Saudi Hiring Mediation

What Saudi hiring mediation is

Saudi hiring mediation (التوسط في توظيف السعوديين) is a licensed activity. Article 1 of Annex 3 of the Implementing Regulations of the Labor Law (اللائحة التنفيذية لنظام العمل) defines it as the service of employing Saudis, male and female, for the benefit of employers in the Kingdom. One of two bodies carries it on: a Saudi recruitment office (مكتب توظيف السعوديين) or a Saudi recruitment company (شركة توظيف السعوديين). Annex 3 calls each of them the licensee (المرخص له).

Annex 3 is titled «ضوابط وقواعد ممارسة نشاط التوسط في توظيف السعوديين» (controls and rules for carrying on the activity of mediating in the employment of Saudis, in our rendering). It has twenty Articles in four parts: preliminary provisions, licensing, mediation in employment, and general provisions.

An establishment that is thinking of using a recruitment office needs to know what the office must satisfy, what it may and may not do, and what becomes of the establishment’s relationship with the people the office puts forward. The fee arrangement between an establishment and an office is discussed in contingency recruitment, and the regulatory framework follows below.

Who may carry on the activity

Article 30 of the Saudi Labor Law (نظام العمل), as amended by Royal Decree M/44, provides that no natural or legal person may carry on the activity of employing Saudis, the activity of recruiting workers (استقدام العمال) or the activity of labour supply (الإسناد) unless the Ministry has licensed that person. Article 2 of the Labor Law defines 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). Before the amendment, Article 30 of the Labor Law named two activities, employing Saudis and recruiting workers, and the amendment added labour supply.

Paragraph 1 of Article 30 of the Labor Law refers to the Implementing Regulations of the Labor Law for the controls on each activity, the conditions for granting and renewing a licence, the licensee’s obligations, and the rules on non-renewal and cancellation. Annex 3 is the set of controls for the activity of employing Saudis.

Article 2 of Annex 3 limits the activity to offices or companies established for the purpose, and only after obtaining a licence from the Ministry. For a breach, it refers to the two schedules of violations and corresponding penalties issued by Ministerial Decision 4786 dated 28/12/1436H, and to any amendments to them.

Article 229 bis of the Labor Law provides a fine of not less than 200,000 riyals and not more than 500,000 riyals for anyone who contravenes paragraph 1 of Article 30 of the Labor Law, without prejudice to Article 229 of the Labor Law. Category (ط) of the table of Ministerial Decision 112377 covers carrying on the activity of employing Saudis, recruiting workers or labour supply without a licence. The fine in that category rises when the violation is repeated. The schedule is explained in violations and penalties schedule.

Licence conditions: Article 3 of Annex 3

Article 3 of Annex 3 of the Implementing Regulations of the Labor Law separates the licence of an office from the licence of a company. The conditions for an office are five:

• The owner must be a Saudi national.
• The owner must be at least twenty-five years old.
• The owner must hold a university qualification or an equivalent, or a general secondary certificate with at least three years of experience in recruitment.
• The owner must not have been sentenced for a crime of dishonour, a crime of breach of trust, or a crime relating to combating human trafficking, unless the owner has been rehabilitated in respect of it.
• The owner must manage the office personally, and may appoint a deputy who meets the same conditions.

The conditions for a company are six:

• The company must have an independent commercial register, as the Companies Law provides.
• Its capital must be wholly owned by Saudi natural or legal persons.
• Its capital registered in the commercial register must be not less than five hundred thousand Saudi riyals.
• Each natural person who takes part in founding it, or joins it after it is founded, must be a Saudi national, must not have been sentenced for any of the crimes named in the conditions for an office unless rehabilitated, and must meet the further condition quoted below.
• Each legal person that takes part in founding it, or joins it after it is founded, must meet the minimum localisation rate (الحد الأدنى من نسبة التوطين).
• The company must appoint a manager who meets the conditions that apply to an office owner, and it must make sure that the manager meets them throughout the licence period.

The further condition on a natural person who takes part in founding the company reads, in Annex 3:

ألا يكون قد سبق له الحصول على ترخيص مكتب للتوسط في توظيف السعوديين، أو كان أحد الشركاء في شركة لمزاولة التوسط في توظيف السعوديين، أو كان أحد الشركاء في شركة شريكة في شركة توسط في توظيف السعوديين، وألغي الترخيص بموجب قرار كجزاء

The English rendering is ours, not an official translation. The person must not previously have obtained an office licence for mediation in the employment of Saudis, or have been one of the partners in a company for carrying on that mediation, or have been one of the partners in a company that is a partner in a company for that mediation, where the licence was cancelled by a decision as a penalty. The Arabic is quoted because the wording of this compound condition carries the point.

