30% of Saudi's companies pay new labor fee

About 30 percent of private companies have complied with the Labor Ministry’s recent order to pay an annual fee of SR 2,500 for each expatriate worker employed by them, an informed source said. The ministry spiked the labor fee from SR 100 to SR 2,500 effective from Nov. 15. “However, the number of companies that show willingness to adhere to the ministry’s new hiked fees is increasing as days pass,” Asharq Al-Awsat daily quoted the source as saying yesterday. It is because the companies will eventually find it next to impossible to run their affairs without the cooperation of the ministry, which is determined to go ahead with its decision, the source said. Some private companies, the daily reported, are striving to make false records about employing Saudi workers to show recruitment of a higher percentage of citizen workers, so that they could get out of the “red category”, which denies them the permission of the Ministry of Labor for the regularization of their expatriate workers’ residential status. According to the categorization of the Nitaqat system implemented by the ministry earlier this year, any company that does not employ a minimum percentage of Saudi workers is put in the red category. On the contrary, a company in the green category, which requires it to achieve a high level of Saudization, is eligible to receive the ministry’s favorable treatment. If the number of Saudi workers is above 50 percent of its total workers, a company will also be exempted from paying the new fee. While the contractors in the construction sector fear they will have to wind up their companies because of the additional fee, which they estimate at SR 5 billion annually, the ministry hopes to gain SR 10 billion from the fees collection annually. The Council of Saudi Chambers of Commerce and Industry (CSCCI) has undertaken a study on the negative impact of the fee. According to reports, companies have to pay the new fee for the Kingdom’s 4 million expatriate workers. The law does not apply to domestic helps. A recent workshop on the impact of the new fees “did not come up with any positive results. All deliberations pointed at the negative impact it would make on the country’s business sector on the one hand, and citizens on the other,” Mushabbeb Al-Saad, assistant secretary-general of the CSCCI for national committees, said. Businessmen also fear that the fee would push up the inflation rate, which is already high. Al-Saad also complained that the CSCCI was taken by surprise by the ministry's fee-hiking decision.