Brief of Developed Nitaqat Program

Strategic Importance of Nitaqat Levels in Employment and Economic Policies

The Nitaqat level is a fundamental pillar in employment policies and economic development in Saudi Arabia. Here are some reasons why this level is important:

• Enhancing Localization: The Nitaqat level motivates companies to employ more Saudis, which helps reduce unemployment rates among citizens and enhances the independence of the local economy.
• Stimulating Economic Growth: By increasing the employment of citizens, the purchasing power of families increases, which positively reflects on the entire local economy.
• Achieving Vision 2030: The Nitaqat level directly contributes to achieving the goals of Vision 2030 by localizing jobs and enhancing local content.
• Work Quality: Improving Nitaqat levels encourages companies to provide a better work environment and advanced training for Saudi employees, thereby increasing work efficiency.

Read also about the commercial courts system and its effects on the business environment in Saudi Arabia in our comprehensive analysis available on the website of Eyad Reda Law Firm.

What Influences the Nitaqat Level?

Several factors influence the determination of the Nitaqat levels of establishments, including:

• Localization Ratio: The primary factor is the ratio of Saudi employees within the establishment. The higher this ratio, the better the Nitaqat level of the establishment.
• Type of Business Activity: Some sectors have higher localization requirements based on their strategic importance to the national economy.
• Size of the Establishment: Localization requirements vary based on the size of the establishment and the number of employees.
• Government Initiatives and Programs: Government programs supporting localization significantly affect improving the Nitaqat levels of companies by offering incentives to compliant companies.

All these factors make the Developed Nitaqat Program a strategic tool for the Ministry in achieving its economic and social objectives, and enhancing comprehensive and sustainable growth of the Kingdom’s economy.

Various Factors that Influence the Determination of Company Nitaqat Levels

The Nitaqat level for each establishment is affected by a variety of factors, which include:

• Localization Ratio: As previously mentioned, this is the ratio of Saudi employees to the total number of employees in the company. This ratio is the primary factor in determining the Nitaqat level.
• Sectoral Classification: Localization requirements vary between different sectors based on their importance and need for specific skills.
• Size of the Establishment: Larger companies may face tougher standards to achieve high localization ratios compared to small and medium-sized enterprises.
• Geographic Region: Some regions may require higher localization ratios due to local economic or social priorities.
• Specific Ministry Criteria: The Ministry of Human Resources and Social Development sets specific criteria for some companies based on their economic activity or contribution to national projects.

How is the Nitaqat Level Calculated?

Detailed Explanation of the Methods and Equations Used in Calculating Nitaqat Levels

Calculating the Nitaqat level depends on an equation that measures the localization ratio within the establishment and compares it with the standards required for each sector. The basic steps in the calculation include:

• Determining the Numerical Base of Employment: The total number of employees in the establishment is calculated.
• Determining the Number of Saudi Employees: The number of officially registered Saudi workers in the company is calculated.
• Calculating the Localization Ratio: The following equation is used to determine the localization ratio:
  Localization Ratio=(Number of Saudi EmployeesTotal Number of Employees)×100\text{Localization Ratio} = \left(\frac{\text{Number of Saudi Employees}}{\text{Total Number of Employees}}\right) \times 100Localization Ratio=(Total Number of EmployeesNumber of Saudi Employees​)×100
• Comparing the Ratio with Nitaqat Standards: The calculated ratio is compared with the standard limits for each range set by the Ministry.

Example of a Nitaqat Standards Table:

When the required ratios are achieved or exceeded, the establishment is classified within the appropriate level. This system encourages companies to enhance localization and support economic and social development in the Kingdom.

Learn how to protect your commercial interests with the best Commercial Lawyer in Riyadh at Eyad Reda Law Firm. Consult our experts for reliable legal advice.

Special Employee Cases in the Developed Nitaqat System

The Developed Nitaqat Program takes into account various employee scenarios when calculating the localization ratio in establishments. Here is an explanation of these cases:

Employees Whose Localization Ratio is Calculated Higher

These employees are often those with rare skills or high qualifications that are considered essential for strategic and vital sectors. Their value is estimated higher to encourage companies to employ more Saudis in these fields.

Employees Whose Localization Ratio is Calculated Lower

Sometimes, the ratio can be lower for employees in positions that do not require high or specialized skills, where it is believed that these positions can be more easily filled.

Employees Whose Localization Ratio is Calculated Equally

The vast majority of employees fall under this category, where they are calculated at an equal ratio according to the usual standards of the program.

Employees Who Do Not Affect the Localization Ratio

There are some exceptions where certain employees are not counted at all in the localization ratio, such as workers within certain age categories or those in certain sectors that have special rules.

Expatriate Employees Who Are Calculated at a Lower Ratio

This category includes expatriate workers who may be calculated at a lower ratio based on certain conditions such as the type of work they perform or specific needs of the company.

These types of classifications aim to improve the program’s flexibility and meet the needs of companies while maintaining the strategic goals of localization. These details help companies understand how to best benefit from the Developed Nitaqat Program to enhance the employment of Saudis in a way that supports the company’s goals and national policies.

Linking Employers, Individuals, and Public Services

The connection between the program and improving public services through job localization The Developed Nitaqat Program not only contributes to enhancing employment within the private sector but also plays an important role in improving public services through several mechanisms:

Increasing Government Efficiency: By localizing jobs in vital sectors, local competencies that can provide better and more efficient public services are enhanced. Saudi employees who better understand the local environment and the needs of citizens can contribute more significantly to the design and implementation of government services.

Improving Services Provided to Citizens: Intensive employment of Saudis in public services ensures superior service delivery that better meets local needs. This includes everything from healthcare to educational and municipal services.

Enhancing Local Economic Development: By localizing jobs, income is redistributed within the national economy, increasing citizens’ purchasing power and stimulating economic growth. This process helps create a stronger domestic market and stimulates consumer spending.

Achieving Social and Economic Stability: The program contributes to reducing dependence on expatriate labor, which helps achieve greater social and economic stability in line with the strategic goals of the state and Vision 2030.

The Developed Nitaqat Program serves as a bridge linking employment policies with economic and social development, enhancing the effectiveness of public services and achieving national goals across various dimensions.

Read also about The Franchise Law and how it impacts businesses in Saudi Arabia, in our comprehensive review available on the website of Eyad Reda Law Firm.