Saudi Shoura Council slams expat fee plan

Scheme would have seen firms fined US$640 for each foreign worker over quota

(Photo for illustrative purposes only)

(Photo for illustrative purposes only)

Members of Saudi Arabia’s legislative Shoura Council have attacked a proposal by the Gulf state’s Ministry of Labour that would see companies fined for hiring too many foreign workers.

Under the Ministry’s proposal, businesses would be charged SAR2,400 (US$640) for each overseas employee not permitted under their Saudization quota, Saudi Gazette reported. The plan was due to come into force from the start of the Islamic new year.

The Shoura Council, which drafts and proposes legislation to the Saudi king, has criticised the idea as bad for business. The council also said that it was not part of the Ministry of Labour’s remit to decide laws on hiring practices.

“I do not need to mention that this will not help in solving the problems with Saudization, but aggravate them,” Ahmed Al-Dhaylai, one Shoura member, one quoted as saying by Saudi Gazette.

“This decision, like many of the ministry’s decisions, will not solve the problem. Undoubtedly, this will produce lots of negative outcomes that the citizens will pay for,” he added.

The Ministry of Labour’s proposal would have applied to private sector firms that employ more foreigners that Saudis. Those with a majority of foreign workers would have had to pay a fee of US$640 for each excess worker.

"The aim of this decision is to increase the competitive advantage of local workers by reducing the gap between the cost of expatriate labour and local labour," read a Ministry of Labour statement posted on the official Saudi Press Agency earlier this month.

Roughly nine in ten employees of private firms in Saudi Arabia are expatriates, say official estimates. Foreign workers, mainly from south or southeast Asia, generally command lower wages than Saudi staff.

This phenomenon has helped increase the rate of unemployment among Saudis to about 10.5 percent.

Saudi Arabia has a population of more than 27m, of which about 9m are believed to be from overseas.

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Posted by: Thamir Ghaslan

I'll make this as simple as possible mathematically and ignore all other benefits and allowance, i.e. medical insurance, 30 day vacation, tickets, housing, transportation, training, 6 hour Ramadhan workdays, work visa, end of service, administrative costs, etc.

People wrongly assume that these giveaways are paid by employer, when in reality it is deducted from basic pay on a monthly basis, in some cases it might approach 50% deductions of the basic pay to give out these benefits.

For simplicity and ignoring all allowances:

If I wanted to pay an expat 1,000 a month, an additional 25 goes into Gosi.

If I wanted to pay a Saudi 1,000 a month, an additional 180 goes into Gosi.

So even if it looks like I'm paying a Saudi and expat the same, Saudi cost more. 1025 vs 1180.

That is my main point of closing costs gaps.

All other allowances can be fixed percentage wise for Saudis and expats, but GOSI puts Saudi at a cost competitive disadvantage.

Posted by: NRI in Saudi

Echo the same comment made by Sardar. As an expatriate, I agree with taking measures to increase the local employment but this will not happen by shutting down companies. In all the press releases I haven't seen how this SAR 2400 per employee will be used by the Ministry of Labour.

On a seperate note, I find it funny how there is there is no coordination between Ministry of Labour and the Shoura council.

Posted by: Thamir Ghaslan

The shoura council have decades of experience, degrees from top notch institutions, economic know how on a macro and micro level, and patriotism looking out for the well-being of nationals.

Hearing negativity from greedy business owners or selfish expats will not slow the process of nationalizing jobs.

Ever since Nitaqat came into effect, ignoring all the usual dribble from business owners and expats, it successfully placed half a million job seekers. I was waiting for such price hike move by the ministry considering business owners understand only the language of money.

Having designed pay packages in the past, even if I paid a Saudi and expat the same rate when calculating basic pay and allowances, Saudi would cost more, for the simple reason that 9% goes to GOSI out of employer, 9% out of employee vs 2.5% expat GOSI paid by employer.

200 riyal a month is a very small amount to try and close the cost gap.

Posted by: thoughtful thinker

Dear Thamir, I am having difficulty following your logic. There is no doubt of the quality of the members of the Shoura. They are saying this isn't a good idea. Are you? Please enlighten us with your point of view?
By the way, please tell us which members of the Shoura took up their responsibilities immediately after their return from the US/UK after completing their post graduate degrees? I don't think you will find that many. You may find that the qualifications to become a member of the Shoura were academic and EXPERIENCE!!
Qualified and Experienced Saudis will do a better job than Qualified and a sense of entitlement with no experience Saudis.
Do you agree? I wish you a pleasant day, Thamir.

Posted by: leo50

as most private businesses in Saudi Arabia are owned by Saudi nationals, it appears to be evident that the problem will not be solved by the proposed activities...

Posted by: Shafqur Rahman

If each company think that they put foreign worker and pay every month 200 more for per worker it is better for them then keep Saudi worker, because if one saudi worker salary is 3000SR. same place one foreign worker salary is 1000 and less then that , the additional 200 if add with this it will be 1200SR., so profite for companies only. saudi nation will lose their job, netaqat is good process and govt. have to increase percentage of saudi worker and push to the companies to recruite more workers and to managerial level also, every companies existing mangers should have each one assistence manager (Saudi nation) existing manager have to give proper training to his assitance manager saudi nation for six months or year once he is ok, then hand over the possition to Saudi assestance manager. In between foreign manager also get chance to move country without any problem.

Posted by: expatian

Going over all these comments, I can safely conclude that it would not be hard to find Saudis who are better educated and erudite than the predominant Expat workforce.
Its time that 'Photo for illustrative purpose' found its way to the trash can .
Its been around for quite a few issues - that its nauseating

Posted by: jeban

To Mr. Street Cleaner from Italy,
Thanks for your comments, but you don't know internal matter & what is the managerial job, that is why you are saying like this,
last year I received more then 25o resume of Saudis those are well educated have Masters, MBA, Engineering degree they are better then those foreign managers are working existing position.
but the problem is their resumes are cut and troughed in the garbage only, and then requited some other Saudis those don't have more education, govt. offices and by papers these Saudis are the GM, DGM, etc., when ministry investigation come these persons acting same. But in real they are nothing, not manager.
Those Saudis are educated they can work as manager, engineer even without training also.
Mr. Rahman is correct what he wrote. Educated Saudi people can work as manager, engineer at any time, if get training that will be additional advantage for them.

Posted by: Street Cleaner

Dear Mister Rahman, do you really think that it only takes 6 month to make someone a Manager? unless you are speaking about a low job Manager that works 12 hours outside or in a bakery? But even then it is needing experience that is difficult to gather in 6 month. The become a Bakery Master it needs 3 years. To become a good foreman, it needs 3 years. To become a Manager in an office needs good judgement, people management skills, be able to help others solve problems, be able to training the guys, it needs more than 3 years to be come a middle Manager.

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