Local media recently reported on the decision by the Ministry of Labor to charge the private sector a fee of SR 2,400 annually for the employment of each non-Saudi citizen, if the number of expat employees exceed that of Saudis. The ruling came into effect this month.
The logical reason for this decision is understandable, which is to raise the cost of foreign labor. As a result, it will encourage the employment of nationals and contribute to the process of Saudization.
The fee is just one of many measures to raise the cost of foreign labor and reduce the number of foreign workers flowing into the Kingdom.
The question is: How do we do that? The problem lies in the details. This means the objection is not against the idea itself, but against the details of implementation, and as the proverb says, “The devil is in the details.”
Let me give you some examples. First, the starting date of the implementation is not reasonable. It is not fair to impose fees effective immediately. This should be done gradually, because of the overriding numbers of non-Saudi workers, and the private sector’s employment policy. A decision could have been made to charge a lesser fee, say SR 400 for the first year, and introduce a multi-year plan with an additional 20 percent charged annually. This would allow the private sector to make arrangements accordingly.
Secondly, a relation between jobs and the type of sector was not taken into consideration. There is no doubt that Saudis’ pursuit of work in the private sector is variable according to the nature of the job and the size of the establishment. Therefore, the fee should not be the same for all companies and sectors. One example is the construction sector. It includes the minimum number of Saudi workers, which is less than 10 percent. At the most, their numbers improve at a rate of one percent annually.
These solutions are temporary. The best solution is to void the sponsorship system. This should coincide with reducing the number of annual work visas and make employment subject to market requirements. This represents a long-term structural solution for Saudization.
Present policies should aim to facilitate the process of moving to a wage system that is dependent on the market.
It is important to know that there is no human procedure to change the status quo without any impact.
This means we shouldn’t expect to control the employment of non-Saudis without difficulty and at considerable cost. This is the reality.
There is no doubt economic activity will suffer as the imbalance of the Gulf job market will take some time to address and adjust to — more than what the ministry of labor has predicted.
— Courtesy of Al-Eqtisadiah newspaper