Small businesses forced to comply with Saudization rules

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According to a new rule by the Saudi Ministry of Labor, small and medium-sized businesses in the kingdom will be forced to comply with saudization rules. Photo – BAE

According to a new rule by the Saudi Ministry of Labor, small and medium-sized businesses in the kingdom will be forced to hire at least one Saudi worker from next month.

The rule will be applicable on businesses in Saudi Arabia that employ ten or fewer staff. Government figures show that there are about 340,000 businesses in the Kingdom that currently do not employ any Saudi citizens. The Ministry of Labor estimates that about half of all companies operating in Saudi Arabia are not complying with rules on employment of citizens.

Based on Saudi Arabia’s Nitaqat system, about 48 percent of 248,828 firms have been found to be in violation of the employment rules and are classified in the ‘Red’ zone. In 2012, 19 major international companies were also in violation of Nitiqat, while 80,347 were found to be complying with these rules.

However, the Saudi government has decided to act tough against the violators to promote employment of local nationals in the private sector of the economy. Small businesses that do not obey the rules will be financially penalized, while their operating license could also be revoked. Further, the government has also decided not to renew the residency permits of their workers.

The government of Saudi Arabia has undertaken these steps to encourage greater participation of locals in the private sector. Saudi Arabia, the Gulf’s most populous nation and world’s biggest oil exporter, is taking active steps to reduce its reliance on income earned through oil exports and diversify its economy. Currently, about 12 percent of Saudis are unemployed, while 90 percent of workers in the private sector are expatriates.

Last year, the Ministry of Labor introduced another controversial new policy of placing heavy fines on companies that would employ more foreign staff than nationals. While the policy was praised by Prince Alwaleed bin Talal, Saudi Arabia’s richest businessman, it drew heavy criticism from the kingdom’s top Muslim cleric and the legislative Shoura Council.

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