Understanding Saudization!

According to the Ministry of Human Resources and Social Development, the Saudi nationalization program (also referred to as “Nitaqat”) requires all private sector businesses to retain a specific percentage of Saudi national workers. Saudization’s primary goal is to minimize the number of Saudi citizens who are out of work and to improve the workforce’s skills and experience in accordance with Vision 2030.

There are presently more than 40 job titles earmarked for Saudi nationals in addition to the basic qualifications. These roles range from entry-level to more senior ones, such as HR Director or Manager.

The Kingdom of Saudi Arabia also plans to encourage foreign investment in the nation through a variety of programs. Through investments in industry, education, and tourism, the economy will be broadened beyond oil. An other initiative to broaden the country’s economy and create 380,000 employment is “Neom”, an intelligent metropolis designed to serve as a global center for commerce, innovation, and information.

What is the importance of Nitaqat?

Every company operating in the private sector in Saudi Arabia is required to employ a particular percentage of Saudi citizens, based on the nature of their business.

Using color-coded zones for company classification, Nitaqat assigns a score based on the company’s performance.

Employers in the private sector with more than nine workers must comply with the Nitaqat, which mandates that a specific percentage of Saudi citizens be hired and ensured, based on the industry and the size of the firm. Businesses with less than nine workers are free from the need to employ a Saudi national, although even those companies are compelled to hire one.

Maintaining either a High Green or Platinum Nitiqat status is required to ensure continuity in the company’s labor file. An average of 20-50% of the workforce should be Saudi natives, as this is the norm.

Color Coding system

Compliant companies are designated as platinum, high green, and low green; non-compliance companies are labeled as red.

Nitaqat Coding System

Enterprises in the compliance zone have a variety of advantages, including the ability to get work permits for expats through an accelerated online process and the ability to hire staff from red zone companies without the consent of their former employer..

In contrast, companies in the non-compliant red zone are prohibited from renewing or employing new expatriate personnel. As long as they don’t improve their Nitaqat rating, they can’t start new businesses or branches or limit the mobility of their workers.

Calculation of the Saudization rate

It is the Ministry of Labor and Social Development that does the calculations, using data provided by other government agencies such as the Ministry of Interior and the General Insurance Organization (GOSI).

Here is how the data is calculated:

Saudization Rate = (Average Saudi nationals / Average Saudi nationals + Average Expats) * 100

Forming a new business in Saudi Arabia

It is suggested to hire at least one Saudi national employee when international enterprises or investors initially form their entity. As a result, the firm will be able to process further foreign national employee visas (known as Iqama’s) without any labor limitations. The procedure of getting visas for foreign workers is simplified and expedited for platinum-classified companies. GOSI can provide a certificate to any KSA firm that identifies the company’s Nitaqat classification.

If you want to learn more about compliance and the process of expanding your business in Saudi Arabia, feel free to consult with our experts today at enquiries@pangeaworldwide.sa

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