Changes to the Saudi Labor Law: August 2024

On August 6, 2024, the Saudi Council of Ministers approved comprehensive amendments to the Kingdom of Saudi Arabia Labor Law and its Implementing Regulations. These changes represent the most significant updates since 2015 and will take effect on February 19, 2025 — 180 days after publication in the Legal Gazette (August 23, 2024).

The amendments align with Saudi Vision 2030, aiming to create a more attractive work environment, enhance job stability, protect contractual rights, and increase employment opportunities for Saudi citizens, particularly women.

Scope of Changes

The Ministry of Human Resources and Social Development (MHRSD) conducted an extensive study benchmarking labor laws from various countries and examining global best practices. The amendments include:

38 articles altered or modified
7 articles removed
2 new articles added
Expanded chapters on leave and contracts

Key Changes and Implications

1. New Definitions (Article 2)

Two critical definitions have been introduced:

Assignment (Outsourcing): The service of providing a worker to work for a person other than the employer through an establishment licensed for this purpose. This formalizes the practice of labor outsourcing with proper licensing requirements.

Resignation: A written declaration by the employee expressing their wish to terminate a fixed-term employment contract without coercion, conditions, or reservations, and accepted by the employer. This provides clear legal definition for what constitutes a valid resignation.

2. Employment Contract Duration (Article 37)

Previous Rule: If a contract for non-Saudi employees did not specify the term of employment, it was deemed fixed to the end date of the work permit.

New Rule: If the contract does not specify a fixed term, the period of employment will be one year from the date the employee actually commences work.

Auto-Renewal: If the employee continues working after the expiry of the fixed term, the contract is considered renewed for a similar period automatically.

Implication: Non-Saudi employees must now have written contracts with specified durations. Employers should review all existing contracts to ensure compliance before February 2025.

3. Resignation Process (New Procedures)

The amendments introduce formalized resignation procedures for fixed-term contracts:

30-Day Response Window: Employers have 30 days to respond to an employee's resignation request
Automatic Acceptance: If the employer does not respond within 30 days, the resignation is automatically accepted
60-Day Extension: Employers can request a 60-day delay in accepting the resignation under specific conditions
Written Declaration Required: Resignations must be in writing and voluntary (no coercion)

Implication: Companies need to establish clear resignation acceptance procedures and ensure timely processing to avoid automatic acceptance.

4. Work Permit Renewal (Article 35)

Previous Rule: MHRSD could refuse to renew work permits of non-Saudi employees if the employer failed to comply with Saudization requirements.

Amendment: The provision has been revised to provide more clarity on enforcement mechanisms and employer obligations.

Implication: Employers must maintain strong Saudization compliance to ensure smooth work permit renewals for expatriate staff.

5. Training and Qualification Requirements (Articles 42 & 43)

Previous Requirement (Article 42): Employers were obligated to train Saudi employees to improve their skills so they could gradually assume the work of non-Saudi employees.

New Requirement: Employers must establish a policy for training and qualifying Saudi employees. The explicit objective of replacing non-Saudi employees has been removed.

Previous Requirement (Article 43): Employers with 50+ employees must qualify or train Saudi employees comprising at least 12% of total employees annually.

New Requirement: Every employer (regardless of size) must qualify or train Saudi national employees at a rate to be determined by the Minister's decision.

Implication: All employers, including small businesses, must now develop formal training policies. The shift from "replacement" to "qualification" reflects a focus on skill development rather than job displacement.

6. Training Contracts (Articles 46 & 47)

Changes have been made to:

Training contract requirements and conditions
The Minister's authority to oblige employers to accept students and graduates for training
Obligations regarding internship programs

7. Leave Entitlements (Expanded Chapter)

The chapter on leave has been expanded to provide:

Greater clarity on various types of leave
Enhanced protections for employees
Revised procedures for leave requests and approvals

Implication: HR departments should review leave policies to ensure alignment with the expanded provisions.

8. Worker Grievance Processes (Revised)

The amendments revise procedures for handling worker complaints and grievances, providing:

Clearer pathways for dispute resolution
Enhanced worker protections
Streamlined grievance mechanisms

9. Unlicensed Recruitment Penalties (New Provision)

The law now imposes penalties for unlicensed worker recruitment activities.

Implication: Only licensed recruitment agencies may provide worker placement services. Businesses using unlicensed recruiters face penalties.

10. Prohibition on Non-Saudis Working for Third Parties (Article 39)

Existing Rule: Non-Saudi national employees are generally prohibited from working for anyone other than their sponsor or on their personal account.

Enforcement: MHRSD is empowered to inspect establishments and refer violations to the Ministry of Interior (MOI) for action and penalties.

Note: This provision remains largely unchanged but enforcement may be stricter under the new framework.

Strategic Goals

The amendments are designed to achieve several key objectives:

Vision 2030 Alignment: Support Saudi Arabia's economic diversification and development goals
Attractive Work Environment: Create better conditions for both employers and employees
Job Stability: Enhance employment security and reduce turnover
Human Capital Development: Promote skill development and training
Saudi Employment: Increase job opportunities for Saudi citizens, especially women
Rights Protection: Safeguard the interests of all parties in employment relationships
SME Support: Provide a conducive legislative environment for small and medium enterprises

Implementation Timeline

August 6, 2024: Council of Ministers approval
August 23, 2024: Publication in the Legal Gazette
February 19, 2025: Amendments take effect (180 days after publication)

What Employers Should Do Now

To prepare for the February 2025 implementation, employers should:

Review All Employment Contracts: Ensure all non-Saudi employee contracts specify fixed terms; update indefinite-term contracts
Develop Training Policies: Establish formal training and qualification policies for Saudi employees, regardless of company size
Update Resignation Procedures: Implement systems to track and respond to resignations within 30 days
Verify Recruitment Practices: Ensure all worker recruitment is conducted through licensed agencies
Review Leave Policies: Update leave policies to align with expanded provisions
Audit HR Processes: Conduct comprehensive HR compliance audits before February 2025
Train HR Teams: Educate HR staff on new requirements and procedures
Consult Legal Experts: Seek professional legal advice to ensure full compliance

MHRSD Public Consultation Process

The MHRSD actively sought public opinion on these proposed changes, involving over 1,300 participants from various sectors. This consultative approach reflects the government's commitment to inclusive policy development that considers stakeholder perspectives.

International Standards Alignment

The amendments align with:

International labor standards
Global best practices in employment law
International agreements ratified by Saudi Arabia
Modern workforce management principles

Important Legal Note

The Arabic version of the Labor Law shall prevail in the event of any discrepancies with translations. Employers are strongly encouraged to consult with qualified legal professionals to ensure the information is accurate and applicable to their specific circumstances.

How PalmHR Can Help

Navigating Saudi Arabia's evolving labor laws can be complex. PalmHR's platform is designed with Saudi compliance in mind:

Contract Management: Digital contract templates compliant with new fixed-term requirements
Resignation Tracking: Automated workflows to ensure 30-day response compliance
Training Records: Documentation systems for Saudi employee training policies
Leave Management: Updated leave modules aligned with expanded provisions
Government Integration: Seamless connectivity with Qiwa, GOSI, Mudad for compliance reporting

Our HR Concierge service can also manage the transition on your behalf, ensuring your business is fully compliant before the February 2025 deadline.

Stay Informed

Labor law compliance is critical for business operations in Saudi Arabia. PalmHR will continue to monitor regulatory developments and update our platform to ensure you remain compliant with all current and upcoming requirements.