FAQs Document

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1. What is Nitaqat?

Nitaqat (RANGES) is a program designed by the Saudi Ministry of Labour to boost nationalization of jobs in the private sector. This direct intervention initiative aims to deliver quick results and give Saudi nationals a better stand in the labour market.

The program evaluates private sector entities based on their nationalization

performance, which is measured by calculating the percentage of Saudi employees out of total employees working for the entity; subsequently the Ministry of Labour classifies entities into the Nitaqat ranges/bands that reflect their performance nationalization-wise relative to their economic activity/size cohorts. The four Nitaqat ranges/bands are:

Depending on the band, such entities will either receive incentives, in the form of services and facilities, or be subject to suspending some of the ministry services and face punitive measures.

Previous nationalization programs - dubbed as “Saudization” - required all sectors to

have a blanket quota of 30 percent Saudis, although only a third was achieved after many years of implementation. The new Nitaqat system, in contrast, is more dynamic, and derives its nationalization quotas from the actual performance of private businesses which varies according to their economic activities (industries) as well as entity employment size.

To make such quotas realistic and practical the ministry remapped the labour market into 41 economic activities and further categorized companies into five (5) sizes - according to workforce size from micro (0-9 employees) to giant (3000+ employees). It is worth noting that micro entities (0-9 employees) are exempt from the Nitaqat program at the launch stage, this leaves us with a new 164 different nationalization quotas for business entities (41 activity x 4 sizes). The program was designed so that 50 percent of the companies in any of the 164 classifications – i.e. entities which share similar size and similar type of economic activity - are in the green and excellent ranges. excellent zones.

Entities achieving exceptional nationalization performance

Entities achieving good nationalization performance. They represent the top half of entities within the same economic activity and size

Entities achiving below average performance in termsof jobs nationalization

Entities achiving poor nationalization performance, and they represent the worst one fifth of entities within thesame economic activity and size

Excellent

Green

Yellow

Red

Starting 23rd February 2012 employees of entities in Yellow range are allowed to move to entities in Green and Excellent range without their employer consent, and if they decided to continue working for the same employer then the work permit renewal is conditional to them having spent 6 years or less in KSA. If they want to stay longer, they would have to move to entities in the Green or Excellent range/band.

4. Why did MoL choose to launch the program now?

The drive to nationalize private sector jobs is not a new measure in the labour market. The Ministry launched its nationalization programs since the mid 1990s.

Saudi has a young population and this exert pressure on the labour market due to the

increased numbers of young Saudis coming into working age. Unemployment is a serious issue with diverse negative implications that could affect the country’s socioeconomic stability. That's why Nitaqat is launched now as part of the Ministry short term solutions to solve unemployment.

5. How will Nitaqat affect the lives of expatriates in the Kingdom?

The Ministry of Labour recognizes and appreciates the role of expatriates in fostering economic growth in the Kingdom. The Ministry understand that the new program will have direct and indirect effects not only inside the Kingdom but also on labour markets of expatriate's countries of origin.

NITAQAT is not designed to threaten the presence of expatriates; however, the ministry understands the cautionary perception which many expats might have of the program. We believe the program is fair to all stakeholders, including expatriates. Furthermore, expatriates can play an important role in making their current companies more stable if they start encouraging their employers to recruit more Saudis.

There will be certain change of employment preferences following the implementation of Nitaqat and some sectors will be affected by the program more than others, but even if we provide jobs for all unemployed Saudis, the private sector will still be in need of millions of expatriates.

Niatqat non-compliant businesses, i.e. Red or Yellow entities, are subject to restrictions including the inability to renew work permits for their workers. This does not mean that their employees will necessarily have to leave the Kingdom; on the contrary Nitaqat offers workers at Red and Yellow range entities’ greater job mobility by allowing them to seek employment with other businesses provided that these potential employers fall within the Green or Excellent ranges. In addition job switching will take place without the consent of their initial “non compliant” employer and through a regulated mechanism to safeguard the rights of workers and job owners.

2. What kind of incentives and restrictions will companies face once the program is fully implemented?

Green and Excellent companies will be able to hire from any part of the world, get new visas with open professions, and change professions of workers even to restricted categories, except jobs such as employment officials, receptionists, government liaison officials, treasury staff, and security officers. Excellent and green companies will be also allowed to recruit employees of Red and Yellow ranges and transfer their services without their employers consent.

Yellow companies will not be able to apply for new visas, visa transfers or open files for new business and/or new business branches. However, they will still be able to change the workers professions until the 26th of November 2011. Moreover, Yellow companies will be allowed to renew their workers’ work permits unconditionally until 22nd Feb 2012, and after that they will only be able to renew their workers' work permit provided they haven’t completed more than six years in the Kingdom.

