Saudization “Nitaqat” – an initiative launched by the Saudi Ministry of Human Recourses and Social Development

1.Introduction

Nitaqat is an initiative launched by the Saudi Ministry of Human Recourses and Social Development(“HRSD”) to encourage the private sector to hire Saudi nationals, thus, decreasing Saudi unemployment and increasing the share of their participation in the labour market.

The initiative restricts certain positions in the private sector to be occupied only by Saudi nationals. Currently, there are five Zones; Red, Low Green, Medium Green, High Green, and Platinum. Nitaqat applies to all entities that have 6 employees and above.

HRSD would apply Nitaqat to place the Saudi entity into a zone based on the percentage of Saudization it holds. Each range has its privileges and limitations.

Since its application in 2011, Nitaqat has been subject to different changes and updates, the latest of which was in December 2021( the “Advanced Nitaqat”).

• What changes affected the Advanced Nitaqat

• Using the number of employees instead of the size of the entity:

Nitaqat classifies entities by their sector, activities and number of employees using the International Classification Standard (“ISIC4”) over three years. By applying a specific equation using the Saudization percentage and number of employees, the entity will be able to know in which zone it falls for the first, second and third year onward.

• Minimum wage

While there is no specific minimum wage for a Saudi national generally under the Saudi Labour Law, the MHRSD would only count an employed Saudi national towards Nitaqat if his/her basic monthly salary is at least SAR 4,000, which was SAR 3000. However, those whose salaries are SAR 3000 and less than SAR 4000, including part-time workers shall be counted as ½ of the Saudi worker. In addition, flexible-hours workers shall be counted as 1/3 of the Saudi worker, provided the worker has completed not less than 168 hours in service. Handicapped worker will be considered as 4 workers, provided that his/her salary is not less than SAR 4,000.

• Consolidation of Related Activities

The previous Nitaqt classified organizations under 85 categories, which have been condensed to 33 activities and placed them in the same category with common characteristics.

• Parallel Saudization: no reference is made to Parallel Saudization.

• Nitaqat Saudization Calculation:

To explain how the equation works, the table below shows the values that need to be used to generate the minimum classification for each zone, then the Saudizatin percentage will be compared to the result to allocate the entity in the relevant zone.

Below is an example of an activity and the Nitaqat zones for the first year on the assumption that the entity has 19 employees (7 Saudis and 12 non-Saudis):

• Saudization percentage= total number of Saudi employed divided by the total number of employees multiplied by 100 = xx%

7%19× 100 = 36.84

• Equation to produce the values for each zone:

Curve Fixed Value * log(total number of employees) + absolute fixed value for the relevant year

Nitaqat Low Green Value: 1.68× log(19)+14.08= 16.22

Nitagate Medium Green Value: 1.87× log(19)+16.87= 19.26

Nitaqat High Green Value: 2.08× log(19)+20.47= 23.12

Nitaqat Platinium Value: 2.08× log(19)+23.87= 26.52

Accordingly, the entity will be placed by comparing the Saudization percentage with the results we reached above:

From 0% – 16.21 falls in Red Zone.

From 16.22 – 19.25 falls in Low Green Zone.

From 19.26 – 23.11 falls in Medium Green Zone.

From 23.12 up to 26.51 falls in High Green Zone.

From 26.52  up to 100 falls in the Platinium Zone.

As the Saudization percentage is: 36.84%, which exceed the minimum range of the Platinium Range (26.52), then the entity shall be placed in the Platinium Zone.

• Privileges and Limitations of Each Range:

Premium Range Companies:

• Receive applications for the balance of visas for any available professions.
• Can change professions of their foreign employees to any other profession, except for profession restricted to Saudi nationals.
• Can renew the work permit of foreign employees at any time, provided the remaining validity period of Iqama does not exceed six months upon renewal.
• May transfer foreign employees’ from any of Nitqat range.
• Shall be given a replacement visa for employees who leave the county on final exit visa.
• Shall be counted immediately in Nitaqat program.

High Green Range Companies:

• Receive applications for the balance of visas for any available professions.
• Can change professions of their foreign employees to other profession, except for profession restricted to Saudi nationals.
• Can renew the work permit of foreign employees at any time, provided the remaining validity period of Iqama does not exceed six months upon renewal.
• May transfer foreign employees’ from any of Nitqat range.
• Shall be given a replacement visa for employees who leave the county on a final exit visa.
• Shall be counted immediately in Nitaqat program.

Mid Green Range Companies

• Receive applications for the balance of visas for any available professions.
• Can change professions of their foreign employees to other professions, except for profession restricted to Saudi nationals.
• Can renew the work permit of foreign employees at any time, provided the remaining validity period of Iqama does not exceed six months upon renewal.
• May transfer foreign employees’ from any of Nitqat range.
• Shall be given a replacement visa for employees who leave the county on final exit visa and was occupying any of the specialised professions.
• Shall be counted immediately in Nitaqat program.

Low Green Range Companies:

• Cannot receive applications for new visas.
• Can change professions of their foreign employees to other professions, except for profession restricted to Saudi nationals.
• Can renew the work permit of foreign employees at any time, provided the remaining validity period of Iqama does not exceed six months upon renewal.
• May transfer foreign employees’ services from the Law Green Range and below.
• Shall be given a replacement visa for employees who leave the county on final exit visa and was occupying any of the specialised professions.

Red Range Companies:

• Cannot file applications for new visas.
• Cannot transfer visas.
• Cannot change employees’ professions.
• Cannot issue work permits for new foreign workers.
• Cannot open new files for new branches or facilities.
• Cannot renew employees’ work permits.

By Hammad & Al-Mehdar, Saudi Arabia, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact saudiarabia@transatlanticlaw.com

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