Saudi Arabia to Reimburse Contractors for Rise in Expat Fee

The Saudi Arabian government would compensate contractors for increased expatriate worker fee in state projects that were approved before December 2016, it said on March 27.

“After reviewing the imposition of monthly fees on expatriate labor, the cabinet orders the finance ministry to compensate enterprises which entered into government contracts before December 2016,” the statement said, the Saudi Press Agency reported. The new move will provide some relief to the country’s construction industry, which is highly labor-intensive and reeling from an economic slowdown.

In December 2017, the Saudi Ministry of Finance announced that a monthly expat levy will be introduced in 2018. The ministry said that the monthly tax will be between 300 and 400 Saudi Riyal, and added that it has to be paid by private sector companies. The move was aimed at replacing foreign workers with locals, according to a report by Al-Arabiya English.

Expat workers, who constitute a third of the population of Saudi Arabia, are being increasingly substituted by locals in various jobs like sales and services due to the remodeling of the economy. According to government statistics, between January and September 2017, more than 300,000 blue collar workers lost their jobs in the country, the report said.

The country has been largely dependent on foreign workers for various jobs, especially the ones in the construction sector. However, the rise in expat levies and fee for dependents has compelled a lot of them to quit their jobs.

The imposition of dependent’s fee came into effect in July 2017, and required expatriate workers to pay SR100 per dependent per month. The fee was hiked to SR200 in 2018, and will be raised further to SR300 in 2019 and SR400 in 2020, according to the Saudi Gazette. All dependents are included in the regulation, including children, wife, as well as maids and drivers working directly for a sponsor.

The country’s finance ministry said in 2017 that the expat levy will be hiked to SR600 in 2019 and to SR800 in 2020 in private firms hiring more foreigners than locals. For those companies where the number of locals is more than foreign workers, the levy will be SR300 in 2018 and it will be increased till it touches SR700 in 2020. The Saudi Arabia government is keen to cut down on the rate of unemployment among Saudis to 9 per cent by 2020 and to 7 per cent by 2030, according to reports.

From September 2018, foreign employees will be banned from working in 12 sectors. The decision is likely to adversely affect about 3.2 million Indians, most of whom are blue collar workers. The rule will come into place starting Sept. 11, 2018.

In March 2017, the number of Indians in the country was marked at 3,039,193, and rose by 200,000 by October 2017.