Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
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.
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.
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”):
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:
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.
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:
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: