Due to the ongoing impact of COVID-19 on certain sectors of the economy, the Ministry of Human Resources and Social Development (“MHRSD”) and the General Organization of Social Insurance (“GOSI”) have announced an extension of the measures that were put in place in April 2020 to assist employers in the private sector. These announcements seek to continue the support measures introduced by the KSA authorities to assist employers whilst also safeguarding the employment of workers in sectors which are still adversely affected by COVID-19.

Extension of Sanid wage subsidy scheme

On 29 September 2020, GOSI announced the extension of the Sanid wage subsidy scheme (“Sanid Subsidy”) for a further three months until January 2021. However, the Sanid Subsidy has been reduced in scope and will now only be available for a maximum of 50 per cent of Saudi national employees in companies operating in economic activities that are still affected by COVID-19, including the accommodation sector, travel agencies, tour operators, reservation services and other relevant activities, air transport, sports activities, leisure and entertainment activities, creativity activities as well as arts related activities.

Employers are required to reduce the proportion of their Saudi national employees supported by the Sanid Subsidy to 50 per cent of their total Saudi employees by 15 October 2020. If employers fail to do so then the Sanid Subsidy will cease to be available to them and they will be required to pay full wages to their employees as well as make the required social insurance contributions. Additionally, GOSI has announced that employees working in sectors which are no longer substantially affected by COVID-19 will now stop receiving the Sanid Subsidy and they will be re-registered onto their employer’s social insurance accounts. Employers will have to pay them their full salaries and make the required social insurance contributions to GOSI.

Extension of Article 41

In April 2020, the MHRSD passed Ministerial Resolution No. (142906) to amend Article 41 of the Executive Regulations (“Article 41”) for the purpose of assisting employers impacted by the restrictions imposed by the government to curb the spread of the COVID-19 virus. Although Article 41 was revised with the intention of dealing with the impact of the coronavirus pandemic, its application is much wider in scope and can be invoked whenever there is a force majeure event. Article 41 allows employers to take the following measures where they have been impacted by a force majeure event (the “Measures”):

1. reduce the wages of employees in line with a reduction in their working hours by up to 40 per cent;
2. place employees on annual leave; or
3. agree a period of unpaid leave with employees.

Additionally, Article 41 imposes restrictions on employers where they are proposing to dismiss employees for a force majeure reason (i.e. due to the impact of COVID-19). Employers must not terminate employment for a force majeure reason unless they:

1. have applied one or more of the Measures;
2. waited a period of six months; and
3. are not in receipt of any state subsidies provided to reduce the impact of COVID-19.

Article 41 will apply and be effective for as long as the force majeure event exists. As a consequence of the COVID-19 pandemic continuing to have an impact on the economy, on 4 October 2020, the MHRSD announced that the period for which Article 41 will apply has been extended by three months to a total of nine months. This has the effect of extending the period for which the Measures are available to employers but also the period for which employers are prohibited from terminating employment for a force majeure reason.

According to the announcement, employers operating in sectors which are regulated will not be able to benefit from the extension of Article 41 if the relevant regulatory authority has decided to exclude them. This is likely to include entities operating in sectors which have now substantially returned to normal operations following the lifting of lockdown restrictions imposed earlier in the year.

Key Takeaways

The extension of the Sanid Subsidy and the application of Article 41 are very helpful to employers given that the COVID-19 pandemic is continuing to have an adverse impact on a national and global level. Employers who are still eligible to receive the Sanid Subsidy or can benefit from the measures available under Article 41 should ensure that:

• they reduce the number of Saudi employees who are receiving the Sanid Subsidy to no more than 50 per cent by 15 October 2020;
• consider whether they wish to continue the Measures that are currently being applied to employees and notify them accordingly; and
• review proposals to dismiss employees in light of the extension of Article 41.

The Employment & Incentives team in the KSA regularly advises on all aspects of the employment relationship. If you require further information on dealing with the impact of the Coronavirus pandemic on the workplace or any other employment issue, please feel free to contact:

Key Contacts:

Zahir Qayum
Senior Counsel, Employment & Incentives
z.qayum@tamimi.com

Mohsin Khan
Senior Associate, Employment & Incentives
mohsin.khan@tamimi.com