Saudi to Relax Nitaqat Classification for Foreign Nationals

Saudi Arabia’s Vision 2030 is ambitiously charting a new economic future, one that moves away from oil dependency and embraces a diversified economy. 

Central to this vision is the Nitaqat programme, designed by the Saudi Government to increase employment opportunities for Saudi nationals by classifying companies based on their compliance with Saudisation targets. 

In a significant shift, the Saudi Ministry of Human Resources and Social Development has approved changes to this programme which will allow certain foreign investors and other non-Saudi categories to be treated as Saudis. 

This move is set to benefit the labour market and business operations in the Kingdom, promoting a more inclusive and flexible economic environment.

Understanding Nitaqat classification in Saudi Arabia

The Nitaqat programme has always been about balancing the scales, ensuring that a Saudi national can find ample job opportunities in their own country. Companies that align with Saudization program targets receive a range of incentives, including easier access to visas for foreign workers, priority in government contracts, and reduced fees. 

On the flip side, those lagging face penalties like fines, restrictions on visa issuance, and challenges in renewing business licences. This setup has historically posed challenges for businesses needing specialised skills that are not readily available locally, often complicating the hiring of expatriates.

The proposed changes to Nitaqat in Saudi Arabia

So, what exactly is changing? 

The new regulations now classify certain foreign investors, sons and daughters of Saudi women from non-Saudi nationals, and non-Saudi mothers or widows of Saudi citizens as Saudis for the purposes of Saudisation calculations. 

It also means that workers from displaced tribes, Gulf country citizens, and Gulf players or athletes will be considered as Saudi workers. Palestinians with Egyptian passports and Baluchis will also be counted at a reduced rate, provided they don’t exceed 50% of the workforce. This nuanced approach aims to strike a balance between attracting skilled labour and boosting Saudi employment.

Implications for foreign nationals in Saudi Arabia

This is big news for foreign nationals. The relaxed classifications open up a wealth of opportunities, offering improved job security and more hiring possibilities. 

For those with personal or familial ties to Saudi citizens, this change is particularly beneficial. It also paves the way for investors eyeing the Saudi market to establish and expand their businesses more easily. These adjustments underscore Saudi Arabia’s recognition of the critical contributions a diverse workforce brings to its economy.

Impact on businesses in Saudi Arabia

For businesses, these changes are a game-changer. 

Greater flexibility in hiring expatriates means companies can optimise their workforce without worrying about negatively impacting their Saudisation percentages. This flexibility is crucial for attracting international talent, enhancing competitiveness and effectively managing labour costs. 

The expected boost in foreign direct investment, highlighted by a 21.4% increase in net FDI inflows in 2022 to SR105 billion, is a testament to the positive business environment these changes are creating.

Strategic opportunities

The relaxed Nitaqat classification will be of particular benefit to businesses in high-growth sectors like technology, healthcare, and non-oil industries, which rely on specialised talent that’s not always readily available locally.

Companies should seize this chance to attract top foreign talent and adapt to the new regulations proactively. Additionally, businesses can leverage these changes to enhance their competitiveness and innovation, potentially entering new markets and expanding their operations more efficiently within the region.

What do the updates to the Nitaqat programme in Saudi Arabia mean?

The relaxation of Nitaqat classification for foreign nationals is a positive, forward thinking move that promises to create a more inclusive and vibrant economy. Both businesses and foreign nationals should stay abreast of these developments to fully leverage the new opportunities.

The announcement sets a new standard for progressive labour market reforms in the region and will help to create a more inclusive labour market that benefits both employers and employees.

How Can Sovereign PPG Help?

The updates to the Nitaqat programme in Saudi Arabia will positively effect the business environment and company formation experience in the Kingdom. For those considering setting up or expanding their business in Saudi, Sovereign PPG can assist in navigating the effects presented by this development.

Setting up a business in Saudi Arabia can be a complex with regulatory requirements and compliance. This is where the expertise of a professional corporate services provider becomes invaluable. Sovereign PPG has decades of experience assisting businesses to find the perfect licensing solution.

If you need assistance with this or with any other related company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Saudi Arabia, Bahrain, Oman or Qatar, then please do get in touch with us on +966 (0)535 377 578 for Saudi Arabia or +971 (0)4 456 1761 for Dubai, or email us at ksa@sovereigngroup.com or complete the contact form below and we will be delighted to assist you.