An update on Saudisation

Since the launch of Vision 2030, transforming the Saudi Arabian workforce and creating employment opportunities for nationals (a policy known as Saudisation) has been a key driving force in government policy. In August 2011, the framework for Saudisation was radically overhauled with the launch of the Nitaqat program which introduced robust quotas linked to the employer’s commercial activity and size. Following ten years of this framework being in place, the Ministry of Human Resources and Social Development (MHRSD) announced a revised version in June 2021, with the aim of further boosting the employment of Saudi nationals in the private sector.

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In this article, we summarise below a high level overview of the latest updates on Saudisation in Saudi Arabia.

The Key Features of Nitaqat 2.0

Ministerial Decision 182495 dated 11/10/1442H has the following key features:

• a fixed Saudisation plan for three years giving employers time to adjust their recruitment plans 
• reduction of the business activities categories to 32 instead of the existing 85 
• elimination of employer classification based on size and a stronger emphasis on employee headcount - retention of the color-coded tier level classification of companies, i.e.: red, low-green, medium green, high-green and platinum 
• use of a formula or algorithm to determine a fixed Saudisation value and additional annual values for year one, two, three and the following years of the company’s operations, as well as a logarithm of its total workforce. The Saudisation values provided by the MHRSD are prescribed for each economic activity and for each Nitaqat tier level

New formula

Integral to Nitaqat 2.0 is the following algorithm Y = M log (X) + W which is made up of the following components:

• Y = minimum rate for the category or sector
• M = the fixed value of curve for category – obtained from the MHRSD’s manual
• W = fixed value for nationalisation in each year for three years 
• X = total number of workers
• Log X function for calculation of natural logarithm value of total workers

The MHRSD’s key aim in introducing Nitaqat 2.0 is to increase the rate of Saudisation gradually and from the beginning of an employer’s life cycle instead of only at the point of an employer becoming subject to a larger headcount tier group.

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