Saudi labour charge could cost contractors $1.9bn

Contracting committee estimates big losses as ex-pat fee sky-rockets

The annual fee for employing an ex-pat worker in Saudi is set to rise from $26.66 to $640
The annual fee for employing an ex-pat worker in Saudi is set to rise from $26.66 to $640

A Saudi contracting committee has estimated that government plans to increase the charge for employing foreign labour could cost the construction industry $1.9bn (SAR 7bn) annually, Arab News reports.

The contracting committee of the chamber in Abha said last week’s decision is causing some small contractors to consider halting works completely and that the sector’s losses could drive small- and medium-sized enterprises and subcontractors out of business. It also suggested that the move would exacerbate the problem of casual labour as workers left their sponsors for higher wages elsewhere.

Fees are imposed on companies in Saudi that employ more than 50% of expats in their workforce, and a recent decree raised the amount companies will have to pay from $26.66 (SAR 100) per worker to $640 (SAR 2,400).

Following the announcement last week, government sources had said the construction industry may face charges as high as $2.7bn (SAR 10bn).

The ministry and chambers of commerce are holding discussions, workshops and meetings as contractors study a number of mechanisms to obtain reimbursements for their current contracts.

The Abha committee meeting heard further objections from contractors on the grounds that the decision will have a serious impact on other sectors, and it will not solve the issue of Saudization either.

The increase in fees is understood to be an attempt to encourage the employment of Saudi nationals by making the employment of foreign workers prohibitively expensive. Unemployment figures are on the rise according to Hafiz, the one-year program for the unemployed that expired last month.

The Ministry of Labour did not respond to the contractors’ demands, the committee said, to send data concerning Saudi unemployment.

Mohamad Al-Saker, former member of the employment committee in Riyadh’s chamber of commerce, said companies should support all decisions concerning Saudization. However, he added that the ministry should coordinate with the private sector before making any decision.

The committee plans to voice its grievances in a report explaining the damages inflicted on businessmen which it will submit to the Royal Court. However, it encouraged all contractors to follow the legal procedures in dealing with the decision.

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