Saudi Arabia punishes expat workers for doing their jobs

Let’s say over a year ago that economists expressed the cold, hard truth to the rulers in Saudi Arabia that expat workers meet the demands of the Saudi job market better than Saudi graduates do  so much so that foreigners dominate the job market in not only manual labor, but also specialist and professional jobs.  In addition, over 140 billion riyal (37B USD) was spent on expat labor in 2014.  What could be done to solve this problem?

Well, step one was to force-feed Saudis into the telecom sector without a proper transition period or training.  When forced Saudization was found to be unsuccessful, the Ministry of Labor and Social Development closed over 1,000 mobile phone shops, issued warnings to 174 others, and asked a special committee to take punitive action against a total of 1,809 shops.  Nothing like the heavy hand of government compliance to spur job growth.

(Amazingly, another 13,000-plus shops were judged to have met the Saudization standard right on time.  If I were to guess, there is a high probability of expats working in the backroom behind the curtain.  But that’s just me.)

So if the telecom sector didn’t work that well, it’s time to implement step two: levy fees on foreign workers and their employers to reduce the presence of expats in the workforce.  The Saudi Gazette reports:

The authorities have announced plans to levy a monthly fee of SR100 for each dependent of expatriate workers from the middle of this year. This fee will increase to SR400 per head by 2020.  The government will also impose a monthly fee of SR400 on every foreign worker, which will eventually be raised to SR800.

Not only must workers and private establishments pay the fees, but the levy will be extended to the expats’ dependents living in the kingdom.  And if you thought companies would foot the entire bill, you would be wrong.

Member of the Saudi Society of Accountants Abdullah Al-Barrak said paying fees on a monthly basis is relatively better, as it will be in the form of premiums taken from the salary [emphasis added] and will not have a cumulative effect on the financial situation of the workers.  He pointed out that the amount would be similar to social security deductions and therefore does not need additional staff for the collection of payments because the operations will be carried out electronically.

In other words, there will now be no such thing as tax-exempt income for working in the kingdom.  And authorities admit that smaller companies will eventually go under, while the survivors will ultimately pass on the increased costs to the customer.  If the Saudi government thinks this is a formula for success, it had better hope its citizens can fill the vacuum, and quickly.  I’m not holding my breath.

John Smith is the pen name of a former U.S. intelligence officer.

Let’s say over a year ago that economists expressed the cold, hard truth to the rulers in Saudi Arabia that expat workers meet the demands of the Saudi job market better than Saudi graduates do  so much so that foreigners dominate the job market in not only manual labor, but also specialist and professional jobs.  In addition, over 140 billion riyal (37B USD) was spent on expat labor in 2014.  What could be done to solve this problem?

Well, step one was to force-feed Saudis into the telecom sector without a proper transition period or training.  When forced Saudization was found to be unsuccessful, the Ministry of Labor and Social Development closed over 1,000 mobile phone shops, issued warnings to 174 others, and asked a special committee to take punitive action against a total of 1,809 shops.  Nothing like the heavy hand of government compliance to spur job growth.

(Amazingly, another 13,000-plus shops were judged to have met the Saudization standard right on time.  If I were to guess, there is a high probability of expats working in the backroom behind the curtain.  But that’s just me.)

So if the telecom sector didn’t work that well, it’s time to implement step two: levy fees on foreign workers and their employers to reduce the presence of expats in the workforce.  The Saudi Gazette reports:

The authorities have announced plans to levy a monthly fee of SR100 for each dependent of expatriate workers from the middle of this year. This fee will increase to SR400 per head by 2020.  The government will also impose a monthly fee of SR400 on every foreign worker, which will eventually be raised to SR800.

Not only must workers and private establishments pay the fees, but the levy will be extended to the expats’ dependents living in the kingdom.  And if you thought companies would foot the entire bill, you would be wrong.

Member of the Saudi Society of Accountants Abdullah Al-Barrak said paying fees on a monthly basis is relatively better, as it will be in the form of premiums taken from the salary [emphasis added] and will not have a cumulative effect on the financial situation of the workers.  He pointed out that the amount would be similar to social security deductions and therefore does not need additional staff for the collection of payments because the operations will be carried out electronically.

In other words, there will now be no such thing as tax-exempt income for working in the kingdom.  And authorities admit that smaller companies will eventually go under, while the survivors will ultimately pass on the increased costs to the customer.  If the Saudi government thinks this is a formula for success, it had better hope its citizens can fill the vacuum, and quickly.  I’m not holding my breath.

John Smith is the pen name of a former U.S. intelligence officer.