The Ministry of Human Resources and Social Development (MHRSD) recently announced new labor reforms to the 70-year-old Kafala (sponsorship) system under the Labor Reform Initiative, allowing greater job mobility for migrant workers. This decision ushers a new era for foreign workers in the private sector, whereas under the previous Kafala system, a local citizen or company (kafeel) was required to sponsor a foreign worker to maintain a valid visa and residency – in essence, a foreign worker’s individual right to work was dependent on the employer.
Oversight of the exit permit and other authorizations will now fall under the authority of the MHRSD. Effective March 14th, 2021, workers can switch occupations upon the expiration of their work contract without requiring their current employer’s approval, provided the notice is given within a set timeframe. They will also be exempt from employer-provided “exit authorization,” allowing them to travel without obtaining the prior approval of their employer. Moreover, expat workers can now apply directly for government services, with their employment contracts documented digitally for improved transparency. The changes in digital documentation and employer authorization procedures will be implemented in the Saudi e-government system through the “Absher” and “Qiwa” portals available online and through smartphone apps. The initiative also launched the “Wedy” system in November 2020 for settling labor disputes.
This decision follows Vision 2030’s objectives of building an attractive job market that will in turn attract greater investment. Expat workers have responded to the reform package enthusiastically as it offers them unprecedented support and recognizes their vital role in Saudi Arabia’s development. The Kingdom’s Labor Reform Initiative will benefit as many as 10 million migrant workers with the holistic objective to foster a competitive and fair working environment. These reforms follow Saudi Arabia’s economic trend of diversification to end its economic dependency on oil and aim to strengthen the private sector’s ability to attract foreign talent. Under these changes, Saudi Arabia is expecting to attract more highly skilled workers who may have been hesitant to work under the previous Kafala system.
U.S. companies interested in investing in Saudi Arabia or partnering with Saudi companies will welcome this change, as it ensures greater protections for foreign workers. The new initiative brings Saudi Arabia’s labor laws more closely in line with international labor conventions. If you are a U.S. company looking for new markets, partnerships, and business opportunities in Saudi Arabia, the U.S.-Saudi Business Council is ready to help you with visa facilitation, business intelligence, networking, virtual events, personalized business advisory services such as introductions to potential Saudi partners, and much more.
