Saudi Arabia Officially Abolished The "Kafala" Labor System


The Ministry of Human Resources and Social Development (HRSD) launched today a Labor Reform Initiative (LRI) under the National Transformation Program (NTP) to enhance the contractual relationship between workers and employers and aims to support the Ministry's vision of establishing an attractive job market, empowering and developing labor competencies and developing the work environment in the Kingdom.

LRI allows job mobility and regulates the Exit and Re-Entry Visa issuance. It applies to all expatriate workers in the private sector. It includes specific control measures put in place to take into account the rights of both parties of the contractual relationship. The reforms come into effect on March 14, 2021.

MHRSD stated that this initiative will improve and increase the efficiency of the work environment in Saudi Arabia and complement similar initiatives launched in this regard, including: the wage protection system, the digital documentation of work contracts, the labor education and awareness Initiative, and the launch of "Wedy" for the settlement of labor disputes. In addition to other programs concerning the development and improvement of the working environment and safeguarding the rights of both parties of the employment relationship.

LRI seeks to increase the labor market's flexibility, effectiveness, and competitiveness and raise its attractiveness in line with the best international practices and the Saudi labor law. It also activates the contractual agreement between the employee and employer based on their employment contract through digital documentation of those contracts, which will contribute to reducing the disparity between Saudi workers and the expatriates.

This, in turn, will reflect positively on the job market by increasing the employment opportunities for Saudis while also increasing the attractiveness of the local job market for top talent.

Employee mobility will allow expatriate workers to transfer between employers upon the binding work contract's expiry without the employer's consent.

The initiative also outlines conditions applicable during the contract's validity, provided a notice period, and adhered to specific measures.

The Exit and Re-Entry Visa reforms allow expatriate workers to travel outside Saudi Arabia without the employer's approval after submitting a request: the employer will be notified electronically of their departure.

The Final Exit Visa reforms allow the expatriate worker to leave the Kingdom after the end of the employment contract without the employer's consent and will notify the employer electronically with the worker bearing all consequences (financial or otherwise) relating to breaking the employment contract.

All three services will be made available to the public through the smartphone application (Absher) and (Qiwa) portal of the MHRSD.

The LRI enhances the competitiveness of the local Saudi labor market and puts it on par with similar international markets. It would also increase its ranking on international competitiveness indicators as it elevates the labor regulations to international practices in line with signed labor conventions.

LRl is also expected to decrease the number of dispute cases between employers and employees and attract high-level caliber worldwide.

LRI is also expected to have several economic effects, including developing the local market and the flexibility of work, increasing the private sector's productivity, attracting highly skilled talent, and ultimately contributing to achieving the Kingdom's Vision 2030 through the National Transformation Program.

LRI was achieved through collaboration and close work with the Ministry of Interior, the National Information Center, and with the support of several other government agencies.

It was preluded by several meetings and workshops with representatives of the private sectors and the Council of Saudi Chambers and is based on studies and research that included international best practices in this field.

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