April 20, 2012
Saudi Arabia plans to introduce a new tracking system to monitor the payment of expatriate salaries. The system is to be launched in May 2012 and is designed to track salaries of allforeign workers as well as Saudi employees, ensuring that their monthly salaries are transferred to their bank accounts in line with the terms specified in their employment contracts.
Since 1994, as the country’s economy expanded, the Government of the Kingdom of Saudi Arabia implemented a “Saudization” effort to ensure a certain percentage of Saudi nationals were employed by Saudi companies.
In September 2011, a new program “Nitaqat” (or Ranges) replaced the “Saudization” efforts. This nationalization program is being implemented in phases over the course of 2012 by categorizing Saudi companies according to thenumber of total workers and establishing Saudi worker quotas. The program also has color categories denoting levels of compliance, with each color having different ranges of incentives or penalties based on compliance in hiring guidelines.
The salary tracking system (a.k.a. “Bank Wage” system) is a scheme similar to Nitaqat and will soon be introduced to encourage companies to appoint Saudis to higher and better paid positions. This system will also ensure expatriate workers are paid according to the terms of their employment contracts and that the full amount of their contract salary are deposited in monitored Saudi bank accounts.
In a recent interview, Labor Minister Adel Fakieh advised the new salary tracking system will be phased in over the next two to three months. “In the first phase it will be applied to large companies; this will be within two months or three at the latest. Smaller firms will be monitored at a later stage and in a year’s time all companies will be registered.” The Minister has advised that this program is not designed to reduce issuanceof Saudi work permits or visas.
ACTION ITEMS FOR EMPLOYERS
The new tracking system to monitor the payment of expatriate’s salaries is being designed in cooperation with the Central Bank of Saudi Arabia. This will help authorities to rate companies not only according to the ratio of Saudi citizens they employ, but also based on the proportions of their payrolls being paid to Saudi citizens.
Please note that as these regulations are not yet formalized nor officially announced, companies should be following existing Saudi regulations to transfer the salary into the expatriate’s bank account on the date indicated in the employment contract. Salary deposits can be made no later than the last day of a month.
Expatriate accounts can be opened with any official banking institution operating in Saudi Arabia (e.g., SABB, Al Rajhi Bank, Saudi Fransi Bank).
This new regulation is expected to apply to all foreign workers, no matter what position they occupy. To legally work in Saudi Arabia, it is obligatory to be on the Saudi payroll via a labor contract.
Companies should work with their global immigration suppliers to ensure when their Saudi sponsoring organizations will be required to start the salary reporting requirements as part of the “iqama” (residence permit) process and to ensure anassignee’s Saudi bank account is opened as part of the relocation process.
Glenn Faulk, Global Knowledge Manager, has written this alert in coordination with our Saudi KGNM-Move One.
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