Saudi Arabia: Labor reforms for both foreign and local workers

Employer Action Code: Act

The cabinet has approved a labor law reform package that will amend the 2005 Labor Law to “create a more attractive work environment for employees” in accordance with “the goals of Saudi Vision 2030.” The reforms are similar to an earlier so-called Labor Reform Initiative announced in 2020 that was derailed by the COVID-19 pandemic.

Key details

Changes to the labor law include:

• Increasing the duration of employer-paid maternity leave from 10 to 12 weeks (six weeks prenatal and six weeks postnatal)
• Expanding bereavement leave to cover the death of a sibling, payable for three days by the employer
• Establishing an explicit definition and process in the law for resignation regarding fixed-term employment contracts, which apply to all non-Saudi employees, under which the employee will be able to request to resign with 30 days’ notice (employers will have the option to delay accepting the resignation for up to 60 days after notice, by written justification — provided within the initial 30-day period — of the need for the delay for operational reasons; employment will end 1) when the employer accepts the resignation, 2) after 30 days if the employer does not respond, or 3) at the end of the delayed acceptance period if applicable)      
• Reducing the notice period for termination of indefinite-term employment contracts (which apply only to Saudi employees) by employees, from 60 to 30 days (the notice period for employers will remain 60 days)
• Allowing employers to provide paid time off in lieu of overtime pay (subject to employer/employee agreement)
• Simplifying the trial period for new employees as a maximum of 180 days (currently the maximum is 90 days, with the possibility of extension by another 90 days subject to employer/employee agreement)
• Requiring employers to provide employees with appropriate accommodation and transport to and from work or allowances in lieu
• Stipulating that the duration of all fixed-term contracts will be one year unless specified otherwise (continuation of employment past the expiration date of the contract will be considered a renewal of the contract for the same duration)

Employer implications

The labor law reform package will take effect 180 days after it is published in the Official Gazette. Employers should review the changes against their existing policies and practices. For example, 70% of employers in Saudi Arabia surveyed by WTW provide maternity leave for only the minimum mandatory duration and so will be affected by the new longer maternity leave.