Throughout March and April 2013, the KSA Ministry of Labour launched a series of surprise labour inspections designed to root out unlawful working in the Kingdom. The scale of the irregularities discovered lead to the declaration of an amnesty which will expire on 3 July 2013. With less than one month to go before the amnesty expires, we examine the impact of the amnesty and the authorities’ long term plans regarding labour and employment in KSA.

Employment and immigration framework

Each foreign individual (meaning an individual who is not a national of KSA or any of the other five members states of the Arabian Gulf Cooperation Council (AGCC)) working in KSA must have a local KSA entity or national sponsoring the individual for work and residency visa purposes. This authorisation is obtained by the employer through the Ministry of Labour and the Passport Office (within the Ministry of the Interior). The Ministry of Labour usually places limits or caps (in line with public policy) on the number of nationals from any particular country within the workforce at a given time or within any particular employer’s workforce.

Such authorisation permits the individual to work for the KSA national or registered entity sponsoring him in the particular role specified on the labour card and residency permit. It is unlawful under KSA immigration regulations for an employee sponsored for work and residency by one company to work for another company or strictly speaking in a role other than that specified in his authorisation papers. If an employee wishes to change employment and therefore transfer sponsorship, he must complete two years’ continuous service with the current employer and obtain the current employer’s consent to change jobs and transfer sponsorship.  If the new employment is in a different role, then the sponsorship transfer is complicated by the additional requirement to obtain approval for the change in job role.

As a result of a number of factors, including the limits placed on the number of visas an employer may obtain for foreign workers, Saudization requirements and, the 2 year limitation on transferring sponsorship from one employer to another, there are a number of individuals in KSA who are sponsored by company A but in fact working for company B – a clear violation of the labour and immigration laws.

Legal provisions and penalties

Article (39) of the KSA Labour law was amended in early 2013 and now provides that “it is not allowed for an employer – without following the statutory rules and regulations – to let his (foreign) worker go out and work for others. It is also not allowed for a worker to engage in work for another employer. The employer is not allowed to employ workers who are under the sponsorship of others. The Ministry of Labour shall inspect the firms and investigate the violations discovered by its inspectors, and then forward them to the Ministry of Interior to take penal actions against them. The employer is not allowed to let his worker engage in work for his own benefit. The worker is also not permitted to work on his own account. The Ministry of Interior shall arrest, deport and take punitive measures against those violators who are working for their own benefit in the streets and public squares and against those who run away (from their sponsors) as well as the employers, benefactors of such violators, those covering up on them and transporting them in addition to any person having a role in such violation.

Other changes were also made to the KSA Labour Law including the removal of Article 233 which included the penalties for those in violation of Article 39. Such penalties are now encompassed in a draft law that was approved by the Shura Council ‘The Rules for Dealing with Expatriates in Violation of the Laws’ (the Rules). The Rules include 14 articles identifying the competent authority for enforcing the range of penalties, the penalties and the employer’s obligations. The Ministry of Interior is in charge of arresting and deporting violators of the Rules. Employers who have been charged with violation of the Rules will be prohibited from recruiting foreign employees for a maximum period of 5 years. Examples of violations include the following

  • hiring illegal immigrants;
  • leaving the employer’s workers to work for their own account or for someone else; or
  • hiring workers of others without following the statutory rules and procedures.

Inspections and amnesty

The aim of the inspections launched in March was to identify companies and individuals who were employing individuals sponsored by other companies and thereby employing individuals unlawfully. The scale of the violations uncovered (the authorities stating that at least 5 million people were working unlawfully) resulted in the KSA Government declaring an amnesty for all individuals and employers to correct employee status within the three month amnesty period due to expire on 3 July 2013 (Amnesty). The Amnesty does not cover individuals who have entered KSA unlawfully and it only covers those individuals who have work and residency sponsorship under one employer but who are working for another. It does cover individuals who had lawful sponsorship which has since expired but under which they have been working for an employer other than the sponsoring employer.

All employers and individuals are required to correct the status of their employees or their individual status respectively (as applicable) by the expiry of the Amnesty, through either ensuring that the correct sponsorship is put in place or arranging for the individuals leave KSA and be repatriated. As alluded to above, the KSA Government has made it clear that the Amnesty will not be extended (despite a number of requests for an extension from the governments of certain foreign nationals) and that following its expiry a further series of labour inspections will be launched. Those employers found in violation of the labour and immigration laws will be subject to a fine of SAR 10,000 per employee employed unlawfully, and a potential jail sentence of at least 2 years (the maximum being 5 years).