Red companies will not be allowed to benefit from basic ministry services such as transfer of visas, issuance of new visas and opening files for new business and/or new business branches. However, Red range companies will be allowed to renew the work permits and change workers professions until November 26, 2011 only.

Both Yellow and Red companies will in time lose control over their workers who will

be allowed to seek employment at companies in the higher Green and premium categories.

3. Which phase of Nitaqat are we in now?

From June until September all private companies were asked to update their employees’ information both at the General Organization for Social Insurance (GOSI) and the Ministry of Interior (National Information Centre) for the purpose of calculating the nationalization ratio including their national and foreign workers respectively. The period was utilized by Red and Yellow entities to hire more Saudis and increase their nationalization levels. The Ministry of Labour has also allowed all private sector entities to rectify their workers professions. The ministry provides periodic information and counselling to companies on the Nitaqat website (www.emol.gov.sa) to assist companies in conforming to the program’s guidelines.

The second phase started in 10th September 2011 when Nitaqat was implemented and some services are provided only to companies in Green and Excellent range and suspended for entities in the Yellow and Red ranges.

The third phase starts on the 26th of November, 2011 when employees of companies in Red range are allowed to move to companies in Green and Excellent range without their employer consent, and if they continue in working for companies in Red then their work permits will not be renewed once it's expired.

6. How will Nitaqat work vis`-a-vis the rising recruitment trends?

Nitaqat is not designed to stop recruitment of expatriates, but rather to rationalize the issuance of recruitment visas. Nitaqat program encourages recruitment of expatriates in entities that fulfil the nationalization requirements (Green and Excellent entities). By doing this, the Ministry is actually making the tenure of expatriates more stable.

As for the expatriates already existing in Saudi labour market, Nitaqat program allows the freedom of mobility to those of them who are in Red and Yellow entities. The program encourages them to seek employment stability by moving to Green and Excellent entities helping them reduce their exposure to unemployment due to employers' non compliance with Nitaqat.

7. What are the new regulations that the ministry plans to announce to foreign labor?

The ministry cares about and protects the interest of private sector workers whether they are local or expatriates. While Nitaqat comes to cater for national labour, the Ministry has new initiatives for expatriates in the pipeline. Before year's end, the ministry will announce a number of new regulations, programs and services for expatriates.

The new recruitment agencies will handle the hiring of foreign workers and become responsible for providing a proper work environment and ensuring foreign workers’ financial well-being and rights. In parallel, the ministry is working to establish a direct hot-line service in multiple languages to provide information, assistance and help to foreign labour. These two initiatives are of particular importance for domestic and low-skilled workers.

The Ministry is also developing an electronic system for wage protection. The new system will ensure that salaries and wages are duly, paid hence reducing potential labour disputes and disagreements.

8. How will Nitaqat affect the overall Saudi labour market? Nitaqat has the potential to introduce much-needed market adjustments to enhance

the efficiency of the private sector. The program aims to increase the share of national workforce in the private sector and amend the imbalances of the labour market’s workforce ratio where national labour constitute only 10% of the private sector’s eight (8) million workers. These levels are unacceptable specially since unemployment is estimated at 10.4% and tends to rise due to a young population and the gradual increase in the number of job seekers.

Apart from increasing the number of national workers to economically sustainable

levels, Nitaqat will have other implications on the local labour market such as accelerate women employment, training for job seekers, establishing minimum wage and protecting the rights of employees.

9. How will the program deal with people who have special cases (born to a Saudi mother or married to a Saudi)?

For the purpose of Nitaqat, non-Saudi employees who are either born to a Saudi mother or married to a Saudi national are counted as Saudis. Nitaqat will only consider those who are registered in the National Information Centre database under the sponsorship of their mother/spouse. Employees belonging to this tranche would then be registered in GOSI (General Organization for Social Insurance) to be included as Saudis in the entity nationalization rate.

10. How will Nitaqat gain a wider public appeal from stakeholders?

The objective of any program design is to offer creative and feasible solutions and to minimize glitches and problems and Nitaqat works according to these parameters. We are neither claiming that Nitaqat is the sole remedy for unemployment nor have we said that it is a rigid non adjustable program.

We hope to create a public consensus over the importance of job nationalization with job owners, workers, job seekers, media and other government and non government bodies.

We have to understand that investing in the future of Saudi youth pays back.

Providing nationals with decent job opportunities means more demand on products and services which in turn lead to robust economy.

Expat employee can continue working in the same entity until his work permit expires

Exit Only Visa

ExcellentGreen

Work Permit expired

Transfer services to

Green / Excellent entity

Transfer services to

Green / Excellent entity

Renewing Work Permits

NO

NO

YES

YES

Found new Entity in

Yellow Red

More then 6 years

11. Is it true that because of Nitaqat all expatriates stay in KSA is now limited to 6 years only?

Nitaqat is not intended to limit expatriate stay in KSA for six years; this law is intended for entities in the Yellow range that have low job nationalization rates.

