Wage protection system to be phased in for smaller employers

IMPACT – MEDIUM

What is the change? Saudi Arabia’s Ministry of Labor has begun implementing its wage protection system for employers of smaller sizes and will cover all companies except those with 10 or fewer employees.

What does the change mean? The system is primarily aimed at ensuring that companies pay employees on time. Companies face fines of up to 3,000 riyals (about US$800) and loss of privileges for not complying, including the loss of work permits for repeat violations.

• Implementation time frame: Ongoing. Companies with 60 to 79 employees began to be covered by the system in August, and implementation for all companies with 11 or more will begin in November. For employers with 10 or fewer employees, implementation has been postponed.
• Who is affected: Saudi employers with 11 or more employees.
• Business impact: Employers are required to file monthly online records demonstrating timely payment of wages.

Background: The Saudi wage protection system began in 2013 with the intention of covering all private sector employers regardless of size by the end of 2017. The Ministry of Labor and Social Development monitors wage payment to prevent illegal working and to ensure that companies are paying their workers on time and at the agreed upon wage.

BAL Analysis: The implementation of the wage protection system for smaller companies is the last phase of the program and part of the overall plan to enforce labor rules across all corporate sectors and sizes. Small companies with fewer than 80 employees should anticipate obligations to make monthly filings through the wage protection online system in the coming months.

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.

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