Labour Supply Services (Isnad)

What labour supply (الإسناد) is

Labour supply (الإسناد) and the providing of labour services (تقديم الخدمات العمالية) are licensed activities. Article 2 of the Saudi Labor Law (نظام العمل) defines labour supply (الإسناد) as the service of providing a worker to work for someone other than the employer, through an establishment licensed for that purpose (our rendering). Royal Decree M/44 added the definition to Article 2 of the Labor Law.

The controls on the activity are in Annex 4 of the Implementing Regulations of the Labor Law (اللائحة التنفيذية لنظام العمل). Annex 4 is titled «قواعد ممارسة نشاط الاستقدام وتقديم الخدمات العمالية» (rules for carrying on the activity of recruiting workers and providing labour services, in our rendering), and it has 72 Articles. Joining the definition of الإسناد in Article 2 of the Labor Law to the procedures for providing labour services (تقديم الخدمات العمالية) in Annex 4 is our reading: it takes Annex 4 as regulating what Article 2 defines.

An establishment that uses workers whom a licensed company provides needs to know who pays their rights, what Annex 4 bars the company from doing, and which complaint channels are open. Labour supply differs from managerial outsourcing (الإسناد الخارجي), in which an organisation entrusts a whole activity to another party that performs it. That arrangement is explained under outsourcing.

Who pays the worker’s rights

Article 35(ج) of Annex 4 requires the licensee (المرخص له) to conclude an employment contract with the worker and to document it on the approved platform. The worker must know the nature of the work fully, and the contract must set out the rights and obligations of both parties. Annex 4 labels the items within its Articles with Arabic letters, given here as printed.

Under that contract a direct contractual relationship arises between the licensee and the worker (علاقة تعاقدية مباشرة بين المرخص له والعامل). The licensee is responsible for paying all the worker’s rights that arise from that relationship, «وفق التعليمات التي أصدرتها الوزارة» (in accordance with the instructions that the Ministry has issued, in our rendering), and the licensee must comply with the Labor Law and its Implementing Regulations in that respect.

In Annex 4 we found no text that places payment of the worker’s rights on the client. Article 35(ج) of Annex 4 does not say that the client bears none of them, and we do not infer that.

Article 31 of the Labor Law provides differently for hiring through offices. Saudi workers whom offices or companies helped to employ, and workers whom they recruited on behalf of employers, are workers of the employer, tied to it by a direct contractual relationship. Hiring through offices and labour supply both fall under Articles 30 and 229 bis of the Labor Law. They differ in the party with which the direct relationship arises: the establishment, in hiring through an office, and the licensee, in labour supply under Article 35(ج) of Annex 4. The controls on Saudi hiring mediation (التوسط في توظيف السعوديين) are in Annex 3 of the Implementing Regulations.

Licensing and definitions: Articles 30 and 229 bis of the Labor Law, and Articles 1, 3, 8, 23 and 48 of Annex 4

Article 30(1) of the Labor Law, as amended by Royal Decree M/44, bars any natural or legal person from carrying on three activities, namely employing Saudis, recruiting workers and labour supply (الإسناد), unless the Ministry has licensed that person. Article 229 bis of the Labor Law provides a fine of not less than SAR 200,000 and not more than SAR 500,000 for a breach of Article 30(1) of the Labor Law, without prejudice to Article 229 of the Labor Law.

Article 30(2) of the Labor Law provides that the Ministry proposes the fees for practising these activities. In Annex 4 we found no amount for licence fees.

Article 1 of Annex 4 defines the terms that the Articles on labour services use:

• Supporting labour (العمالة المساندة) and professional labour (العمالة المهنية). They are supporting service workers who work in the home of the employer, and professional service workers. Each category includes those in a similar position, and covers both sexes.
• The client (العميل). It is any natural or legal person who contracts with the licensee to be provided with labour services for a set period.
• The competent agency (الوكالة المختصة). It is the agency responsible for the services provided to licensees, also called «الوكالة» (the agency) in Annex 4.

Article 3 of Annex 4 sorts the companies subject to it into four classes:

• Class 1. It is a large human resources company («شركة موارد بشرية كبيرة»), the only class whose row lists the activity «أسناد السعوديين» (labour supply of Saudis, in our rendering) and the activity «تقديم الخدمات العمالية (المساندة والمهنية)» (providing labour services, supporting and professional). Its paid up capital is SAR 100,000,000, and its licence cell reads «يسمح بالترخيص» (licensing is permitted).
• Classes 2 to 4. Their rows list supporting labour activities only. The licence cell of class 2 carries the same wording. The licence cell of classes 3 and 4 is one merged cell across both rows and reads «يُقتصر على المرخص لهم قبل صدور هذه القواعد» (limited to those who were licensed before these rules were issued, in our rendering).

In Annex 4 we found no Article that separates the activity of labour supply of Saudis from the other activities.

