Coronavirus: Saudi Arabia to cut private sector salaries by 40%

Coronavirus: Saudi Arabia to cut private sector salaries by 40%

A ministerial decision in Saudi Arabia is set to allow private sector companies to cut salaries by up to 40%, with the possibility of terminating contracts given the challenging economic circumstances surrounding the coronavirus pandemic, Al Arabiya reported, citing a report in Arab daily Asharq al-Awsat.

According to the newspaper, the new decision has not yet been published by the cabinet.

The decision which the newspaper saw a copy of was signed by Saudi Ministry of Human Resources and Social Development to regulate the labour contract in the current period, allows employers to reduce the employees salaries by 40 percent of the actual effective wage for a period of 6 months, in proportion to the hours of work and allowing the termination of employee contract after 6 months of the COVID-19 circumstances.

The decision also stressed that employers are not allowed to terminate any employee unless three conditions are met.

  1. The passing of six months since a salary cut came into effect
  2. Reducing pay, annual leave and exceptional leave were all used
  3. The company proves that it’s facing financial troubles due to the circumstances.

The decision also specified that employees will receive their salaries if they are on annual leave within the stipulated six-month period.

Asharq al-Awsat reported that the ministerial decision would come into effect once it is confirmed by the Saudi Arabian government and published in its official newspaper.

The new decision also included a provision allowing employers to reduce wages, even if they benefit from subsidies provided by the government, such as those to help pay workers ‘ wages or exemptions from government fees.The decision further stated that employers are not allowed to terminate any staff until three conditions are met.

There are currently 28,656 reported cases of coronavirus in the Kingdom, with 191 fatalities.