Employment Law in Saudi Arabia

The principal item of legislation governing employment relationships in the Kingdom of Saudi Arabia is the Labour Law (promulgated by Royal Decree Number M/51 of 23 Sha’ban 1426 [27 September 2005]), accompanied by a set of implementing regulations, plus resolutions on specific issues issued by the Ministry of Human Resource and Social Development. The Labour Law does not apply to:

• an employer’s family members who constitute a firm’s only employees

• domestic servants

• groups such as certain maritime and agricultural workers

• foreign nationals entering Saudi Arabia to perform a specific task for two months or less.

The Labour Law is interpreted by Labour Courts. It should be noted that in the Saudi Arabian judicial system, case law does not set binding precedents (and is not publicly reported) and courts judge cases solely on their facts. Therefore, it is often difficult to state with any confidence how matters left undefined by the legislation — such as what constitutes a permissible “valid” reason for Dismissal with notice — will be interpreted by a Labour Court in a particular case.

Employment contracts and company’s internal work regulations are other important sources of regulation (in both cases, these must follow an official model drawn up by the Ministry of Human Resource and Social Development). There are no collective agreements.

A key feature of employment in Saudi Arabia is that around 80% of the private sector workforce is currently made up of foreign nationals. In order to increase the proportion of Saudi nationals in the workforce, the Government pursues a policy of “Saudisation” and penalises employers that do not meet targets for the employment of local staff (see Saudi Nationals/Saudisation). There is positive discrimination in employment in favour of Saudi nationals, who also receive preferential legal treatment in various areas. For example, only Saudi nationals:

• may be employed on indefinite-term employment contracts (see Types of Contract and Employee)

• are entitled to a de facto statutory minimum wage (see Minimum Wages)

• may perform “flexible work” (see Part-time Work)

• have statutory protection from discrimination on grounds such as sex and age (see Prohibition of Discrimination)

• may elect labour committees (see Trade Unions)

• have specific protection from collective redundancies (see Collective Redundancies)

• must be given vocational training by their employer (see Vocational Training).

For the purposes of most of the issues covered in this topic, the rights and priorities accorded to Saudi nationals also apply to the citizens of four other member countries of the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman and the United Arab Emirates.

This topic refers only to the private sector.