Experts divided over proposed amendment to Saudi labor law

Experts agreed on the negative effects of proposed amendments in the labor law that allows expatriates to freely transfer their sponsorship between firms

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Several experts agreed on the negative effects of proposed amendments in the labor law that allows expatriates to freely transfer their sponsorship between companies in the green and platinum categories of the Labor Ministry’s Saudization program known as Nitaqat. Previously, expatriates needed the approval of their respective employers but the ministry plans to do away with this requirement, Al-Jazirah daily reported.

Under the Nitaqat program, private firms, based on the percentage of Saudization, are classified into platinum, green, yellow and red categories.

Companies with high Saudization rates will come under the platinum and green categories, while those who fail to achieve the required rates or refuse to employ Saudis will be included in the yellow and red categories, respectively.

The ministry published the draft of the new law on its website for discussion and to receive feedback and recommendations of businesses.

Experts said the new law would create chaos in the job market, increase expatriates' salaries and, in turn, increase prices of goods and services for end consumers.

Mohammad Al-Ajlan, the head of the commercial committee at the Riyadh Chamber of Commerce and Industry (RCCI), said the law would create illegal competition between businesses and also claimed that expatriates who have been in the kingdom for a long time would exploit the law to their advantage and negotiate higher salaries and benefits.

“In addition to increasing prices for the end consumer, this law will create more problems and legal cases between businesses, and courts and labor committees simply do not have the resources to deal with more disputes between businesses. Expatriates who have acquired the required experience and secrets of the profession will certainly exploit that knowledge in negotiating better salaries in competing businesses," he said.

Economist Abdulrahman Al-Sultan accused the private sector of creating chaos in the job market by employing cheap yet unqualified expatriates.

“The private sector has turned the Saudi job market into the world's largest training workshop. Most expatriate workers do not have better skills than Saudis and this law is not a magic solution to the Saudization problem, but it is one of several laws that will increase competition for Saudis,” he said.

Al-Sultan pointed out that although the law may increase prices for consumers, it is still a good law as it will encourage Saudization in the private sector.

"The real reason for the private sector to recruit expatriates is their low cost compared to Saudis and by allowing expatriates to freely transfer their sponsorship, businesses will be obliged to offer higher salaries and benefits. This will decrease advantages of hiring expatriates and encourage businesses to employ more Saudis,” he added.

Recruitment specialist Mohammad Al-Saqr said the new law was a big step toward the eventual abolition of the sponsorship system, which many human rights organizations have criticized for giving employers easy opportunities to exploit workers.

"I believe that this law will have positive effects on the Saudization process because it aims at increasing the costs of expatriate workers and allow better opportunities for the employment of Saudis," he said.

Al-Saqr pointed out that the law would face some opposition initially as it will cause problems for some firms, especially in the contracting and construction sector, but said it would ultimately benefit citizens.

This article was first published in the Saudi Gazette on May 26, 2014.

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