Saudization Explained, The War For Talent in Saudi Arabia

What is Saudization?

Nitaqat is the official name of the policy of the Government of the Kingdom of Saudi Arabia implemented by its Ministry of Human Resources and Social Development, to increase the percentage of Saudi nationals employed in the private sector of the economy and reduce the dependence of the economy on expatriate labour which has long dominated many industry sectors in Saudi Arabia.

Saudization is not a recent policy. The campaign has been ongoing since 1985 but since 2011 it has been implemented more strenuously when the Saudi Government took the decision to reduce unemployment among native Saudis, under the slogan 'Let's Put the Saudi in Saudization'. Companies which fail to comply with Saudization regulations have been warned that they "will not be awarded government contracts". While the "Saudi political elite" is agreed on the importance of Saudization, Saudi businesses have complained of its implementation and sought ways to avoid it.

The program classifies the country's private firms into six categories: Platinum, High Green, Mid Green, Low Green, Yellow and Red. Platinum is the highest percentage of Saudi employees category followed by High Green and the Yellow and Red categories being the lowest.

Nitaqat requires employers in the private sector with over 10 employees to hire a certain percentage of Saudi nationals, depending on the company’s industry and the number of employees in the company. Companies with less than 10 employees are exempt from the zoning system but are still required to hire at least one Saudi national.

The companies receive incentives or penalties depending on the category they belong to and a full list of Saudization percentage breakdown by industry and company size is available. Rapid visa services are available only to businesses which are in the platinum category of the Nitaqat system.

History, Saudization Progress

The initiative was announced in June 2011, when the Ministry of Labor passed Ministerial Resolution no. (4040) with an  implementation deadline for the program of 2013. Large numbers of expatriate workers left Saudi Arabia, transferred their employer sponsorship or changed their job titles to legalize their status. More than 200,000 private firms were closed down in 2014 for failing to meet the conditions set within the Nitaqat nationalization program aimed at reducing unemployment among Saudis.

However, over the last 8 years the Saudi government has made certain roles exclusively for Saudi Nationals. Saudi nationals make up two thirds of the 36 million people who live in Saudi Arabia with the other third comprised of expatriates working in various industries. There are regular policy updates varying the professions open to Saudi nationals and the percentage of Saudis who must be employed depending on industry and company size. 

Upskilling Saudis

The Saudi Government has resolved to upskill its population as a key component of its economic policy Vision 2030 which aims to reduce dependency on oil and gas and diversify the economy. Whilst the authorities have reserved over 90 professions exclusively for Saudi Nationals, many of these are junior roles. However, the list does include human resources roles, jobs associated with labour affairs, certain sales specialists and some finance roles.

The shortage of skills is seen to be in the more technical roles reserved for engineers, architects, IT specialists and healthcare practitioners. This has led to the Saudi Arabian government implementing new eligibility requirements on its multibillion-dollar scholarship program for young Saudis who want to study for university degrees abroad.

If you are approached for a role you feel maybe reserved for a Saudi National the best course of action is to ask the employer if they have a visa (Iqama) for a non-Saudi.

Are all industries affected by this change? If no, what are the key industries and why?

In recent months, and notwithstanding the challenges presented to employers by the COVID-19 pandemic, the KSA Ministry of Human Resources and Social Development (‘MHRSD’) has continued to implement the government’s Vision 2030 strategy to increase employment opportunities for Saudi nationals in the private sector by targeting certain roles, professions and sectors of the economy for nationalisation. Both foreign and local companies have had to adapt their workforces to the rapidly developing labour reforms in KSA, much of which have been focused on the recruitment of Saudi nationals.

As the largely young Saudi population continues to gain educational qualifications and relevant work experience, the MHRSD has sought to “Saudise” a number of sectors and, increasingly over the last 12 to 18 months, professions which require higher levels of qualifications. This trend looks set to continue into an increasing range of professions and industries. Employers will be required to plan their future workforces factoring in the required number of roles which must be occupied by Saudi nationals. They will also need to strategically consider which of their foreign workers will be required to remain within the workforce to ensure continuity, and also to assist with training and passing experience to their Saudi national colleagues.

What impact does this legislation have on business owners?

The new rules laid down in the governmental strategy have given companies fresh challenges to tackle, with organisations finding themselves barred from hiring more expatriates but unable to find the required local talent. A war on talent is seeing well qualified able Saudis moving jobs regularly increasing salaries, especially in the government sector.

Meanwhile, the Human Resources Development Fund (HADAF) has transformed its branches across the Kingdom into employment centres to support Saudi jobseekers. Khaled Abalkhail, spokesman of the fund, said that as many as 22 branches of HADAF in various cities and regions of the Kingdom have been transformed into specialized centres to support job seekers take up jobs in the private sector.

How will this affect an expat currently living and working in Saudi?

If you are an expat with vital skills which are in short supply, you need have no fears. However if your skills are abundant in the country, your employment contract may not be renewed at the end of your contract if there is a Saudi national available to do the work.

The Saudi government has implemented the Expat Dependent fee. This was imposed in 2017, and the fee obliges working expats to pay additional fees for each dependent or companion they have in the country.  The iqama attracts issuance and renewal fees which must be paid annually or quarterly and the dependent levy is added as an extra.

So is it all bad news for Expats in Saudi?

Certainly not. While the number of roles available for expatriates in the Kingdom has reduced, there are still significant skills shortages in critical fields, healthcare being one. There are iqamas being issued in many professional services companies, private family groups and government roles where it has been agreed that a skill set shortage is evident.

Many expats enjoy working in an environment where they bring their experience and are shadowed by Saudi professionals to learn best practice.

We hear many good new stories of expats enjoying the warm, friendly Saudi culture and although Saudization is a policy to reduce the reliance on expat workers, there will be many rewarding roles in the coming years as the country works toward the Vision 2030 goals.