The Amnesty has made it imperative for employers to meet Saudization targets and targets under Nitaqat in order for the employer to obtain permission to employ expatriate workers and obtain the necessary visa authorisations from the Ministry of Labour and the Passport Office. The general belief is that at least 20% of foreign nationals forming part of the workforce can be replaced with KSA nationals.

The Ministry of Labour and the Passport Office have been working around the clock and also on Thursdays due to the heavy rush of applications for rectification of residence and labour status of expatriate employees following the Amnesty being announced.

It is reported that since the Amnesty was announced, tens of thousands of illegal residents have registered with their consulates in an effort to get airline tickets. An estimated 6,000 Pakistanis, 60,000 Indians, nearly 10,000 Filipinos, 7,000 Sri Lankans and other nationalities have sought permission to leave KSA and be repatriated. In addition, it is reported that 200,000 people have been deported and around 240,000 individuals have regularised their immigration work/status.

A growing issue at present for those being deported or seeking to leave KSA of their own accord is in relation to the biometric tests that individuals need to undergo before leaving the Kingdom. These must be done at the Labour office in the district where the work authorisation was issued even if the worker is not actually based there anymore.

The Amnesty only applies to persons whose violations were committed before 6 April 2013 and any government fees incurred on the violations will not be exempted under the Amnesty. The employment, transportation and harbouring of applicable employees is a violation exposing the employer to imprisonment for up to 2 years and/or fines of up to SAR 100,000. Moreover, the employer is responsible for keeping the Iqama and work permit valid and any breach of this obligation gives the employee the right to terminate the employment contract and transfer his services to a new employer without the approval of the current employer.

Other key features of the Amnesty include the following:

  • During the Amnesty period, no administration fees will be chargeable for changing an employee’s profession or job title on his work permit and residency visa and job titles or profession may be corrected regardless of the employer category  under Nitaqat.
  • An employer with less than 9 employees will be permitted to sponsor a further 4 expatriate employees provided that the employer employs at least 1 KSA national and that following the employment of the additional 4 expatriate employees, the overall headcount does not exceed 9 employees.
  • The Ministry of Labour caps on the proportion of nationalities permitted within a workforce will not apply during the Amnesty in order to enable employers to correct employees’ immigration status (this provision does not apply to applications to sponsor new recruits who are not already in KSA under another company’s sponsorship).
  • Sponsorship transfers are permitted during the Amnesty without the current sponsoring employer’s consent, for example company A (which sponsors the individual but where he does not work) does not have to consent to the transfer of sponsorship to company B (where the employee has actually been working). However, the employee will have a travel ban period of 3 months following sponsorship transfer in order for the original employer to raise any claims or concerns regarding the employee (for example financial liabilities).
  • Individuals who depart KSA as a result of the Amnesty will be fingerprinted before departure but are not banned from re-entering KSA in the future if they secure employment and proper work and residency authorisation.
  • Individuals who entered KSA on a domestic worker visa status may transfer sponsorship to work for a private sector employer subject to the existing employer’s consent and the new employer not falling below the ‘green’ category under Nitaqat following the transfer of such individuals’ visa and work permits to it.
  • An employer established following the Amnesty is not able to have the sponsorship of individuals transferred to it under the terms of the Amnesty.

Future action

The KSA authorities are encouraging all individuals and employers to benefit from the Amnesty and have made it clear that leniency will be shown to those correcting violations as soon as possible. A series of workshops have been held, and newspaper notifications distributed, across the Kingdom. However, once the Amnesty expires, a further series of inspections is expected and penalties are expected to be imposed on violators.

The Amnesty and greater enforcement action must be viewed against a wider aim to promote the employment of KSA nationals and to rationalise the labour arrangements (particularly recruitment) within KSA and in agreement with labour exporting countries such as the Philippines, India, and Indonesia. A series of bilateral agreements are being signed with a number of countries, including Vietnam, Cambodia, India, Sri Lanka, Nepal and Indonesia. These agreements are designed to cover training, medical insurance cover, and employer and employee rights arising out of the employment relationship.

In addition, a series of amendments to the KSA Labour Law have been proposed and published. These, along with other proposals (such as unemployment benefit for KSA nationals and measures to enhance job location and recruitment for returning graduates to KSA), will be covered in our next update.