Saudization, officially known as the Saudi nationalization scheme or ‘Nitiqat’ is a system implemented by the Ministry of Human Resource and Social Development requiring all private sector companies to maintain a designated percentage of Saudi national employees in their workforce. The key aim of Saudization is to reduce the number of unemployed Saudi nationals and boost the skills and knowledge of the workforce in line with Vision 2030.
Alongside the minimum requirements there are currently over 40 job designations reserved exclusively for Saudi nationals. These positions vary from junior positions to more skilled professions such as a HR Manager / HR Director.
What is Nitaqat?
The Nitaqat program requires all employers in the private sector to hire a certain percentage of Saudi nationals, depending on their industry and business activities.
Nitaqat uses a rating system, by classifying companies into color coded zones; platinum, high green, mid green, low green and red.
The Nitaqat makes it mandatory for employers in the private sector with over nine employees to hire and ensure a certain percentage of Saudi nationals depending on the company’s industry and the number of employees in the company. Any company in the private sector with less than nine employees are exempt from the system but are still required to hire at least one Saudi national.
In order to maintain continuity in the company’s Labour file, it is necessary to maintain either a High Green or Platinum Nitiqat status. As a general rule this would typically be a requirement to employ between a 20-50% employees as Saudi nationals.
The Nitaqat Color Coding explained
Companies are categorized into platinum, high green and low green which are considered compliant and the red zone which is considered non-compliant.
Companies in the compliant zone enjoy a number of benefits such as being able to obtain work permits for foreign employees through an expedited online process and hiring of employees from red zoned companies without approval from their former employer.
In contrast, entities in the non-compliant red zone are restricted from renewing their employees residence permits and hiring new expatriate employees. They are also restricted from opening new entities or branches and forfeit their authority to restrict their employees from moving to a new employer until they have improved their Nitaqat rating.
How is the Saudization rate calculated?
The Ministry of Labor & Social Development makes the calculation based on the information received from the Ministry of Interior and the General Organization for Social Insurance (GOSI).
The data is calculated using the following formula
Saudization Rate = (Average Saudi nationals employed / Average of Saudi nationals + Average of Expatriates) * 100
The entity is categorized into a color-coded zone based on its average Saudization performance percentage in the previous 26 weeks.
Setting up a new entity in KSA
When foreign companies / investors first establish their entity it is recommended that the first employee is a KSA national. This will immediately position the company in the Platinum category which will allow the company to continue processing additional employee visas (known as Iqama’s) for foreign nationals without any labour restrictions. A platinum classified company will experience a faster and more streamlined process of obtaining visas for foreign employees.
Each KSA company can issue a certificate from the General Organization for Social Insurance (GOSI) that will determine the Nitiqat category of your company.
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