Saudization and Nitaqat Program

The Kingdom of Saudi Arabia (KSA) has become a popular business destination in the Middle East, attracting plenty of foreign investment. This has enabled the creation of an environment filled with lucrative business opportunities, allowing entrepreneurs to establish and grow their brand.

However, of late most of the workforce in Saudi Arabia has been filled with immigrants due to excessive globalisation. To curb this problem and provide more opportunities to the residents of Saudi Arabia, the government introduced the scheme of Saudization and Nitaqat. It ensures that the citizens of the nation feel empowered to showcase their skills and talent. Read on to learn about the Saudization policy and the Nitaqat program in Saudi Arabia.

What is the Saudization Policy?

Saudization is a nationalisation scheme, established by the Ministry of Labor in 1985. The aim was to provide more opportunities to the citizens and help reduce the unemployment rate. The recent updates in the policy diversified the regulations and are more in line with Saudi Vision 2030.

Understanding Saudization Characteristics and Ratios

The Saudization ratio specifies the minimum number of employees required to be Saudi nationals in the company. There is a given formula to calculate the percentage which is mentioned below. In simple terms, the Saudization requirements are as follows-

• Small companies with only 5 employees need at least 1 Saudi worker (not counting the manager).
• Medium companies with up to 99 employees don't need to maintain a set number of Saudi workers.
• Big companies with a headcount of over 100 employees need at least 30 percent of workers to be residents of KSA.

Note:  This ratio can vary depending on the business activity conducted or the license obtained.

Characteristics of Saudization

• The percentage of Saudi nationals in a company remains the same for men and women
• Any Saudi employee earning less than SAR 4,000 is considered as 0.5 people towards the Saudization quota
• Employing 1 person with disability counts as employing 4 citizens in the company

• All GCC nationals are considered for the Saudization quota

What is Nitaqat in Saudi Arabia?

'Nitaqat' literally means ‘Ranges’ in Arabic. Nitaqat is a program under the Saudization policy that uses a categorisation system to classify companies into four zones. Each represents the percentage of Saudi nationals required in the private sector in the KSA. 

Classification of Nitaqat

Companies are classified into four zones that are colour-graded. Let us look at these zones in detail-

• Platinum

This is the highest rank a company can achieve. To reach the platinum zone, your company's total workforce must comprise 40 percent of Saudi citizens. Being placed in this zone provides you with more opportunities and benefits from the government, such as easier visa regulations for foreign employees, tax exemptions, subsidies and many more.

• Green

This is the most common zone and is further categorised into shades of green. They are high-green, mid-green and low-green. You need to maintain a Saudi workforce range between 9 and 38 percent to stay within this zone. The darker the gradient, the more benefits can be availed from the government.

• Yellow

If your company's total workforce comprises 4 to 7 percent of Saudi nationals, you can face a lot of challenges from the authorities. Continuing to stay in this zone can affect your company's brand image and cause difficulty with other business services related to visas, license renewal and patents.

• Red

This is the lowest level in the Nitaqat program. Companies having less than 4 percent of Saudi residents in their workforce fall in this category and are flagged by the government. It can result in facing heavy fines or being coerced to shut down your business.

How to calculate the Nitaqat Percentage?

This linear formula was introduced recently to provide organisations with the flexibility to adjust to the program. It enables you to plan and recruit your workforce without hampering your business activities.

The formula to calculate the Nitaqat percentage

y=m×log(x)+c, where 

‘y’ stands for minimum Saudization rate for a range.

‘m’ for the fixed value of the curve for the category provided by the Ministry of Human Resources and Social Development (MHRSD)

‘c’ stands for Y-axis intercept (fixed value for nationalisation for each year, also provided by MHRSD).

‘X’ represents the total number of employees.

‘log(x)’ indicates the natural logarithm of the total number of employees.

Note: Both ‘m’ and ‘c’ are fixed values provided by the MHRSD each year.

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