Levies on companies hiring foreign workers set to increase

11 Sep 17

SAUDI ARABIA

IMPACT – MEDIUM

What is the change? Saudi Arabia will increase the monthly fees that companies pay for each foreign worker they employ, and companies that hire more Saudis than foreign workers will no longer be exempt from paying the fees. The current amount is 200 Saudi riyals (about US$53) per month per foreign employee.

What does the change mean? Beginning in January 2018, companies that employ an equal or fewer number of foreign nationals compared with Saudi citizens will pay 300 riyals per month for each foreign worker; 500 riyals per month in 2019 and 700 riyals per month in 2020. For companies that employ more foreign workers than Saudis, the fees will be 400 riyals per month in 2018, 600 riyals per month in 2019 and 800 riyals per month in 2020 for each foreign worker.

  • Implementation time frame: Ongoing.
  • Visas/permits affected: Work visas.
  • Who is affected: Saudi companies that employ foreign nationals.
  • Business impact: The increased fees will increase the costs of employing foreign nationals, especially for companies with higher ratios of foreign workers to Saudi workers.
  • Next steps: Companies should budget for the fee hikes and consider them in planning for stricter Saudization rules.

Background: The implementation schedule is as follows:

Employer Category 2018 2019 2020
Companies where foreign employees are equal or fewer than Saudi employees 300 riyals per month per foreign worker 500 riyals per month per foreign worker 700 riyals per month per foreign worker
Companies where foreign employees exceed Saudi employees 400 riyals per month per foreign worker 600 riyals per month per foreign worker 800 riyals per month per foreign worker

 

The fees are part of the government’s efforts to encourage companies to hire Saudi workers. The government also imposed a new tax on family members of expatriate workers in July and new Saudization rules on employers took effect Sept. 3.

BAL Analysis: Saudi employers should plan for the graduated fee hikes for foreign employees over the next three years and assess their ratios of foreign workers to Saudi workers to begin planning for a set of Saudization policies that will impact business costs and hiring and recruitment practices.

This alert has been provided by the BAL Global Practice group and our network provider located in Saudi Arabia. For additional information, please contact your BAL attorney.

Copyright © 2017 Berry Appleman & Leiden LLP. All rights reserved. Reprinting or digital redistribution to the public is permitted only with the express written permission of Berry Appleman & Leiden LLP. For inquiries please contact copyright@balglobal.com.