In a strategic move aimed at enhancing the business environment and supporting the stability of the private sector, His Excellency the Minister of Human Resources and Social Development in the Kingdom of Saudi Arabia, Engineer Ahmed bin Sulaiman Al-Rajhi, issued a new ministerial decree establishing regulations and conditions for settling violations of the Labor Law. The decree offers a package of unprecedented facilitations, most notably a reduction of up to 80% in the value of financial penalties, provided that establishments commit to rectifying their situations and eliminating the violations.
Background of the decision in the context of Vision 2030
This decision comes as part of a series of broad structural reforms underway in the Saudi labor market, aligned with the goals of Vision 2030. The Vision aims to diversify the national economy and reduce dependence on oil by empowering the private sector to become the primary driver of growth. To achieve this, the government is working to improve the regulatory and investment environment, making it more flexible and attractive to both local and international investors. This decision represents a shift in regulatory philosophy, moving from a focus on deterrent penalties to a corrective and compliance-based approach. This gives businesses, particularly small and medium-sized enterprises (SMEs), an opportunity to adjust without incurring financial burdens that could hinder their growth.
Terms and conditions for benefiting from the discount
The ministerial decision outlined a clear mechanism for establishments wishing to benefit from the settlement. The basic conditions are as follows:
- Removal of the violation: The establishment must first take the initiative to remove the violation that was recorded against it and completely rectify its situation to ensure that it is not repeated.
- Time limit: The settlement request must be submitted within 90 days from the date the establishment is notified of the administrative decision imposing the penalty.
- First violation: The decision focuses on giving establishments a chance when they commit the violation for the first time, to encourage them to comply in the future.
- Non-payment in advance: The fine to be settled must not have been paid yet at the time of application.
- Minimum fine: Settlement does not apply to fines that are less than one thousand Saudi Riyals.
Expected impact on the national economy and business environment
This decision is expected to have a multifaceted positive impact. Domestically, it will alleviate the financial burden on businesses, enhancing their ability to survive, grow, and create more jobs. Furthermore, the decision will foster a culture of voluntary compliance rather than one based on fear of punishment, thereby increasing overall adherence to labor regulations and improving the relationship between regulators and the private sector.
At the regional and international levels, this step enhances the Kingdom's reputation as an attractive investment destination with a transparent and supportive regulatory environment. Foreign investors always seek markets characterized by clarity and regulatory stability, and this decision sends a strong message that the Kingdom is committed to supporting the success of its private sector partners. The new decision also supersedes previous Ministerial Decision No. 75907, underscoring the new direction towards flexibility and continuous development of regulations to serve the goals of comprehensive development.
