If you’re running a business in Saudi Arabia or planning to do so, understanding the Nitaqat system is essential. This guide will walk you through what Nitaqat is, why it matters, and how to calculate your Nitaqat level step by step. Whether you’re an expat entrepreneur or a local business owner, this article will simplify the process and help you stay compliant with Saudi labor laws.
What is Nitaqat?
Nitaqat is a Saudization program introduced by the Ministry of Human Resources and Social Development (MHRSD) in Saudi Arabia. Its primary goal is to encourage the hiring of Saudi nationals by requiring businesses to meet specific nationalization percentages.
Businesses are classified into one of five Nitaqat categories based on the percentage of Saudi employees in their total workforce:
- Platinum
- High Green
- Mid Green
- Low Green
- Red
The higher your category, the more benefits your business can enjoy. Falling into the Red category, however, comes with significant restrictions, such as being unable to renew work permits or obtain new visas.
Why Does Nitaqat Matter?
Your Nitaqat category affects your ability to:
- Renew work permits for foreign employees.
- Apply for new work visas.
- Transfer employees between departments.
- Change employee job classifications.
Being in the Red category can severely limit your business’s operations, while maintaining a Green or Platinum status ensures smoother access to government services and labor permissions.
Factors That Affect Nitaqat
Three key factors determine your Nitaqat level:
- Entity Classification: The type of primary activity registered with MHRSD.
- Establishment Size: The total number of employees in your business.
- Nationalization Percentage: The ratio of Saudi employees to the total workforce.
How Is Nitaqat Calculated?
There are two methods for calculating your Nitaqat level:
1. Traditional Method
This method calculates the average nationalization rate over 26 weeks. It’s designed to provide stability and prevent your Nitaqat level from suddenly dropping if Saudi employees leave your company.
2. Immediate Calculation Method
This method calculates the nationalization rate weekly and is used in the following cases:
- Your establishment has maintained at least Low Green for 13 consecutive weeks.
- Your establishment is newly formed (less than 13 weeks old).
For small businesses with five or fewer employees (classified as Small A entities), only the immediate calculation method applies.
Steps to Calculate Your Nitaqat Level
Let’s break down how to calculate your Nitaqat level using the Nitaqat Calculator provided by the Ministry of Human Resources:
Step 1: Determine Your Establishment’s Economic Activity
Every business is classified under an International Standard Industrial Classification (ISIC4) code based on its primary activity. Select your business’s activity in the calculator.
Step 2: Count Your Total Employees
Include all employees (Saudi and non-Saudi) in your workforce. Remember to factor in both full-time and part-time workers.
Step 3: Calculate Your Nationalization Percentage
Use this formula
Nationalization Percentage = (Number of Saudi Employees ÷ Total Employees) × 100
For example, if you have 10 Saudis and 40 non-Saudis:
Nationalization Percentage = (10 ÷ (10 + 40)) × 100 = 20%
Step 4: Account for Special Cases
Certain employees have different weightings in Nitaqat calculations:
- Higher Weighting (Increases Nationalization Percentage):
- Saudis with special needs (count as 4 Saudi employees).
- Former prisoners (count as 2 Saudi employees).
- Lower Weighting (Decreases Nationalization Percentage):
- Part-time Saudis (count as 0.5 Saudi employees).
- Saudi students (count as 0.5 Saudi employees, with limits).
- Neutral Weighting (Count as 1 Saudi):
- Remote Saudi workers.
- Sons, daughters, widows, or mothers of Saudis.
- Gulf Cooperation Council (GCC) citizens.
- No Effect on Nitaqat:
- Spouses of non-Saudi expats.
Step 5: Use the Nitaqat Calculator
Once you’ve gathered the necessary information, use the Nitaqat Calculator:
- Select your sub-economic activity.
- Enter the number of Saudis and non-Saudis in your workforce.
- Click “Calculate Nitaqat Level.”
The calculator will display your current Nitaqat level and allow you to compare it with the expected level if you make changes to your workforce.
Tips for Maintaining or Improving Your Nitaqat Level
- Hire Strategically: Focus on hiring Saudi nationals, particularly from categories with higher nationalization weighting (e.g., individuals with special needs).
- Monitor Your Workforce Regularly: Keep track of your nationalization percentage weekly to ensure you’re meeting your category requirements.
- Plan for Growth: As your company grows and your total workforce increases, adjust your hiring strategy to maintain the required nationalization rate.
Conclusion
Calculating and maintaining your Nitaqat level is a vital part of running a business in Saudi Arabia. By understanding how the system works and using tools like the Nitaqat Calculator, you can stay compliant and enjoy the benefits of being in a higher Nitaqat category.
Take the time to evaluate your workforce today and make adjustments as needed. If you have specific questions or want to explore further, visit the Nitaqat Calculator or consult with a labor law expert.