The word إسناد appears in Annex 4 in three places. The first is the row of Article 3 of Annex 4 quoted above, the only one that names a licensed activity. The second is Article 23(4) of Annex 4, which allows a company to entrust its internal audit tasks to an external service provider after the Ministry approves. The third is Article 48 of Annex 4, which requires the licensee to observe the necessary controls and conditions when it entrusts part of its duties to an external service provider and those tasks include processing, maintaining or accessing beneficiaries’ data and information.

Article 8 of Annex 4 sets the conditions for obtaining any of the licences «المسموح الاستثمار فيها» (in which investment is permitted, in our rendering) under Article 3 of Annex 4. The company must be a closed joint stock company whose capital is wholly owned by Saudi persons. Article 8(2) of Annex 4 excepts a foreign investor who meets the foreign investment requirements in Annex 4.

For class 1, the table of Article 8 of Annex 4 sets a bank guarantee of SAR 10,000,000. In place of the guarantee, the company may provide insurance against the risk of failures to meet clients’ rights. The table also sets a paid up capital of SAR 100,000,000, the same figure as in the table of Article 3 of Annex 4, and a licence term of ten years. The Ministry may require companies to carry insurance cover for that risk, and a company may not practise its activity if the remaining insurance period is under three months.

How the service is provided: Articles 35 to 39 of Annex 4

Article 35 of Annex 4 gives three steps for providing the service:

• The licensee applies on the approved platform for recruitment visas, under the controls that the agency sets (Article 35(أ) of Annex 4).
• The licensee chooses male and female workers whose professional or scientific specialisations or practical experience match the occupations for which they were recruited or drawn in (Article 35(ب) of Annex 4).
• The licensee concludes the employment contract described above (Article 35(ج) of Annex 4).

Article 36 of Annex 4 bars the licensee in any circumstances from employing labour provided as labour services in one category or occupation for work in another, except with the Ministry’s approval.

Article 37 of Annex 4 concerns localisation. It covers labour that provides services to a client of the licensee when the client is an establishment, and it says that this labour enters the labour described in these words:

ضمن العمالة التي تحسب على أساسها نسب التوطين لديه

In our rendering, the quoted words say that this labour counts among the labour on the basis of which localisation rates are calculated at someone’s place. The last word, «لديه» (literally “at him” or “at it”), can refer to the client or to the licensee. Because it can refer to either, no calculation of either party’s localisation rate is built on the sentence before the Ministry’s controls are consulted.

Article 37 of Annex 4 adds two points. First, the counting rule applies unless the Ministry sets particular requirements for counting that labour in localisation rates. Second, the licensee must follow the controls that the Ministry sets on the approved platform for ending the contractual relationship if the benefiting establishment moves to a scope (نطاق) in which it may not use labour services.

Article 38 of Annex 4 speaks plainly of the client’s localisation rate. The licensee must comply with the localisation requirements that the Ministry issues for its clients, according to the records of the Ministry’s approved electronic systems. It must refrain from supplying labour to a client when that labour would breach the localisation rate that the client must meet, and it must not provide labour services to establishments that specialise in activities that the Ministry prohibits.

In Annex 4 we found no list of the scopes that are not permitted to benefit from labour services, and no list of the prohibited activities on which Article 38 of Annex 4 depends. How the localisation rate is calculated, and how an establishment is placed in a scope (نطاق), is explained under Nitaqat.

Article 39 of Annex 4 requires the licensee to provide staff who are fluent in the language of communication with the workers attached to it, and allows it to use external parties for this.

What the licensee must refrain from: Article 50 of Annex 4

Article 50 of Annex 4 lists what the licensee must refrain from. The items include four that concern the workers and the service:

• Providing the service at a cost that differs from the cost announced on the website specified on the platform (Article 50(ي) of Annex 4).
• Receiving sums outside the approved platform (Article 50(ك) of Annex 4).
• Engaging in any practice that constitutes an encroachment on workers’ rights (التعدي على حقوق العمالة, in our rendering), or helping others to do so (Article 50(ب) of Annex 4).
• Transferring or substituting the workers assigned to provide one service for another service without the Ministry’s approval (Article 50(ل) of Annex 4).

Records, price, platform, contract and advertising: Articles 1, 34, 43, 45, 47, 54 and 63 of Annex 4

• Records. Article 34 of Annex 4 requires the licensee to document the data and information that the Ministry requests in its systems or on the approved platform, including all contracts and dealings with clients. The licensee must also publish the prices of all its licensed activities on the Ministry’s approved site and on the approved platform, and document an update of its data within thirty days.
• Sums received and their amount. Article 43 of Annex 4 uses the verb «يراعي» (to observe, or to take account of) for the value of the sums the licensee receives for mediating in recruitment, for providing labour services or for transferring services, according to the activities it is licensed for. It does not say how the licensee is to observe that value, and it allows the agency to fix those amounts when needed.
• Platform. Article 45 of Annex 4 bars the licensee from providing the services or licensed activities outside the approved platform. Article 1 of Annex 4 defines the approved platform (المنصة المعتمدة) as an electronic platform through which licensees’ operations are documented, such as «مساند، وأجير استقدام» and any platform that the Ministry approves. Article 63(ن) of Annex 4 lists, among the things the licensee must refrain from, providing labour services that are proven to have gone undocumented through the platform named أجير استقدام.
• Contract. Article 47 of Annex 4 requires the licensee to carry on the activity under a contract with the client, in the forms approved on the platform and under the controls and conditions that the agency sets. The contract covers the obligations, rights and responsibilities of both parties.
• Advertising. Article 54 of Annex 4 requires an advertisement for a service to include the licensee’s name, logo and contact details, the name of the service with its cost stated clearly, and the licence details on printed materials and stamps. The agency may require the licensee to withdraw an advertisement that does not comply within one working day of notice.

