Global employment briefing: Saudi Arabia - February 2016

  • Saudi Arabia
  • Employment law - HR E-Brief


Ministry of Labour makes numerous labour law changes

The Ministry of Labour made a number of changes to labour law with effect from 18 October 2015. Amongst other things, the amendments cover disciplinary procedures, training, Saudization privileges, labour contracts, women’s employment, including maternity and compassionate leave on the death of a husband, and the inspection mechanism. The Ministry will implement the new law by laying down models for organizing the workplace, based on international practices.

We have set out below some of the key amendments made by the Ministry.

Internal Regulations/work organisation rules
All employers must now develop internal regulations. Previously, this was only required if employers had more than ten employees. Internal regulations must still conform to the Model issued by the Ministry but an employer may now include additional terms and conditions provided they do not contradict the provisions of the law.

Training of Saudi nationals
Employers with 50 or more employees must train on an annual basis Saudi employees, amounting to not less than 12 per cent of the total workforce (previously this was six per cent).

Probationary period
This period can be extended to 180 calendar days (ie six months in total). This allows employers more flexibility in establishing whether the employee is suitable for the role. An employee can now also be placed under a second probation period with the same employer if more than six months have passed since the employee was previously terminated by the employer.

Conversion of fixed term contracts for Saudi nationals
If a Saudi national is engaged on three consecutive fixed term contracts or if the continuous employment of the Saudi national reaches four years (whichever comes first) and both parties to continue to perform the contract, then the contract will be automatically converted to an unlimited term contract. Previously the maximum term was three years or two consecutive renewals of the fixed term contract.

This will provide more certainty for employers in engaging Saudi nationals, given that a fixed term contract will be automatically terminated on its expiry (unless both parties continue to perform the contract) whereas an unlimited term contract can only be terminated for a valid reason to avoid a finding of arbitrary dismissal.

Transfer of work location
Employee consent is now needed before an employer can assign an employee to another location. In an emergency, however, an employer can temporarily assign employees to another work location for a maximum period of 30 days per year without obtaining their consent, subject to bearing all the expenses.

Service certificate/employee reference
On termination employers are currently required, on request, to provide a service certificate (free of charge) which sets out details of the employee's employment (date of joining and leaving, salary details and profession). Employers are now expressly prohibited from including anything in this certificate that may be harmful to the employee's reputation or may 'reduce his employment opportunities'. Previously, a certificate could contain this kind of information provided the employer gave reasons for including it.

It is now expressly recognized that an employment contract can be validly terminated where the employer is (i) closing down the establishment completely; or (ii) terminating the business activity where the employee is employed. This recognition of a redundancy does not extend to situations where there is a reduction in work requirements requiring a reduction in the workforce or a reduction in a particular role. It may, therefore, be difficult to justify individual redundancies or smaller scale restructures.

Notice periods to terminate employment
The minimum notice period for monthly paid employees on unlimited term contracts has doubled from 30 days to 60 days. The minimum notice period is 30 days for other employees.

Compensation for invalid terminations and removal of the right to claim reinstatement
The parties may expressly set out in the contract of employment what compensation is payable if either party terminates the contract for an unlawful reason.

Time off work to look for alternative employment
Employees now have a right to paid time off work to look for alternative employment where the employer has given notice of termination.

Summary termination for unlawful absences from work
An amendment has been made to article 80, which sets out the only circumstances when employment can be terminated without notice and without an end of service gratuity. An employer can now only terminate for unlawful absences where an employee has been absent for 30 days a year or 15 consecutive days (previously 20 and 10 days respectively).

Wages must now be paid into employee's bank accounts via approved banks.

Paid leave has been increased as follows:

  • Paternity leave: three calendar days
  • Marriage leave: five calendar days
  • Compassionate leave: five calendar days.

Paid compassionate leave for a female Muslim employee whose spouse dies has been increased from 15 days to the Eid leave of four months and ten days. A non- Muslim woman is still entitled to 15 days' compassionate leave on the death of her spouse.

A female employee can now start her maternity leave when she wants provided this is no earlier than four weeks before the expected date of birth.