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Thursday, 28 May 2015

Can employer deduct Iqama Renewal Fee and Insurance cost at the time of Resignation?

Many expatriates working in Saudi Arabia ask me this question, if their employer has the right to deduct iqama renewal fee and insurance cost of the remaining months of iqama period from the salary. Well, the answer is no simple “Yes” or “No”. If you have completed your contract, employer cannot deduct iqama renewal fee or insurance cost from your salary. However, if you have resigned before completion of contract, employer can ask you much more than that. If you are looking for the specific references from Saudi Labor Law, continue reading the article.



Let’s establish who has the responsibility to pay the insurance cost and iqama renewal or issuance fee. As per Article 40 (1) of the Saudi Labor Law, it is the responsibility of the employer to pay for the iqama renewal of iqama issuance fee. As per Article 144 of the Saudi Labor Law, it is the responsibility of the employer to provide health care and insurance to each and every employee. According to latest rules of Iqama renewal, it cannot be renewed if employee is not insured. So, now it has been established that the primary responsibility of payment of iqama issuance, iqama renewal or insurance cost is of employer.



Now there can be two scenarios, your contract can be a fixed term contract or an indefinite contract. If you don’t know about the type of your contract, I would suggest you to have a look at this article “Fixed Term and Indefinite Contract under Saudi Labor Law”.



If you resign within the validity of the fixed term contract, your employer has a right to take you to the “Commission for the Settlement of the Labor Disputes”. Average dispute resolution time of cases is around 4 months. Since it is your mistake to resign within the validity of the fixed term contract, you will have to pay damages to the employer. Damages in such cases generally include the visa cost initially incurred, ticket cost, iqama charges, insurance cost and may also include some other charges. Moreover, Labor Office may also decide to process your final exit and impose a ban of 5 years. In this scenario, it is better if you just settle the dispute with the employer. Going to court is not in your interest. Source: Article 77 of Saudi Labor Law



However, if you have an indefinite contract with the employer, you can terminate it at any point of time with one month’s notice period. At the time of resignation, send it either by Email and keep a print of it for record or take receiving of your boss on it. You might need it at the time you go to the court against your employer. Since resignation is your legitimate right under Article 75 of the Saudi Labor Law in case of indefinite contract, your employer cannot ask for the iqama renewal fee or insurance cost of the remainder period of the contract. If he asks so, you can go to the court against him. Again, settling anything with the court takes not less than 3 to 4 months. Time is money for you so it is better if you settle the dispute in office. Ask him to provide you reference of the Law where he is allowed to deduct this amount from your salary. He would not be able to provide it.



Resignation / Termination under Saudi Labor Law
  1. Fixed Term and Indefinite Contract
  2. End of Service Benefits (ESB) Calculation
  3. Notice Period under Saudi Labor Law
  4. Can I request Final Exit within 3 months?
  5. Can I request Transfer of Sponsorship within Probation Period?

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