Introduction

The amendments to the Saudi Labour (Royal Decree No. M/46 of 05/06/1436) were published in Official Gazette No. 4563 dated 24 April 2015. It has been announced by the Ministry of Labour that these will come in force after six months after the date of its publication and therefore implemented on the 24 October 2015. The Ministry of Labor of Saudi Arabia announced an overhaul of the Labor Law that would include 38 amendments to its statutory provisions.

In this article, we have highlighted the notable amendments to the labour law.

I. Liability related to Sale or Transfer of Business

Originally, Article 11 stated that, where all or part of a business is sold or otherwise transferred in the Kingdom of Saudi Arabia, both the previous employer as well as the successor was jointly liable for the mandatory and contractual benefits of the employees of the business affected from such transfer.

The new amendment exempts the previous employer from providing statutory and contractual entitlements of the affected employees of a sold or otherwise transferred business and it will now be the responsibly to be borne by successor only.

II. Internal Regulations/work organization rules

All the employers are now mandatorily required to develop internal regulations, previously this was only required only if employers had more than ten employees. The requirement for the regulations to comply with the Model regulations issued by the Ministry still exists but now an employer may include additional terms and conditions subject to the condition that such additional regulations do not contradict the provisions of the law.

However, it is not yet clear whether the Internal Regulations will require the approval from the Ministry of Labour or not and it is expected that this will be confirmed in the coming months.

III. Training

Employers with 50 or more employees are required to train basis Saudi employees annually, which must amount to at least 12 percent of the total workforce (previously this was six per cent). It is important to note here that this 12 per cent includes Saudi employees whose study fees (i.e. course fees) is paid by employer.

IV. Probationary period

Originally, an employee is subject to a probationary period of no more than 90 calendar days and during probationary period the contract can be terminated without giving any notice. New law provides that, subject to the employee’s consent, probationary period can be elongated up to 180 calendar days in total. This allows employers more resilience in identifying whether the employee is fit for the role. As per the provision of new amendments, employee can now also be placed under a second probation period under the same employer in case more than six months have elapsed since the employee was previously terminated by the employer.

V. Conversion of fixed term contracts for Saudi nationals

New amendments provides that if a Saudi national have completed three consecutive fixed term contracts or if a Saudi national completes four years of consecutive service (whichever is less), and both parties to continue to bound by contract, then such contract will automatically be converted into an unlimited contract. Before these amendments, the maximum term was three years or two consecutive renewals of fixed term contracts, whichever is less.

VI. Transfer of work location

An employer cannot transfer an employee to another location, if such transfer requires him to move house, without obtaining the employee’s prior consent in writing. Previously, this was not allowed where there was a “grave disadvantage” to the employee and the employer did not have acceptable reasons for such transfer. However, in case of an emergency an employer can temporarily assign employees to another work location for a maximum period of thirty days per year without obtaining their consent.

VII. Service certificate/employee reference

On termination of contract, the employers are currently required, to provide a service certificate (free of charge) which sets out details of the employee’s salary, date of joining and leaving, details and profession etc. on request. The new amendments expressly prohibit employers from including anything in the said certificate that may be disadvantageous to the employee’s reputation or may trim employment opportunities for him in future. Previously, employer may include it in the certificate if the employer can provide reasons for the same.

VIII. Termination of employment

New amendments expressly recognize that a contract of employment can be validly terminated where the employer is (i) closing down the business completely; or (ii) terminating the business activity in which the employee is employed.

But, this recognition of a redundancy does not go as far as to extend to situations where there is a reduction in work requirements that requires curtailment of workforce or a reduction in a particular role. It may therefore be difficult to justify individual termination(s).

IX. Notice period

The notice period for employees paid on monthly basis on unlimited contracts is doubled from 30 days to 60 days and not less than thirty days for all other employees. If either party failed to give the required notice to terminate the contract, the parties can agree on compensation payable.

X. Wages

Wages will be required to be paid into the bank account of employee. This gives recognition to the Wages Protection System which is being implemented in phases in Saudi Arabia and currently companies having 170 or more employees must be in compliance with Wage Protection System since 1 June 2015.

XI. Working hours

Total number of hours per day an employee may be required to stay at his place of work are now increased from 11 to 12 hours. The requirement to give rest breaks and the normal weekly limit of 48 working hours remains the same.

XII. Leave for Female Employees (Article 151, 152, and 160)

Maternity Leave

Previously, Article 151.1 and 151.2 of law stipulates an employer to grant maternity leave to a female employee at least four weeks before the tentative date of delivery, as determined by persons prescribed by the law, and extending six weeks after delivery.

Originally, Article 152 required payment of atleast half pay for a female employee who served the organization for one to three years and payment of full salary for a female employee serving for three years or more during their maternity leave.

Article 151.1 and 151.2 as amended provides that the employer is mandatorily requird to grant at least 10 weeks of fully paid maternity leave to the female employee, to be divided she desires. However, she must take maternity leave for six weeks immediately following her delivery. Further, the employer must not restrict the female employee from taking maternity leave at least four weeks prior to the expected date of birth, as determined by persons mentioned above.

Amended Article 151.3 states that a female employee who gave birth to a sick child or a child who needs permanent care shall be entitled by law to an additional month of paid maternity leave, and she may extend the leave for an unpaid month, for a maternity leave of maximum eighteen weeks.

Article 152 was repealed completely, which means that now female employees in all cases are entitled to get paid for maternity leave without sacrificing for paid annual leaves.

Conclusion

As a whole, the Amendments aims to boost Saudisation since these are designed to encourage the employment of Saudi nationals in the private sector and promote employees’ rights in general, while a some of the provisions fall in favor of employers.  The new amendments include an increase in leave entitlements of employees, doubling of notice periods for employees serving unlimited term contracts and severe penalties for labour law violations. However, law makers appears to have provided recognition of market practices and the needs of businesses and deciding about advance compensation in the contract of employment for unlawful terminations and removal of right to claim reinstatement.