A Brief Overview of Saudi’s New Insurance Scheme for Migrant Workers

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Saudi Arabia’s Ministry of Human Resources and Social Development (MHRSD) and the Insurance Authority, the Kingdom's insurance regulator, announced - Opens in new tab the launch of a new insurance scheme called the 'Insurance Product.” Effective October 6, 2024, the scheme will cover unpaid wages owed to migrant workers in the private sector whose employers defaults for over six months, as well as the cost of a return ticket for those wishing to go back to their home country. Domestic workers are excluded from the scheme.

According to the insurance guideline - Opens in new tab published by the MHRSD, a migrant worker is eligible for compensation if all the following conditions are satisfied:

Their employer delays or defaults on wage payments for over six months.
The delay affects 80% or more of the workforce of the company.
The delay happens during the insurance coverage period (12 months from the policy's start date).

It’s unclear if unpaid wages will be assessed based on six months of non-payment cumulatively or consecutively.

Upon the worker filing an insurance claim, the insurance company will notify the defaulting employer and give them 10 working days to submit any objections. If no objections are received, the worker is entitled to insurance benefits per the policy's terms and conditions. The insurance company will then seek reimbursement from the employer for the cost of the claims.

All migrant workers in the private sector employed by establishments with commercial registrations, regardless of classification, will be automatically covered by the insurance scheme (see sidebar for all workers excluded - Scroll to section). The insurance regulations state that the MHRSD will cover the cost of the insurance service and its application, however, it is unclear whether workers need to pay any fees.

Workers employed by “defaulting establishments,” and are insured under the scheme, are entitled to unpaid wages and allowances for up to six months, with a maximum coverage of SAR 17,500 (US$4,660) per worker. If total claims exceed the establishment’s insurance coverage limit, compensation will be distributed proportionally among eligible workers, up to the coverage ceiling. The insurance policy - Opens in new tab provides a maximum compensation of SAR 30 million (US$ 7.99 million) within a single defaulting institution. It is unclear if, in cases where the worker's total claims exceed the insurance coverage limit, the settlement would be final or if the worker could pursue the remaining dues in court. In the former case, the new insurance system could potentially hinder workers from receiving their full dues when making a claim.

The guideline defines “defaulting establishments” as establishments that delayed paying 80% or more of their employees' wages for six months or longer. The insurance does not cover migrant workers in establishments that defaulted before the wage insurance scheme came into effect. The covered wages include monthly salaries, allowances, and other entitlements specified in an employment contract validated by the MHRSD that have not been paid by the establishment. Notably, the insurance scheme does not cover end-of-service benefits. Coverage also does not extend to defaults caused by wars, terrorist acts, natural disasters, epidemics, pandemics, or nuclear radiation.

A migrant worker may also claim a travel ticket (capped at SAR 1,000 – US$266) if they wish to leave Saudi Arabia, provided they have not transferred to another employer and can demonstrate that they have completed all legal departure procedures, including obtaining a final exit visa.

Workers Excluded from the Insurance Scheme

The following migrant workers are excluded from the insurance scheme:

Workers employed in establishments fully owned by the government.

Workers exempted by the MHRSD based on their probationary period or the date of their arrival in the Kingdom.

Domestic workers and their equivalents.

Seasonal or temporary workers.

Family members of the employer working in an establishment comprised solely of family, including spouses, children, and grandchildren.

Athletes from sports clubs or federations, as well as their coaches.

Agricultural workers, farmworkers, and their equivalents.

Non-Saudi workers arriving in the Kingdom for a specific task, for a period of less than two months.

The scheme will be offered through insurance companies across Saudi Arabia. While the exact number of providers is unclear, the insurance guidelines state that workers must inquire with Al-Etihad Cooperative Insurance Company (Aletihad) - Opens in new tab, a joint stock company, to verify that they are covered under the scheme.

To apply for benefits, the worker must submit an online claim to the appointed insurance company through a platform that will be launched soon. This can be done either personally or by a legally authorised representative. The worker must provide a copy of their contract, detailing the last received wages and entitlements, as well as any notifications of lawsuits filed in amicable settlement bodies or judicial authorities against the employer. Additional documents, such as the worker’s ID, are also required. Furthermore, the worker must pledge not to file any further claims related to the rights and entitlements for which they have already received compensation from the insurance company and may submit only one insurance claim during a current insurance year.

According - Opens in new tab to Al-Etihad Insurance, compensation will be paid within 45 calendar days from the submission of all required documents by beneficiaries, pending MHRSD approval of the establishment's default status and the compensation amount.

More time is needed to evaluate the effectiveness of the insurance scheme and its accessibility for migrant workers. However, based on the available insurance guidelines, it appears that workers may face significant challenges in receiving compensation. The process is not automated, requiring workers to apply for claims themselves—an especially difficult task given the bureaucratic hurdles and language barriers.

A more critical concern is that workers must endure six months of non-payment, affecting 80% or more of their company's workforce, to qualify for benefits. This requirement is likely to exclude many victims of wage theft who do not meet these specific criteria. Moreover, most migrant workers cannot sustain themselves without pay for such an extended period, forcing them to either transfer employment or leave the country before they can qualify for compensation.

It is also unclear why employers are given the power to object to compensating workers, which could further hinder access to benefits. Employers may also obstruct claims by filing absconding cases against workers, which, if, not challenged within 60 days, absolves the employer of any responsibility toward the worker, further complicating access to any compensation.

Since the Saudi MHRSD is already funding workers' insurance, the system would be more efficient and accessible to workers if the government provided the service directly as a social protection mechanism, rather than relying on intermediary insurance companies. This approach could be automated and integrated with the wage protection and dispute resolution systems, eliminating the need for workers to provide proof of non-payment and other documentation, as required under the current scheme. While the Saudi government asserts that the scheme will safeguard the rights of migrant workers, these workers remain excluded from public social security and safety nets available to citizens.

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A Brief Overview of Saudi’s New Insurance Scheme for Migrant Workers

Workers Excluded from the Insurance Scheme

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