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Saturday, March 22, 2014

What is Nitaqat System in Saudi Arabia?

In June 2011, Saudi Ministry of Labor introduced Nitaqat Law for Saudization. Purpose of the law is to provide employment opportunities to Saudi nationals ahead of foreign expatriates. This program classified the Saudi companies of private sector into four categories i.e. Platinum, Green, Yellow and Red. A company which is in Platinum or Green means that it has high saudization rate. Conversely, a company which is in Yellow or Red means it has low saudization rate. The benefits available to the companies in each category are different from each other.






Need for Saudization or Nitaqat
Following charts suggest why the Saudi Government took the decision to introduce Saudization in the Kingdom of Saudi Arabia.


Calculation of Saudization Percentage





The number of Saudi employees is calculated based on the number of Saudi employees insured with the General Organisation for Social Insurance (GOSI) in the past three months. It also means that if one has complied with green category by recruiting Saudi employees in one month, it will take 3 months to be “Green” in the books of Ministry of Labor.






The number of Foreign workers is calculated by the average number of employees registered under Ministry of Interior in the past three months. It also means that if one has complied with green category by firing foreign employees in one month, it will take 3 months to be “Green” in the books of Ministry of Labor.


Requirement of Saudization varies from industry to industry. Requirement of saudization for banking industry will be more than the requirement of Aviation Industry. In this regard, 41 industries have been established by the Ministry of Labor. Requirement of Saudization percentage for Advisory industry is following;

Saudization Percentages – Advisory Services








Platinum Category of Nitaqat
As it is shown in the table above, if advisory company has more than 40% Saudi Employees, it will qualify for as Platinum category. Companies with Platinum category will be getting following benefits.
  1. Visa processing for foreign workers will be easier for them. They would be able to recruit foreign workers easily.
  2. If some employee is in Red or Yellow category, employer with Platinum category will be able to transfer their sponsorship without permission of their Kafeel.
  3. I have explained the procedure in this article. "Process of Transferring Sponsorship if Kafeel is Red"
  4. It is the requirement of Jawazat that an employee’s sponsorship cannot be transferred to other company before completing two years. However, in case of Platinum employer, this requirement is no more valid. It can transfer the sponsorship to its name of any employee even without completing two years.
  5. They will get one year grace period when their license will be expired
  6. They can change the profession of their employees. Even professions which are reserved to Saudi Nationals can be changed for their employees.
  7. They can renew the Iqama of their employees three months before the expiry.


Green Category of Nitaqat
As it is shown in the table above, if advisory company has more than 12% Saudi Employees, it will qualify for Green category. Companies with Green category will be getting following benefits.
  1. It can apply for new visas once after every two months.
  2. If some employee is in Red or Yellow category, employer with Green category will be able to transfer their sponsorship without permission of their Kafeel.
  3. They can change the profession of their employees. However, professions which are reserved to Saudi nationals only cannot be awarded to foreign employees.
  4. They will get six months grace period when their license will be expired
  5. They can renew the Iqama of their employees three months before the expiry.


Yellow Category of Nitaqat
As it is shown in the table above, if advisory company has more than 7% Saudi Employees, it will qualify for Yellow category. Companies with Yellow category will be getting following advantages and disadvantages.





  1. They can only get one visa when 2 foreign employees depart from their sponsorship. It includes transfer of sponsorship as well as exit visa.
  2. They cannot transfer visas from other sponsors.
  3. If their employee wants to go to some company with Green or Platinum status, they cannot stop him from doing so.
  4. They cannot renew the Iqamas of their employees who have completed two years. (From May 2015) Before October 2014, employers with Yellow categories were not able to renew the Iqamas of employees who had completed six years in the company. Similarly, from May 2015, these employers will not be able to renew the Iqamas of the employees who have completed two years in the company. 


Red Category of Nitaqat
As it is shown in the table above, if company has more than 4% Saudi Employees, it will qualify for Red category. It means very poor compliance. An employer with such category does not enjoy any benefit effectively. In fact, he will have to transfer his status from Red to Green category sooner or later by either employing more Saudi Nationals or by firing foreign employees. Red category employers will be facing following problems;.
  1. They cannot get new visas for new foreign employees
  2. They cannot transfer visas from other sponsors.
  3. If their employee wants to go to some company with Green or Platinum status, they cannot stop him from doing so.
  4. They cannot renew iqamas of their employees.
  5. They cannot change the profession of their employees
  6. They cannot open new branches


White Category of Nitaqat
Businesses with less than 10 employees are not covered by Nitaqat. However, it is also essential for them to employ one Saudi. This one Saudi in most of the cases is owner of the business.


TIPS to improve Saudization for Nitaqat
  1. Make sure that all the employees are registered with the GOSI
  2. If an employer is recruiting Saudis in order to comply with the Saudization or Nitaqat requirements, he needs to take care of following matters.

Category
How Many Saudis are Accounted for?
Comments
Employer – A Saudi National
One Saudi Employee
Provided he is registered with GOSI
Part Time Saudi Employee
Half Saudi Employee
It is not permissible for any entity to employ more than 10% of their Saudi employees as part time employees
Special Need Employees
4 Saudi Employees
Only 25% of Saudi employees can be special need employees to avail this benefit. If any special need employee is hired after 25%, he will be treated as Single employee.
A Saudi who was imprisoned but now released
Two Saudi Employees

Husband or Wife of Saudi National
One Saudi Employee

Expatriate of Saudi Mother
One Saudi Employee







How to Check Nitaqat Category of your Kafeel?
If you want to check Nitaqat Category of your Kafeel, you can check it very easily. Step by Step process of checking Nitaqat Category of Kafeel is explained in this article.

Legal System in Saudi Arabia
  1. Legal System of Saudi Arabia
  2. Taxation System of Saudi Arabia
  3. Zakat and Tax System in Saudi Arabia
  4. Domestic Violence Law in Saudi Arabia
  5. Blood Money (Diyyah) and its Calculation



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