Home / NEWS / Oil-hit Saudi companies delay salary payments

Oil-hit Saudi companies delay salary payments

by Neha Bhatia on Feb 10, 2016

Public sector projects have dried up in Saudi Arabia. [Representational image]
Public sector projects have dried up in Saudi Arabia. [Representational image]

Certain Saudi Arabian construction companies have delayed salary payments as projects dry up in the oil-hit country. 

According to Reuters, the Kingdom's Ministry of Labour confirmed earlier this week that workers at a "major institution" had lodged complaints about non-payments. 

The ministry said it verified these complaints and implemented corrective action, but did not reveal further details. 

A source told the news wire that the firm is a part of Saudi's construction sector, and several other companies in the industry are facing a similar problem. 

Another source, speaking anonymously, added: "It's not just us, it's several construction companies that work on government projects."

The Saudi government's cost-cutting measures, which include a finance ministry-led freeze on investments in Q4 2015, have further exacerbated the country's historic trend of payment delays.

An executive working in a Saudi construction firm said: "Many contractors are awaiting payment from the government.

"It's an industry-wide problem." 

The Kingdom's economy has suffered sizeable slowdowns and losses since the second half of 2015 due to declining global oil prices. 

Construction companies operating in Saudi are now grappling with reduced fluidity as public sector projects dry up. 

In January, Saudi Arabia's finance ministry amended the advance payment made to construction firms working on government projects.

Companies building government projects will now receive 5% of the contract value as advance payment, instead of the 20% payment made earlier.

Finance minister Ibrahim Alassaf issued a circular stating advance payments should not exceed $13.3m (SAR50m).

Construction companies in Saudi are entitled to an advance payment for certain contracts issued by the government.

The move is expected to fund on-site operation, allow for early sub-contractor payments, and the purchase of equipment and materials from suppliers.

The amount is amortised and deducted from the contract's value at a later stage.