This article was written by Sr. Counsel Richard Tyner and Associate Paul Lockyer.
Further to our recent article on Nitaqat, there is another aspect to Saudiization, namely to ensure that a company’s employees have valid Iqamas that comply with the laws relating to sponsorship. This is the “enforcement” side of Saudiization, which seeks to create employment opportunities for Saudi nationals by removing those who are not compliant with sponsorship laws.
The Iqama shows the employee’s name, nationality, the company he works for as his sponsor and his job position. If there is a Labor Office inspection at a company’s premises, each employee is required to show a valid Iqama that shows the company as his sponsor and the correct job title. Violators could be deported and the company fined if a Labor Office inspection found inaccuracies on employees’ Iqamas (and employees may be fined for not having their Iqamas available during inspection).
The Labor Office crackdowns began in April 2013, and created a real sense of panic in the labor market. Shortly afterwards, the King announced (and later extended) an amnesty period to give companies and employees time to regularize their status, or leave the Kingdom. After the expiry of the amnesty, labor inspections recommenced on November 4, 2013. The initial targets for inspections are places where lower skilled expatriates (i.e. laborers) tend to congregate or work.
There have been small isolated riots in Riyadh and Jeddah (and several deaths). The number of “illegals” rounded up for deportation has been 900,000 during the last seven months, 178,000 since November 4, 2013 (see the Arab News article – Over 900,000 undocumented expats deported since beginning of amnesty). Saudi Arabia is not unique in this regard, and observers of Labor and Immigration policies world-wide could easily draw parallels to enforcement actions against illegals in the USA and EEC countries.
What could be the next step in the labor inspections? We think that increased Labor Office inspections at company premises, rather than targeting just the lower level, unskilled laborers is a likely next step. Any employee who is not properly sponsored would be at risk. Dependents cannot work unless they have their own Iqama (i.e. not sponsored by husband or father). Expatriates cannot work in positions reserved for Saudi nationals (i.e. many managerial positions).
A Labor Office inspection or site visit should be taken seriously, as employees could be arrested and held until being deported, for serious violations. While we are not aware of significant fines being imposed so far, the authorities could issue fines of up to SR 100,000 for a single offence.
There are a few manpower supply companies that have been licensed by the Saudi government in order to employ workers who would then provide services to others. There are currently only sixteen such companies, but given the restrictions and enforcement by the Labor Office, they are becoming popular. These companies are actively recruiting staff to meet local demands (see the Arab News article – 89,000 visas granted to licensed recruiting firms).
If there were a Labor Office inspection, and the company tried to show a copy of a “Service Contract” with a supply company or “agency” that was not properly licensed, the Labor Office inspectors would be likely to reject this approach. Assuming they were to do so, the inspectors would be likely to forbid the company from using the agency’s employees and could block the labor file until the issue was resolved and both the company and the agency could be fined and the agency workers deported.
Recently, the Ministry of Labor also referred to a new concept of “ajeer”, which is a relationship between companies so that a company could “ramp up” employment levels for a project and later reduce the numbers when the project was near completion. The concept is new and so we await experience with how it will work in practice.
For Companies to avoid sanction by the Labor Office when inspected, they must have all of their employees under sponsorship, holding valid Iqama (showing the correct job title), use the services of a properly licensed manpower supply company. We will provide further updates on this rapidly developing “other side” of Saudiization as developments occur.