Saudi micro SMEs forced to hire nationals

Small businesses in Saudi Arabia that employ ten or fewer staff must have at least one Saudi worker from next month, the Ministry of Labour reportedly ruled.

According to English language Saudi Gazette, the ministry recently revealed that 340,000 businesses in the kingdom currently have no Saudi citizens working for them.

The newspaper said that small businesses that do not comply with the new regulation face being stripped of their operating license and hit with financial penalties, while their workers’ residency permits will not be renewed.

Earlier in March, a source at the Ministry of Labour was quoted as saying that almost half of all companies in Saudi Arabia are failing to comply with rules on employment of citizens.

The source said 48 percent of 248,828 firms based in the Gulf Arab state are currently classified in the ‘Red’ zone, or in violation of, Saudi Arabia’s Nitaqat system.

The unnamed source told Arab News that 19 major international companies were in violation of Nitiqat, while 80,347 were classified as ‘Green’, or in compliance, during 2012.

Saudi Arabia, the Gulf’s most populous nation and world’s biggest oil exporter, is in the midst of a major drive to push more of its citizens into private sector employment. According to government estimates, 12 percent of Saudis are currently unemployed, while nine-tenths of workers in the private sector are overseas workers.

In November last year, the Ministry of Labour introduced a controversial new policy that would see companies that employ more foreign staff than nationals fined SAR2,400 (US$640)  per overseas employer, per year.

The move has drawn praise from Prince Alwaleed bin Talal, Saudi Arabia’s richest businessman, but criticism from others, including the kingdom’s top Muslim cleric and the legislative Shoura Council.