The Kingdom of Saudi Arabia has launched its most sweeping labor reforms. The Kingdom’s latest amendments to labor laws demonstrate its dedication to modernizing workforce regulations that support its Vision 2030.
These reforms impact employment contracts, employees protections, compensation structures and workplace policies. It is important for business owners, HR professionals and employers to understand these amendments to retain control and promote positive workplace relationships. This article will guide you through all updates and help your business meet the latest compliance standards.
Understanding the 2025 Labor Law Framework
The Council of Ministers has introduced comprehensive reforms to the Kingdom’s labor framework. Recent amendments approved on August 6, 2024, represent a significant overhaul in labor laws. The revisions encompass amendments to 38 articles, the omission of 7 articles, and the introduction of 2 new articles to strengthen the labor law structure.
Key Objectives and Scope of Amendments
The Ministry of Human Resources and Social Development conducted its largest longitudinal study to analyze labor practices across multiple jurisdictions. The primary goals of this study are:
- To benchmark labor practices against international standards.
- To identify areas for improvement in existing labor regulations.
- To ensure alignment with Saudi Vision 2030 objectives.
- To promote fairness and inclusivity in workplace practices.
- To strengthen employees’ protections and rights while fostering a competitive labor market.
These amendments reflect feedback from over 1,300 participants through excessive surveys, where the Ministry also consulted private sector entities, government agencies, and HR experts.
Timeline for Implementation
The new amendments will take effect on February 19, 2025, exactly 180 days after their publication in the Legal Gazette on August 23, 2024. Organizations are advised to use this transition period to adapt their policies and procedures to meet new requirements.
Impact on Existing Employment Relationships
The amendments bring major changes that affect current employment relationships. Employers must now develop training policies for Saudi nationals to boost their technical and administrative skills. The reforms also ensure the equal treatment of all employees under applicable laws.
Employers are required to update their existing contracts, employee handbooks, and employment policies. These changes will impact contract management, employee benefits, and workplace policies. A detailed review of current practices is essential to ensure compliance with the new framework.
Critical Changes in Employment Contracts
Saudi Arabia’s labor law framework introduces fundamental changes to the structure and management of employment contract. Let’s explore the key amendments that will transform employment relationships across the Kingdom.
New Contract Requirements and Definitions
The amendments provide precise definitions for key employment terms. For instance, “resignation” is now formally defined as: “a written declaration by an employee, under no coercion, expressing their intent to unconditionally terminate a fixed-term employment contract”. Additionally, contracts for non-Saudi nationals with indefinite terms must now be documented in writing, with their duration automatically set as a one-year fixed term from the date of commencement of work. Where the employee’s work continues after this term, the contract will be subject to automatic renewal for the same period.
Probation Period Modifications
The rules governing probation periods have undergone significant revisions. Under the new framework, the original 90-day period can now be extended to a maximum of 180 days. During this period, both the employer and the employee have the right to terminate the contract, marking a departure from the previous rules, where termination rights could have been limited to one party.
Contract Termination and Resignation Procedures
- Clear protocols for contract termination and resignation have now been established. Employers are now required to respond to an employee’s resignation within 30 days. Failure to respond within this timeframe results in automatic acceptance of the resignation. However, if justified by business needs, employers may delay acceptance for up to 60 days, provided that the delay is initiated within the first 30 days from the date of resignation, according to article 79 of KSA Labor Law.
- Employees now have the right to withdraw their resignation within seven days if it has not yet been accepted by the employer. Therefore, employment contracts could end on the earliest of the following dates: the date the resignation is accepted, 30 days after submission if there is no response, or upon the expiration of any employer-approved delay.
- Additionally, notice periods for indefinite contracts with monthly wage payments have been revised. Employees are now required to provide a 30-day written notice, while employers must give a 60-day notice. Additionally, the law now recognizes the establishment’s final bankruptcy as a legitimate reason for terminating contracts.
Enhanced Employee Rights and Benefits
The revised Saudi Labor Law further introduces major enhancements to employees’ protections and rights. Let’s delve into the key updates that are set to transform workplace practices across the Kingdom.
One notable area of enhancement is employee leave benefits, which have been substantially expanded. Employees are now entitled to the following:
- 12 weeks of fully paid maternity leave for female employees, according to article 151 of KSA Labor Law.
- Three days of bereavement leave for an employee in case of the death of a brother or sister, according to article 113 of KSA Labor Law.
- Five days of bereavement leave in case of the death of an employees’ spouse or one of his/her ascendants or descendants , according to article 113 of KSA Labor Law
- Three days of paternity leave within seven days of the childbirth date, according to article 98 of KSA Labor Law.
Additionally, key changes to the overtime provisions in article 107 have introduced greater flexibility for both employers and employees. While the employer is still required to pay 150% of the basic hourly wage for overtime hours, the new amendments allow employers, with the employee’s consent, to offer compensatory paid leave instead of monetary payment. This change provides an alternative benefit structure, enabling employees to take time off in lieu of overtime pay. Additionally, the definitions of overtime remain consistent, with hours exceeding the weekly working limit and all hours worked during holidays and Eids classified as overtime. These updates aim to balance employee benefits with operational flexibility.
Anti-discrimination Provisions & Employees Protection Measures
Compliance Strategies for Employers
Updating HR Policies and Procedures
A comprehensive review and update of existing HR policies are essential for companies to ensure compliance with the latest labor law amendments in the Kingdom. Research highlights the importance of developing structured training and qualification policies tailored to the local workforce. Regular policy reviews will help align organizational practices with the updated regulations. Key focus areas include:
- Contract management systems.
- Leave and overtime benefits.
- Resignation handling mechanisms.
- Anti-discrimination provisions.
Documentation Requirements
Proper documentation plays a vital role in regulatory compliance. Companies are advised to keep all employment-related documentation properly organized and available. Key documentation requirements include:
- Employment Contracts: Written contracts clearly outlining terms of employment, including roles, responsibilities, and contract duration, especially for non-Saudi employees as per the new amendments.
- Overtime and Leave Records: Accurate logs of overtime hours, leave balances, and any compensatory leave agreements to comply with updated provisions.
- Resignation and Termination Documentation: Records of resignation letters, employer responses, and termination notices, ensuring timelines align with the new regulations.
- Probationary Period Documentation: Detailed records of probation terms, including duration, performance evaluations, and termination notices during the probation period.
- Anti-Discrimination Policies: Evidence of updated workplace policies that reflect new anti-discrimination provisions and equal opportunity practices.
Training and Implementation Guidelines
HR teams and management are encouraged to conduct regular training sessions to ensure compliance with the labor law requirements and updates. The recommended implementation strategy emphasizes the following priorities:
Develop comprehensive training programs for HR personnel.
Establish clear communication channels for disseminating policy updates.
Leverage technology platforms, such as Qiwa, to optimize management processes.
Conduct internal audits to ensure adherence to regulations.
Activate feedback mechanisms to drive continuous improvement.
To further ensure compliance with the regulations, legal experts specializing in Saudi labor laws can assist organizations tackle complex compliance issues with greater effectively. Leveraging their expertise ensures companies adapt to regulatory changes effectively and implement new requirements properly, maintaining a competitive edge.
Additionally, companies should leverage technology platforms to streamline compliance management by improving accuracy in regulatory filings. This digital transformation simplifies documentation management and reporting processes while significantly reducing administrative workloads.
