Saudi Arabia – Business setup in Saudi Arabia has become a popular choice for many investors and entrepreneurs. The country offers exciting opportunities and a growing market. However, one important factor that every business owner must understand is Saudization, also known as the Nitaqat system.
Here, we will explain what Saudization means, how it works, and how it affects business registration in Saudi Arabia.
What is Saudization (Nitaqat)?
Saudization is a government policy in Saudi Arabia that aims to increase the employment of Saudi nationals in the private sector. The program was introduced by the Ministry of Human Resources and Social Development (MHRSD) under the name Nitaqat.
Under this system, businesses are required to hire a certain percentage of Saudi nationals as part of their workforce. The percentage depends on the size of the company and the type of industry it operates in.
How Does the Nitaqat System Work?
The Nitaqat system groups companies into different categories based on how many Saudis they employ. These categories are Platinum, Green (High, Medium, Low), Yellow, and Red.
Companies in the Platinum and Green categories are considered compliant and can enjoy certain benefits such as hassle free government services, easier processing of work visas and other advantages offered by MHRSD.
On the other hand, companies in the Yellow or Red categories may face restrictions such as digital portal freezing, limited visa services or difficulties in renewing work permits for foreign employees.
Impact on Business Registration or Company Incorporation in Saudi Arabia
If you are planning company formation in Saudi Arabia, it’s important to consider Saudization requirements from the beginning. Here’s how it can affect your business registration:
a) Company Classification Matters
Your Nitaqat category may impact the approval process for your business license and visas for foreign staff.
b) Hiring Plans Need Adjustment
You will need to plan your hiring strategy to include the required percentage of Saudi employees according to your business activity and size.
c) Ongoing Compliance Is Important
Even after your business is registered, you must continue to meet the Saudization targets to avoid penalties or operational delays.
d) Costs May Vary
You may need to invest in training or offer higher salaries to attract Saudi talent, especially in sectors where local professionals are fewer.
Recommended Tips for New Businesses
a) Understand the Quotas: Check the required Saudization percentage for your industry before registration.
b) Plan Workforce Early: Include Saudi hires in your workforce planning from day one.
c) Stay Updated: The Nitaqat system is regularly updated, so keep track of any changes in rules or quotas.
d) Seek Local Support: Working with a local consultant or legal advisor specializing in companies law in Saudi Arabia can help you handle the process smoothly.
Hence, the Saudization (Nitaqat) policy plays a major role in how businesses operate in Saudi Arabia. While it comes with certain obligations, it also supports the country's vision of building a strong and skilled local workforce.
By understanding the rules and planning ahead, you can ensure a smooth and successful business setup in Saudi Arabia.
At SB Saudi Lawyers, we provide expert guidance on complying with Saudization (Nitaqat) regulations and ensuring your commercial registration in Saudi Arabia process is smooth and hassle-free. Our team of lawyers in Saudi Arabia assists with legal structuring, workforce planning, and ongoing compliance to help you establish a successful company incorporation in Saudi Arabia.
About SB Saudi Lawyers:
SB Saudi Lawyers (AlSuwaiket and AlBusaiyes Law Firm) is a premier law firm in Saudi Arabia, trusted and renowned for its legal consultancy services in corporate, commercial, construction, mergers and acquisitions, real estate, employment law, and more. With a team of highly skilled and experienced lawyers, the firm provides comprehensive legal services, ensuring compliance with local laws and regulations. SB Saudi Lawyers is dedicated to providing exceptional legal solutions tailored to meet the unique needs of individuals, corporations, and enterprises. Their commitment to professionalism and excellence makes them a trusted partner for those seeking reliable and affordable legal support in Saudi Arabia.