Initial approval, then the licence: Articles 4, 5 and 6 of Annex 3

The licence is preceded by an initial approval (الموافقة المبدئية) from the Ministry for founding the office or company. The application for it states the name and identity number of the office owner, or the names, national identity numbers and ownership shares of those applying to found a company, together with an undertaking not to change that list. It attaches the company’s founding contract, if the licence is for a company, and the business plan of the office or company for the licence period requested.

After studying the application, the Ministry may grant the approval, in a signed and sealed document that authorises the start of founding the company, or it may reject the application by a reasoned decision. If the Ministry rejects the application, or withdraws the approval after it was issued, the person concerned may not apply for another licence before one year from the date of being notified of the decision (Article 5 of Annex 3).

After the approval, the licence applicant gives the Ministry a copy of the commercial register, a copy of the title deed or lease contract for the premises of the office or company, and an irrevocable bank guarantee from a local bank in the form that the Ministry approves. Article 6 of Annex 3 sets the guarantee at one hundred thousand Saudi riyals for an office licence and three hundred thousand Saudi riyals for a company licence.

After studying the application, the Ministry may grant the licence, in a document issued by the Undersecretary of the Ministry for Customer Services and Labour Relations, or it may reject the application by a reasoned decision. In that case the initial approval is cancelled.

Starting the activity and the licence term: Articles 7 to 9 and 20 of Annex 3

• Start. The licensee must begin the activity no later than six months after obtaining the licence. In that period it must create an interactive website that meets the Ministry’s requirements and holds two electronic registers. One is a register of the contracts signed with employers, in which the date of the agreement is recorded. The other is a register of the applications of job seekers and the names and activity of the establishments in which they were placed (Article 7 of Annex 3).
• Term. The licence lasts two Hijri years and is renewable. The application for renewal is submitted sixty days before the licence ends, with a report on the work of the office or company in the previous period, the renewal of the bank guarantee and any other document that the Ministry requests (Article 8 of Annex 3).
• Refusal of renewal. The Ministry may refuse renewal in two cases. In the first, the licensee stopped its activity for six consecutive months, unless the stoppage was for a reason that the Ministry accepts. In the second, the licensee breached one or more of the conditions of the licence (Article 8 of Annex 3).
• Disposal of the licence. The licensee may transfer ownership of the licence to a person who meets the same conditions, by the same procedures. The transferee receives a new licence for the remaining term of the original licence (Article 9 of Annex 3). The licensee may not lease the licence, directly or indirectly, or give another person a right to use it by any means, even without payment (Article 20 of Annex 3).

When the Ministry refuses renewal, it notifies the relevant bodies. After the licence ends, the licensee must stop work and settle all its obligations to its employees, to job seekers and to the employers that dealt with it. The licensee or its partners remain subject to the Ministry’s authority and answerable to it for violations that come to light, or for acts that created rights for third parties (item second, paragraph 2 of Article 8 of Annex 3).

How the mediation is carried out: Article 10 of Annex 3

Article 10 of Annex 3 sets three steps for carrying on the activity:

• The licensee obtains accurate information from employers about vacant jobs, in particular the job or occupation title, the workplace, the pay, the benefits, the qualifications and experience, the other conditions, and the period set for filling the job.
• The licensee receives the applications of Saudi citizens who want to work, on the form prepared for the purpose. It receives copies of their documents and records them in a special register, and it gives the job seeker a registration card that shows the job seeker’s name, the number under which the application is recorded in the register and the date set for review.
• The licensee interviews job seekers to place them in jobs that suit their abilities, qualifications, experience and specialisations, and it gives advice and guidance to those who need training or retraining.

The first step connects with job posting and job requisition. The job title, pay and qualifications that the employer gives the office are what the nomination of candidates builds on.

The office’s responsibility during probation and its relationship with the worker: Articles 11 and 12 of Annex 3

Article 11 of Annex 3 provides that, without prejudice to the employer’s legal rights arising from the employment contract, the licensee is responsible for a Saudi worker whose hiring it mediated, during the probation period that the employment contract specifies. The limit of that responsibility is returning to the employer the fees that the licensee received from it, within the agreed probation period, in two cases: the worker refuses to work or leaves work for reasons not attributable to the employer, and the worker does not carry out the assigned tasks in accordance with the employment contract.

Here is an example with assumed figures. An employment contract sets a probation period of 90 days. The worker whom the office put forward leaves on day 45 for a reason not attributable to the employer. That is within the probation period, and Article 11 of Annex 3 applies. If the worker leaves on day 100, the probation period has ended, and Article 11 of Annex 3 no longer applies, because it is confined to the probation period.

