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The Privileged Iqama | Electronic Authentication of Employment Contracts

Published: 29/05/2019

Recent Employment Developments in KSA

There have been a couple of significant developments in KSA in recent weeks that are part of the government’s Vision 2030 reform agenda. The highly anticipated ‘green card’ equivalent residency permit for expats has received royal approval and, importantly, the Ministry of Labour and Social Development has made the electronic authentication of employment contracts a requirement for all employers.

The Privileged Iqama

Following the announcement first made in April 2016 by Crown Prince Mohammed Bin Salman of a ‘green card’ for expats, the KSA government has now passed the Privileged Iqama Law by Royal Decree No. M/106 dated 10/9/1440H. The Law allows a non-Saudi national to apply for the Privileged Iqama either on a permanent basis or for a one-year period that is renewable.

The Privileged Iqama will give the holder the following rights and benefits:

  • ability to reside in KSA with immediate family members and obtain visit visas for relatives;
  • ability to recruit domestic workers;
  • right to own property for residential, commercial and industrial purposes in all Saudi cities and towns with the exception of the holy cities of Makkah and Madinah, and some border areas;
  • right to own private transport without restriction;
  • right to make use of property in Makkah and Madinah for a period not exceeding 99 years;
  • right to work in any establishment and to change employment at will;
  • right to enter and exit KSA without restriction; and
  • ability to undertake commercial activities in KSA in accordance with Foreign Investment Law.

All applicants will have to satisfy the following conditions:

  • be at least 21 years old and hold a valid passport;
  • provide evidence of his/her solvency;
  • provide a police clearance certificate;
  • provide a health certificate within six months of the application date confirming that the applicant is free of infectious diseases; and
  • have a valid Iqama if the application is made at a time when the individual is already residing in the country.

What does this mean for you?

The Privileged Iqama is a long overdue and welcome step towards opening up investment opportunities in KSA to non-Saudi nationals. However, early reports are that the associated fees will be significant, suggesting that it is targeted mainly at entrepreneurs who will be able to invest in the KSA and create job opportunities or highly skilled workers, meaning that it will be out of reach for the vast majority of people. Also, the grounds in which it can be revoked are potentially wide in scope and may impact on investor confidence. We eagerly await the implementing regulations to consider the detail and understand to what extent the Privileged Iqama is going to change the landscape for employment and investment opportunities for individuals in KSA.

Electronic Authentication of Employment Contracts

In a further significant development for all employers in KSA, Ministerial Resolution No. (156309) dated 18 Sha’ban 1440 (AH) corresponding to 23 April 2019 has been issued requiring the electronic authentication of employment contracts. The Resolution came into force from the date of issue (i.e. 23 April 2019) and requires employers to upload and update employment contracts through the contracts authentication service via the General Organisation of Social Insurance (GOSI) web services portal.

The requirement to authenticate contracts electronically is immediate for all new hires. As to current employees, the Resolution allows for the authentication process to be done in phases. The timetable for compliance is as follows:

Employer (by no. of employees) Commencement Date Timetable for Authentication
H AD Q3
2019
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020

Giant (3,000+ employees)
1.12.1440 02.08.2019 20% 50% 100%

Large (500 – 2,999 employees)
1.3.1441 29.10.2019 20% 50% 100%

Medium (50 – 499 employees)
1.6.1441 26.01.2020 20% 50% 100%

Small (1 – 49 employees)
1.9.1441 22.04.2020 20% 50% 100%

 

By way of example, a large employer (with between 500 and 2,999 employees) will need to commence the authentication process by 29 October 2019 and upload 20% of its contracts by Q4 2019, 50% by Q1 2020, and 100% by Q2 2020. In contrast, a small employer (with between 1 and 49 employees) will not need to commence the authentication process until 22 April 2020, with completion date of Q4 2020 set.

The penalty for non-compliance is that employees whose contracts have not been authenticated will be able to change employers without the consent of the current employer.

What do you need to do?

Whilst the Resolution makes provision for the gradual uploading of contracts for existing employees, the fact that it requires contracts for all new hires to be done immediately means that it is imperative that the organisation has an up to date and compliant employment contract for all staff. If employment contracts have not been reviewed then this should be done without delay to ensure that they are compliant with the legislative changes that have been in effect since April 2016. Consideration will also need to be given to transitioning existing staff who may be on contracts that are outdated onto new contracts ahead of the relevant commencement date for the authentication process.

The Employment & Incentives team in KSA regularly advises on all aspects of the employment relationship. If you require further information on the Privileged Iqama or the Electronic Authentication of Employment Contracts, please feel free to contact:

Zahir Qayum
Senior Counsel, Employment & Incentives

Mohsin Khan
Senior Associate, Employment & Incentives