Saudi Arabia Officially Abolished The “Kafala” Labor System

The Ministry of Human Resources
and Social Development (HRSD) launched today a Labor Reform Initiative (LRI)
under the National Transformation Program (NTP) to enhance the contractual
relationship between workers and employers and aims to support the Ministry’s
vision of establishing an attractive job market, empowering and developing
labor competencies and developing the work environment in the Kingdom.

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LRI allows job mobility and
regulates the Exit and Re-Entry Visa issuance. It applies to all expatriate
workers in the private sector. It includes specific control measures put in
place to take into account the rights of both parties of the contractual
relationship. The reforms come into effect on March 14, 2021.

MHRSD stated that this initiative
will improve and increase the efficiency of the work environment in Saudi
Arabia and complement similar initiatives launched in this regard, including:
the wage protection system, the digital documentation of work contracts, the
labor education and awareness Initiative, and the launch of “Wedy”
for the settlement of labor disputes. In addition to other programs concerning
the development and improvement of the working environment and safeguarding the
rights of both parties of the employment relationship.

LRI seeks to increase the labor
market’s flexibility, effectiveness, and competitiveness and raise its
attractiveness in line with the best international practices and the Saudi
labor law. It also activates the contractual agreement between the employee and
employer based on their employment contract through digital documentation of
those contracts, which will contribute to reducing the disparity between Saudi
workers and the expatriates.

This, in turn, will reflect
positively on the job market by increasing the employment opportunities for
Saudis while also increasing the attractiveness of the local job market for top
talent.

Employee mobility will allow
expatriate workers to transfer between employers upon the binding work
contract’s expiry without the employer’s consent.

The initiative also outlines
conditions applicable during the contract’s validity, provided a notice period,
and adhered to specific measures.

The Exit and Re-Entry Visa reforms
allow expatriate workers to travel outside Saudi Arabia without the employer’s
approval after submitting a request: the employer will be notified
electronically of their departure.

The Final Exit Visa reforms allow
the expatriate worker to leave the Kingdom after the end of the employment
contract without the employer’s consent and will notify the employer
electronically with the worker bearing all consequences (financial or
otherwise) relating to breaking the employment contract.

All three services will be made
available to the public through the smartphone application (Absher) and (Qiwa)
portal of the MHRSD.

The LRI enhances the competitiveness of the local Saudi labor market and puts it on par with similar international markets. It would also increase its ranking on international competitiveness indicators as it elevates the labor regulations to international practices in line with signed labor conventions.

LRl is also expected to decrease
the number of dispute cases between employers and employees and attract
high-level caliber worldwide.

LRI is also expected to have
several economic effects, including developing the local market and the
flexibility of work, increasing the private sector’s productivity, attracting
highly skilled talent, and ultimately contributing to achieving the Kingdom’s
Vision 2030 through the National Transformation Program.

LRI was achieved through
collaboration and close work with the Ministry of Interior, the National
Information Center, and with the support of several other government agencies.

It was preluded by several meetings and workshops with representatives of the private sectors and the Council of Saudi Chambers and is based on studies and research that included international best practices in this field.

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