The new system (Nitaqat) works as follows: • Entities well performing in terms of nationalization (Excellent and Green) will

have no limitation for expatriates employed by them.

• Entities underperforming in terms of nationalization will be categorized in the Yellow range. This means that entities within this range will be able to renew work permits for their employees unconditionally until 22nd of February, 2012. However, if by then the entity is still in the Yellow range, it will only be able to renew work permits for those who have stayed 6 years or less in KSA. Those who stayed more than 6 years would have to find jobs in Green or Excellent entities. In case of a successful placement, expatriates can transfer their services to the new entity without their employer's consent. The ministry is in fact helping expatriates seek the opportunity to work for better entities. Only failing to achieve the above, would lead to the expatriates return.

• Entities with poor nationalization performance will be categorized in the Red range. This means that expatriates working for these entities will be able to renew work permits for their employees unconditionally until the 26th of November, 2011. However, if by then the entity is still in Red, it will not be able to renew work permits. The expatriates working for these employers would have to find jobs in Green or Excellent entities. In case of a successful placement, expatriates can transfer their services to the new entity without their employer's consent. The ministry is in fact helping expatriates seek the opportunity to work for better entities. Only failing to achieve the above, would lead to the expatriates return.

12. How will the expat worker know in which range the company he is working for is in? And how will he find an alternative company in the Green or Excellent range?

MOL has a service in its electronic portal that will allow any employee to know the Nitaqat (range) of the entity he/she is working for. This will give him/her enough time to search for alternatives in case the entity is still in Red or Yellow. The ministry will also launch a new SMS service for the expatriates to inquire about the range of the entity they are working for. This is done by sending the residency permit number to MOL by SMS, and getting the response immediately.

The ministry is also working on facilitating to those employees a portal where they will

be able to find the contacts and addresses of all entities in Green and Excellent so that they can contact them and start applying to entities that is compliant with Nitaqat.

13. Is it true that if the entity of the expat employee currently in the Red range, and the employee gets a exit/re-entry visa, then once he goes to the airport to travel, the custom will revoke his re-entry and make it an exit only and he/she will not be allowed back to the country?

This is not true. Even after Nitaqat implementation, expats in the Red range entities will not be able to renew their work permit starting November 27th 2011, nothing will effects them before that. After that date, they will not be given exit only visa, they will need to find a new entity in the Green and Excellent range and transfer their services to a new employer. Only failing to secure a new job in compliant entities, would lead the expatriates to exit only visa.

14. What guarantees the contractual relationship of expatriates in case of termination due to Nitaqat?

The Ministry of Labour guarantees by all means the rights of expatriates according to their contractual relationship with their employers. In case of any disputes, the expatriate is encouraged to present his/her case to the labour office committee of labour complaints.

Moreover, Nitaqat provides expatriates with an early indicator by allowing them to

know the status of their employer and his current range. This will provide expatriates with a buffer zone flexible enough for them to seek new employment.

15. How will the Ministry of Labour protect the rights of the expatriate working in Yellow and Red entities who wants to transfer his/her services to Green or Excellent entities without the consent of his/her employer?

The Ministry of Labour guarantees by all means the rights of expatriates according to their contracts. In case the expatriate, belonging to Red or Yellow entities, finds a new job in a Green or Excellent entity, then he/she would follow standard procedures related to transfer of services except acquiring employer's consent.

In case of any disputes, especially concerning employee rights, the expatriate must

present his/her case to the labour office committee of labour complaints.

16. How will Nitaqat solve the inconsistency between expiry dates of work permits and residency permits?

With the inception of Nitaqat, the Ministry of Labour, in coordination with the Ministry of Interior, unified the validity of both work and residency permits. Both are now issued and expiring simultaneously. The renewal window for any of these permits now starts 3 months before expiry. (Note: Renewing aforementioned permits is only allowed for expatriates working in Green and Excellent entities).

17. How would Nitaqat affect the companion of an expatriate?

The residency permit of an expatriate’s family will be valid as long as the expatriate is allowed to stay in the Kingdom. If the expatriate is working for an entity that is non-compliant with Nitaqat, then his/her residency is subject to finding a new job in a Green or Excellent entity.

In case of a successful placement, expatriates can transfer their services to the new

entity without their employer's consent. This would lead to an automatic renewal of the residency permit of the family. Only failing to achieve the above, would lead to the expatriate and his/her family's return.

18. Does Nitaqat apply to domestic labour?

Nitaqat does not apply to domestic labour. It's only intended for the private sector. The Ministry of Labour defines domestic labour to include man and women in the following professions: housekeeper, private nurse, domestic or personal property guard, domestic cook, domestic concierge, domestic gardener, domestic worker, personal driver, and any of the professions related to personal/household work.