Article 12 of Annex 3 provides that a worker whose hiring a licensee mediated is a worker of the employer, and a direct contractual relationship arises between the employer and the worker. The employer is responsible for paying all the worker’s financial rights arising from that relationship. Article 31 of the Labor Law states the same rule: Saudi workers whom offices or companies helped to employ are workers of the employer and are tied to it by a direct contractual relationship. The office does not become the employer of the worker it put forward, and responsibility for the worker’s pay does not pass to it.

What the licensee must do and must not do: Articles 14 to 16 of Annex 3

Article 14 of Annex 3 requires the licensee to:

• carry on the activity in an independent place, according to the premises requirements that the Ministry sets;
• confine all the work in the office or company to Saudis only, except cleaning and hospitality work;
• write its name and licence number on all its printed materials and stamps;
• use the guide to Saudi occupational classification and description in its work;
• obtain its fees for its services from the employer, with no sums of money taken from the job seeker as a result of mediating in the job seeker’s employment.

Article 15 of Annex 3 allows the Ministry to require the licensee to link electronically with the Ministry and the relevant bodies. Article 16 of Annex 3 requires the licensee to refrain from seven things:

• Mediating in the employment of non-Saudis, from inside or outside the Kingdom.
• Opening a branch in the same city or in another city without the approval of the Ministry of Human Resources and Social Development.
• Engaging in any practice that constitutes human trafficking, or helping in it, under the law on combating human trafficking and the international agreements that the Kingdom has ratified.
• Engaging in any practice that constitutes an encroachment on labour (التعدي على العمالة, in our rendering), or helping in it.
• Mediating in the employment of children and juveniles in a way that conflicts with the Labor Law, including where the licensee knows that the age of the child stated in the submitted documents differs from the true age.
• Dealing with any employer that engages in practices that constitute or facilitate human trafficking, an encroachment on labour or the employment of children.
• Carrying out any act that helps with fictitious employment (التوظيف الوهمي, in our rendering) at employers.

Drawing on the guarantee and cancelling the licence: Articles 17 to 19 of Annex 3

Article 17 of Annex 3 allows the Ministry to stop the services provided to the licensee, or to draw from its bank guarantee the sums needed to settle its obligations, or to do both. It may do so after giving the licensee fifteen days from the notice to meet its obligations, if one of five cases is established:

• The licensee fails or refuses to pay the rights of the workers who work for it, or the cost of returning them, with the fines or penalties that follow.
• The licensee fails or refuses to return sums it obtained from employers for activity that it did not perform.
• A final decision or court judgment against the licensee is being executed.
• The Ministry has imposed penalties on the licensee under the Labor Law.
• The Ministry considers that another sum should be collected as a result of applying the controls.

The licensee must make up the guarantee by the amount drawn within one month of being notified of the drawing. The cost of a worker’s return under the Labor Law is explained in repatriation.

Article 18 of Annex 3 allows the Ministry to cancel the licence in seven cases:

• The licensee did not start the activity within six months of obtaining the licence, unless for a reason that the Ministry accepts.
• The licensee lost one or more of the conditions for the licence.
• The licensee submitted forged documents.
• The licensee submitted incorrect information.
• The licensee mediated in the employment of non-Saudis.
• The licensee did not make up the guarantee after the period set for it ended.
• The licensee asked for the licence to be cancelled.

If a decision is issued for permanent closure or for cancelling the licence, the licensee liquidates its business within two months of being notified, and it may not be granted a new licence before three years pass from the closure or cancellation (Article 19 of Annex 3).

What this means for an establishment that uses an office

• The licence number. Article 14 of Annex 3 requires the licensee to write its licence number on its printed materials and stamps, so an establishment can request the number before the agreement is made. This is a practical recommendation.
• The fees. Article 14 of Annex 3 requires the office to obtain its fees from the employer, and it bars taking sums from the job seeker for mediating in the job seeker’s employment. Article 11 of Annex 3 provides for returning the fees that the office received from the employer, in the two cases it names.
• The nationality of the worker. Article 16 of Annex 3 bars the licensee from mediating in the employment of non-Saudis, so an establishment cannot use an office to hire workers who are not Saudi. Recruiting workers from abroad is a separate activity, governed by different controls.
• The difference from a job board. An office nominates named candidates, whereas a job board displays advertisements.

May an office take a fee from the job seeker?

No. Article 14 of Annex 3 requires the office to obtain its fees from the employer, and it provides that no sums of money are to be taken from the job seeker as a result of mediating in the job seeker’s employment. Article 11 of Annex 3 deals with the same fees from the employer’s side: in the two cases it names, the office returns them to the employer.

In Annex 3, we found no amount for the office’s fees and no licence fees. In the sources we reviewed, we found nothing that shows how Decision 4786, which Article 2 of Annex 3 cites, relates to Decision 112377, and we do not state which of the two applies to a particular violation.

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