and to close work premises for a period or permanently where labour law violations are detected.
Action required: Employers should ensure they are familiar with the changes.