February 2025 will see the implementation of amendments to the Labour Law of the Kingdom of Saudi Arabia.
The stated purpose of the changes is to create a more attractive work environment for employees, and to contribute to achieving sustainable development in line with Saudi Vision 2030. This is reflected in the changes, which introduce greater flexibility to both parties in the employment relationship, as well as enhancing certain employee rights.
Many of the changes are likely to require employers to adjust their policies and practices to ensure that they comply with these new provisions.
The key amendments to the Labour Law are as follows:
Probation
Probation under the existing Labour Law is set at 90 days, with an ability to renew for a further 90 days, upon agreement by the parties. The amendments enable the parties to agree to a 180-day probationary period at the outset. This will reduce the administrative burden on employers and give certainty to both parties who will know the extent of the probationary period from the beginning of the employment relationship. The amendments also clarify that each party has the right to terminate the contract during the probationary period, whereas under the current Labour Law, it is possible to restrict the right to terminate during probation to one party only.
Overtime
Currently, all overtime must be compensated by paying an uplift of 50% of the basic wage. However, the amendments allow the parties to agree that the employee may take time off in lieu of overtime worked, rather than receive a payment. This gives greater flexibility to employers to manage overtime liability and may be appreciated by employees who would prefer to enjoy time off in lieu for overtime worked.
Housing and transport
The amendments include an obligation on the employer to provide either accommodation and transport, or housing and transport allowances.
Leaves
The amendments extend paid maternity leave by two weeks, to a total of 12 weeks. Paternity leave for male employees has been added, so that fathers will be entitled to paid leave of three days to be taken within seven days of the birth of the child. Finally, the amendments introduce a new entitlement to paid bereavement leave of three days in the event of the death of a sibling.
Duty of equal opportunities
The amendments to the Labour Law will add a duty on employers to refrain from doing anything that would undermine equal opportunities or treatment in employment, whether through exclusion, differentiation or preference between job applicants or employees on the basis of race, colour, gender, age, disability, marital status, or any other form of discrimination.
Right of appeal
The existing Labour Law provides that an employer may take disciplinary action against an employee and notify the employee of the disciplinary sanction imposed. Under the amendments, the employee has a right of appeal, to be brought within 30 days of the date of the decision (extended where a public holiday falls within this period).
Calculation of limited term period
Non-Saudi employees must be employed under limited term contracts. However, under the current law, where the contract fails to specify the period of the limited term, the Labour Law states that the limited term shall be determined by reference to the expiry of the work permit. The amendments to the Labour Law state that where the contract is silent, the limited term shall be assumed to be for a period of one year, starting from the employee’s commencement date. This gives certainty as to the limited term expiry date, particularly where the work permit and employment dates can become misaligned.
Termination of employment
The amendments introduce an express concept of employee resignation, so that an employee may resign from employment prior to the expiry of a limited term. The resignation will be considered effective where the employer either accepts the resignation or a period of 30 days has passed without a response from the employer. Alternatively, the employer may defer the resignation by a maximum of 60 days. In the case of an unlimited term contract for Saudi nationals, the notice required to be given by the employee has been reduced from 60 to 30 days, although the minimum notice required to be given by the employer to terminate an unlimited term contract remains at 60 days. The amendments to termination of employment give greater flexibility to both parties and enhances the comparative rights of employees which is expected in a modern work environment.
Other amendments
The amendments also impose wider obligations on employers to train Saudi national employees and provide greater powers to the Ministry of Human Resources and Social Development to impose certain penalties for breach of the obligations under the law.
By Rebecca Ford, employment partner and practice head at Morgan, Lewis & Bockius.
