Kingdom of Saudi Arabia | Payroll | Saudi Arabia launches wage insurance service for expatriate workers in private sector

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 introduced the Expatriate Worker Wage Insurance Service, effective 6 October 2024. This initiative aims to protect the rights of foreign workers in the private sector by allowing them to claim outstanding wages if their employers fail to meet payment obligations due to financial distress or insolvency.

This service is a significant step toward enhancing worker protections in the Kingdom’s labor market. One of the Ministers emphasized that it reflects ongoing efforts to safeguard expatriate workers’ rights and improve the labor market’s attractiveness. The wage insurance serves as a safety net, ensuring fair compensation even in extreme circumstances.

Who is Covered and Exempted?

The insurance service covers all expatriate workers employed by establishments with commercial registrations, except for certain exempted categories:

1. Workers in establishments wholly owned by the government.
2. Workers exempted by the Ministry based on their probation period or date of arrival.
3. Domestic workers and their equivalents.
4. Seasonal or temporary workers.
5. Family members of the employer (including the spouse, children, and grandchildren) working in a family-only establishment.
6. Athletes from sports clubs or federations, and their coaches.
7. Agricultural and farmworkers.
8. Non-Saudi workers arriving for specific tasks lasting less than two months.

Insurance Service Benefits:

1. Coverage for unpaid wages and entitlements for up to six months prior to the establishment’s default.
2. A travel ticket for the worker to return to their country, capped at SAR 1,000.
3. Maximum insurance coverage of SAR 17,500 per worker. If total claims exceed the establishment’s insurance coverage limit, compensation will be distributed proportionally among eligible workers.

The Ministry bears the cost of the insurance service and its application. Once the insurance company has disbursed compensation to the workers, it is entitled to seek reimbursement from the employer (establishment) where the workers were employed. The insurance company can demand reimbursement for the compensation amounts paid to the workers, either in full or in part.

Importantly, while this insurance offers crucial support to workers, employers remain legally obligated to pay wages on time per the existing Wage Protection System (WPS), with penalties for non-compliance.

This initiative aligns with Saudi Vision 2030, reflecting 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.

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:

Anir Chatterji
EMEA Immigration Partner

Ali Ibrahim
Director, Middle East Immigration

Jammy Mustafa
Senior Manager

Further information on Vialto Partners can be found here: www.vialtopartners.com

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