The main law governing employment in Saudi Arabia is the Labour Law, issued by royal decree in 2005. The provisions of the law are supervised by the Ministry of Labour. There are also a number of royal decrees, ministerial decisions and resolutions, departmental circulars and other pronouncements of official bodies relating to labour matters issued from time to time that have the authority of law.
Unfortunately, there is no central system that provides a comprehensive reference for all the laws pertaining to employee/employer relationships.
The Labour Law will apply to almost every contract of employment under which any person agrees to work for an employer for a wage. Exemptions from the Labour Law exist; for example, when members of the employer's family are the only employees, for housemaids, for non-Saudi workers performing a specific task for less than two months, and for sports people.
All expatriate employees require an employment visa and must be sponsored by an employer to arrange one. Generally, these will be valid for up to two years when issued. To obtain an employment visa, the employee must submit to a medical examination. Foreign workers must initially obtain a work permit visa and then, with the assistance of their employer, apply for a residency permit (iqama).
There may be a degree of difficulty and delay involved in obtaining visas, so early enquiries should be made in such situations.
Saudisation policy and foreign workers
Foreign businesses setting up in Saudi Arabia should be aware of the Saudisation policy that requires a minimum number of nationals to be employed by a company. This minimum number depends on the type of company and the industry it operates in. Generally, 30 per cent of the workforce must be Saudi unless the business relates to construction, cleaning or operational work, in which case the requirement is 10 per cent.
The Labour Law expressly prohibits the mingling of men and women in the workplace. Furthermore, women (as well as adolescents and juveniles) may not be employed in hazardous operations, nor may they be employed to perform night shifts, with the exception of certain professions such as nursing.
Labour Office inspectors may visit an employer's workplace in order to ensure that these requirements are being complied with.
Female employees are entitled to maternity leave for the four-week period preceding the expected date of delivery and for a six-week period thereafter. During this leave, the employee is entitled to half pay if she has been employed for at least one year, and to full pay if she has been employed for at least three years from the commencement date of the leave.
However, if a female employee takes her annual vacation during the same year as her maternity leave, she will only be entitled during that vacation to half pay or to no pay, depending on whether she received half pay or full pay during her maternity leave.
Medical expenses related to pregnancy and delivery must be paid by the employer.
The Labour Law prohibits an employer from terminating the employment contract of a female employee while she is on maternity leave or during an illness resulting from work or delivery, provided she is not absent from work for more than six months. Also, a female employee cannot be dismissed during the six months preceding the expected date of delivery, unless for a valid reason under the Labour Law.
Definite-term and indefinite-term contracts
The Saudi Labour Law distinguishes between definite-term and indefinite-term contracts.