Significant Amendments to Saudi Arabia's Labour Law and Implementing Regulations

18 September 2024 - On 6 August 2024, the Saudi Council of Ministers approved changes to the Saudi Labor Law, which are expected to be effective 180 days after their publication in the Legal Gazette. The Ministry of Human Resources and Social Development (MHRSD) has actively sought public opinion on these proposed changes, involving over 1,300 participants from various sectors. The amendments aim to align with Saudi Arabia's Vision 2030, fostering a conducive work environment, prioritizing job security, and promoting human capital development and training opportunities. The changes include alterations to 38 articles, the removal of 7 articles, and the addition of 2 new articles. 

A summary of the key changes is set out below:

1. Key definitions and terms: The amendments introduce two new definitions:
   • Resignation: Defined as a written declaration by the employee expressing their wish to terminate a fixed-term employment contract without coercion, conditions, or reservations, and accepted by the employer.
   • Manpower activity: Defined as a service that recruits and provides employees to employers on a contractual basis through a licensed manpower agency.
2. Wage and compensation regulations: The amendments introduce changes to overtime, accommodation, and transportation regulations. Employers can now provide compensatory leave instead of overtime pay with employee consent. Employers must also provide accommodation and transportation or equivalent allowances to employees.
3. Resignation procedures: The amendments introduce new provisions regulating the resignation process for employees on limited term contracts, including automatic acceptance, employer's right to delay, effective date, employee's right to withdraw, and prohibition of postdated resignations.
4. Probation period: The amendments clarify provisions concerning the probation period, including duration and terms, exclusions, and termination rights.
5. Exemptions from the Labour Law: Employees on ships with a load of less than 500 tons are no longer exempt from the Labour Law.
6. Non-KSA national contract duration: The contract duration is deemed to be for a one-year fixed-term, starting from the date of employment and renewed automatically for the same period thereafter.
7. Holiday and leave: The amendments increase maternity leave to 12 weeks on full pay and introduce parental leave for male employees. All employees will be entitled to three days’ bereavement leave in the event of the death of a sibling.
8. Termination of the employment contract: The amendments add bankruptcy as a lawful reason for terminating an employment contract and extend the period for employees to object to any disciplinary action.
9. Notice period: The notice period for terminating an indefinite contract has been modified.
10. Detailed amendments to specific articles: The amendments update various articles of the Labour Law, including Article 2, Article 199, Article 178, and Article 230.

Deloitte’s view

The amendments represent a significant evolution in Saudi Arabia's labour market, aligning with modern labour standards and enhancing worker rights. However, they also pose challenges for employers, necessitating a comprehensive review of existing employment contracts, policies, and procedures.

The changes introduce complexities in managing employee relations, particularly around the resignation process and probation period.  Additionally, modifications to the notice period for contract termination and the introduction of bankruptcy as a lawful reason for termination may impact business planning.

Deloitte is committed to supporting clients through this transition, offering expert guidance on the new regulations, assistance in reviewing employment contracts and policies, and strategic advice on managing employee relations under the new framework. Our aim is to help clients navigate these changes effectively, ensuring compliance and minimizing operational disruption. 

Contacts

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