Article 1 of Annex 4 does not say that the platform named أجير استقدام is the Ajeer programme (أجير). Ministerial Decision 60339, not Annex 4, governs that programme, under which two establishments contract for a service or for the services of a worker who is not a Saudi national.

Complaints, client rights, the guarantee and penalties: Articles 55 to 59 and 66 of Annex 4

Article 55 of Annex 4 requires the licensee to set up a channel for receiving, documenting and handling complaints from workers, employers or clients. The licensee must offer the complaint channels and their guides in Arabic and English, notify the complainant at once that the complaint has been received, and resolve it within the specified period. It must also record complaints in special registers that the Ministry may request.

Article 57 of Annex 4 allows the agency to issue rules and instructions to protect clients’ rights. They are to include the mechanism, procedures and periods for handling complaints, the conditions for providing the service and the effect of breaching the service contract on clients’ rights, controls on marketing and advertising, one set for supporting labour services and one for the licensee’s services, and special controls on the contractual relationship. Under the rules it sets, the agency may also explain to the parties to a dispute that they can resort to the competent judicial body.

Article 59 of Annex 4 allows the competent agency to apply the procedures that Annex 4 sets out once it has given the licensee the period set on the platform to meet its obligations, or when the agency establishes any of five cases. Article 59 of Annex 4 does not list the procedures; in our reading they are the administrative penalties of Article 56 and the collection from the bank guarantee under Article 66, both of Annex 4 and described below. The five cases are:

• The licensee refuses or is unable to pay the rights of the workers attached to it, or the cost of returning them to their countries, and the fines or penalties that follow.
• The licensee refuses or is unable to meet its contractual obligations to employers or clients, or refuses to return the sums it obtained from them or to pay the compensation that the contract provides.
• A final decision or court judgment against the licensee is being executed.
• The licensee commits violations that require these procedures to be applied.
• The Ministry sees fit to collect from the bank guarantee another sum that results from applying the provisions of Annex 4.

Article 66 of Annex 4 allows the Ministry to issue controls for receiving bank guarantees and drawing on them. The approved platform prepares the procedures for collecting the sums and depositing them for the benefit of clients, in coordination with the issuing banks.

Article 56 of Annex 4 provides for two kinds of penalty: a table of violations and financial penalties issued by decision of the Minister or the Minister’s delegate, and administrative penalties that the competent agency issues in categories, from a warning to stopping one or more of the Ministry’s services, suspending the licence or withdrawing it. Under Article 58(2) of Annex 4, labour inspectors record violations of Annex 4 in accordance with the provisions on labour inspection procedures in the Labor Law.

What this means for an establishment that uses supplied labour

• Licence before contract. Article 70(3) of Annex 4 bars any natural or legal person, not only the unlicensed company, from dealing with companies that are not licensed to carry on the activities of recruitment and providing labour services. Checking the licence before contracting is a practical recommendation, not a text of Annex 4.
• Localisation at the client. Article 38 of Annex 4 bars the licensee from supplying labour that breaches the localisation rate that the client must meet, and Article 37 of Annex 4 concerns ending the contractual relationship when the client’s scope changes. A client can ask the licensee before contracting how the supplied labour affects the client’s localisation rate, as a practical recommendation.
• Contract, price and payment. The licensee must contract with the client on a form approved on the platform (Article 47 of Annex 4). It may not provide the service at a cost different from the announced cost (Article 50(ي) of Annex 4), and it may not receive sums outside the approved platform (Article 50(ك) of Annex 4).

How labour supply differs from neighbouring arrangements

• Ajeer. Ajeer is an arrangement under which two establishments contract for a service or for the services of a worker who is not a Saudi national, under Ministerial Decision 60339, as explained under Ajeer.
• Employee secondment and moonlighting. Both concern Article 39 of the Labor Law, which provides that, unless the rules and procedures laid down by law are followed, an employer may not let its worker work for a third party. They are explained under employee secondment and moonlighting.
• Managerial outsourcing (الإسناد الخارجي). Managerial outsourcing is an organisation’s entrusting of a whole activity to another party, as explained under outsourcing.

Under contingent workforce, a worker supplied to an organisation by another establishment is classed as not on the organisation’s register of workers.

Annex 4 leaves several matters to the Ministry and the agency (Articles 35(ج), 37 and 43), so the controls in force are to be checked on the Ministry’s platform.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.