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Saudi-Arabia: Reform of the Kafala System comes into force

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published on 24 March 2021 | reading time approx. 2 minutes

  

After the Ministry of Human Resources and Social Development in Saudi-Arabia announced significant changes to the Kafala System in November as part of a labor reform ("LRI"), these take now effect on the 14th of March 2021 and will accordingly be implemented with immediate effect.

  

  

The Kafala System is a legal framework that regulates the relationship between foreign employees and employers in Saudi-Arabia and the other Gulf states. It is a sponsorship system between employer and employee that gives the employer extensive rights and opportunities. The aim of this system, which was established in the 1950s, was  able to recruit large numbers of cheap workers during the economic growth caused by the discovery of oil. In recent years, however, the system has come under criticism for being vulnerable to exploitation and oppression of foreign workers due to the superior position of the employer. Bad working conditions, as well as low or even unpaid wages were the result. 
 
Through the Kafala System, an individual or company receives sponsorship permits from the government to employ foreign workers. The work permit is closely linked to the residence permit, so that only the sponsor has the right to extend or terminate it. In addition, foreign workers needed their sponsor's permission to terminate employment, change jobs and even leave Saudi-Arabia. All this creates a huge dependency relationship of the worker on their employer.
 
The changes to the Kafala System shall improve the relationship between employee and employer and eliminate the grievances as far as possible. With regard to the Saudi Vision 2030 and the aim of increasing the attractiveness for foreign investors, this step is also intended to create greater transparency in the labor market.
 
The changes to the Kafala System primarily determine the exit and re-entry regulations for foreign workers. For example, it is no longer necessary to obtain permission from the employer if the worker wishes to leave Saudi- Arabia after the end of the employment relationship. The permission of the previous employer is also no longer required for a change of job, whereby the employee can even terminate the employment relationship prematurely under certain conditions, which was not possible before. Furthermore, it is now also possible for the foreign employee to leave the country temporarily and then re-enter it. 
 
The permission of the Saudi government is required in those several cases. However, the ministry has set up an online portal for this purpose, where all applications previously issued by the sponsor can be submitted directly by the employee. In the course of this, the Saudi government can also reject the departure application if, for example, fines are outstanding.
 
At the same time, the previously applicable provisions of the Kafala System are not completely abandoned, but remain effective with regard to sectors, that have a special close relationship to their sponsor. These include, for example, personal drivers, personal security or gardeners. 
 
As a result, the reform will significantly change the working conditions of many foreign employees in the private sector. However, it remains to be seen to what extent the reform will be implemented and enforced in the future, so that the power imbalance between the two parties to an employment contract will be reduced. In particular, it must be seen to what extent the Saudi government will approve the applications submitted by the foreign employees, or whether it will prevent them from leaving the country by rejecting them, so that the reform could in fact remain largely ineffective.


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