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Tue 8 Mar 2016 12:05 PM

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Saudi Oger in spotlight as ministry investigates delayed salaries

Giant contactor is being punished by Labour Ministry as some employees claim they have not been paid for four months

Saudi Oger in spotlight as ministry investigates delayed salaries
(Image for illustrative purpose only - Getty Images)

One of Saudi Arabia’s largest companies is being punished by the country’s Labour Ministry following claims that it has delayed salary payments to some of its workers, according to reports in the kingdom.

Arab News reported that the ministry will cease providing some of its services, including social security and passport affairs, to Saudi Oger as part of its investigation.

The newspaper also quoted sources as saying that the ministry had formed a committee to address a series of complaints from Saudi Oger employees, some of whom claimed not to have been paid for four months.

Saudi Oger has said that salaries were delayed because it had not received payment for work that had already been carried out.

Arab News quoted a Saudi Oger director’s memo sent 10 days ago as saying that regular salaries would resume from March, and that overdue payments would be refunded in instalments.

Saudi Oger is one of the kingdom’s largest contractors and has worked on projects such as the King Abdullah University for Science and Technology and the King Khaled International Airport in Riyadh.

The fall in the oil price is putting unprecedented pressure on the Saudi contracting industry. In its 2016 budget, the government slashed its infrastructure and transport budget by 63 percent.

The finance ministry has cut advance payments to firms doing state construction work, the government has awarded fewer contracts, and its payments to companies for work already done have slowed, industry executives say.

In February, a leading Saudi Arabian businessman asked the king to intervene to ensure that the government makes delayed payments to construction companies, in a sign of growing pressure on the economy due to low oil prices.

Some construction firms have seen scheduled payments from the government delayed by over six months, Abdulrahman Al Zamil, president of the Council of Saudi Chambers business association, wrote in a letter to King Salman.

"If the delay in payments continues, these companies will be at risk of default, or go completely out of business," said the letter, seen by Reuters.

Partly because of the payment delays, some firms have delayed paying their staff or laid off thousands of workers, and several have begun talks to reschedule debts. Jabal Omar Development said last month it was in talks with creditors after failing to make a 650 million riyal ($173 million) first repayment on a 3 billion riyal government loan.

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