For over a decade, Saudization, officially known as the Saudi Nationalization Scheme or Nitaqat has been a cornerstone of Saudi Arabia’s labour market reforms. The program mandates that private-sector companies employ a specific percentage of Saudi nationals, based on their size and industry.
The goal? To reduce unemployment among Saudis and increase their participation in the private-sector workforce. While the initiative has made significant strides, it has also faced challenges, including reluctance from both employers and employees, structural barriers, and compliance issues.
This blog helps you get a better understanding of Saudization.
What is Saudization?
Saudization is a policy introduced by the Saudi Ministry of Human Resources and Social Development to address the Kingdom’s growing unemployment problem and reduce its reliance on foreign labour.
Historically, the public sector has been the primary employer of Saudi nationals, while the private sector has been dominated by expatriate workers. With population growth, more women entering the workforce, and a booming economy, the government recognised the need to shift Saudi workers toward private-sector jobs.
Under the Nitaqat system, companies are classified into six categories:
- Platinum
- High Green
- Mid Green
- Low Green
- Red
based on their Saudization rates. Entities that fail to meet the required percentage of Saudi employees face fines like suspension of HRSD services, while compliant companies enjoy incentives like faster visa processing and access to government contracts.
Saudization Rates and Reserved Jobs
So, what does this mean for your business? What is the Saudization ratio you need to follow?
How to calculate the Saudization percentage is an intricate process based on three factors:
- Saudization Percentage (Saudi Employees)
- Entity Size (Total Employees)
- Entity Classification (Business Activity registered in HRSD System)
For example:
- For international companies entering Saudi Arabia, their second employee after the General Manager must be a Saudi national.
- Companies with more than 100 employees must have a Saudization rate of at least 30%.
- There are certain roles and functions where 100% Saudization in the sector is required.
(These requirements may vary per sector or license type.)
The Successes of Saudization
Since its inception, Saudization has achieved notable successes:
- Increased Saudi Employment: The program has significantly boosted the number of Saudis working in the private sector. For example, between 2011 and 2013, sectors like transportation, manufacturing, and retail saw substantial improvements in Saudization rates.
- Women in the Workforce: Saudization has encouraged more Saudi women to join the workforce, particularly in sectors like retail and education.
- Economic Diversification: By reducing reliance on foreign labour, Saudization aligns with Saudi Arabia’s broader Vision 2030 goals of economic diversification and sustainable development.
Other Interesting Facts About Saudization Quotas
- Companies not meeting the Saudization ratio and other requirements are unable to attain the Saudization certificate, which is mandatory for bidding on Etimad and other public sector projects.
- There is no difference in quotas for men and women.
- A Saudi employee with a salary of less than SAR 4,000 is counted only as 0.5 person towards the Saudization quota.
- Employing 1 person with a disability counts as 4 persons towards the Saudization quota.
- All GCC nationals are counted towards the Saudization quota as Saudi nationals.
- A Saudi employee who is registered under two companies is counted towards the first company’s quota only.
The Future of Saudization
Saudization is more than just a labour policy—it’s a critical component of Saudi Arabia’s Vision 2030. By addressing structural and behavioural barriers, the Kingdom can create a sustainable and inclusive labour market that benefits both employers and employees.
Conclusion
Saudization has undoubtedly played a pivotal role in reshaping Saudi Arabia’s labour market, driving employment opportunities for nationals and aligning with the Kingdom’s Vision 2030. While the initiative has celebrated notable successes, challenges such as employer reluctance, skills mismatches, and ghost Saudization persist.
For Saudization to achieve its full potential, a multi-faceted approach is necessary. Enhancing vocational training, supporting SMEs, and promoting a cultural shift toward private-sector employment are all essential steps. Additionally, continuous monitoring and stricter enforcement can ensure that the program’s goals are genuinely realised.
For more information on Saudization and its requirements, contact DuVolks today
