Payroll
Kingdom of Saudi Arabia | Saudi Arabia launches wage insurance service for expatriate workers in private sector
Summary
Saudi Arabia has introduced a wage insurance scheme to protect expatriate workers in the private sector. Effective 6 October 2024, the scheme ensures workers receive their wages if employers default, without absolving employers of their responsibilities. The insurance also covers travel costs for workers wishing to return home.
The detail
Saudi Arabia’s Ministry of Human Resources and Social Development (MHRSD), in collaboration with the Saudi Arabian Insurance Authority, has launched the Expatriate Worker Wage Insurance Service to protect the rights of foreign workers in the private sector. Effective from October 6, 2024, this service ensures that expatriate workers (excluding those in exempted categories) can claim their outstanding wages if employers fail to meet their wage payment obligations due to financial distress or insolvency. This initiative is a key step in strengthening worker protections in the Kingdom’s labor market.
One of the Ministers highlighted that the initiative is part of ongoing efforts to protect expatriate workers’ rights and enhance the labor market’s attractiveness. The wage insurance acts as a safety net for workers, ensuring they receive fair compensation even in extreme situations where employers are unable to pay their wages.
To access this service, workers can submit claims through a designated insurance company, which will handle compensation claims according to the terms defined in the insurance policy. The benefits also extend beyond wages, including provisions like a return travel ticket if the worker chooses to return to their home country. The Ministry will oversee the implementation and compliance of this service to ensure its smooth execution.
It’s important to note that the introduction of wage insurance does not absolve employers of their legal responsibilities. The Ministry of Human Resources and Social Development (MHRSD) emphasizes that employers are still required to pay wages on time in accordance with the existing Wage Protection System (WPS), with strict enforcement measures and penalties in place for those who intentionally fail to meet their obligations. The insurance is designed as a safeguard in cases of financial failure, not as a fallback option for employers.
This initiative aligns with Saudi Vision 2030 and reflects the Kingdom’s broader efforts to create a more equitable and secure labor environment, enhancing the efficiency and attractiveness of the Saudi labor market for both workers and employers.
What this means
The introduction of the Expatriate Worker Wage Insurance Service in Saudi Arabia marks a significant step in protecting the rights of foreign workers by ensuring they receive their wages, even if employers face financial difficulties or fail to pay. This service acts as a safety net, providing workers with financial security and covering return travel expenses when necessary. While it offers vital support to workers, the policy also reinforces that employers remain fully accountable for timely wage payments and will face penalties for non-compliance. This initiative enhances the fairness and appeal of the Saudi labor market for both expatriates and employers alike.
How we can help
It is essential for businesses to stay informed about the new Expatriate Worker Wage Insurance Service and the recent labor reforms introduced by the Saudi Arabian government to understand their impact on operations. While employers remain responsible for ensuring timely wage payments, it’s crucial for businesses to evaluate how this insurance may affect their financial management and compliance strategies. Our team is well-equipped to provide the necessary guidance and support to ensure compliance with these new requirements. We will also continuously monitor updates from the Saudi government and help businesses navigate this transition smoothly.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Michael Edmond
Partner
Ali Ibrahim
Director
Jammy Mustafa
Senior Manager
Further information on Vialto Partners can be found here: www.vialtopartners.com
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