Saudi Arabia introduces mandatory contract insurance and other initiatives for domestic worker recruitment

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Saudi Arabia has introduced several initiatives related to the recruitment of domestic workers in the past month, including an insurance scheme for contracts, a lower ceiling for recruitment fees, and several new recruitment agreements with countries of origin.

Insurance for domestic worker contracts

On 25 December 2023, the Ministry of Human Resources and Social Development (MHRSD) announced - Opens in new tab that starting from 1 February 2024, all new employment contracts for domestic workers recruited through Musaned — the online platform for streamlining the recruitment process — will be insured for the first two years. The insurance will be mandatory during this initial period and optional thereafter.

The initiative is based on Cabinet Resolution No. 591 issued on 25 May 2021 - Opens in new tab, which requires recruitment agencies to insure domestic workers’ contracts. The cost of insurance is built into recruitment fees paid for by the employer. The MHRSD and Central Bank of Saudi Arabia participate - Opens in new tab in this process by linking and regulating the insurance companies on the “Musaned” platform.

Following the decision, Najm for Insurance Services, a major insurance company in Saudi, announced - Opens in new tab the launch of its services through the Musaned platform, where employers can browse and select insurance options.

According to the Ministry, the insurance service will compensate both the employer and the domestic worker in various cases. This includes compensating employers for recruitment expenses and repatriation if the domestic worker ‘absconds’ or is unable to work due to chronic diseases or death. In the latter case, the insurance will cover the repatriation cost of the worker's body and belongings.

The insurance scheme will also provide compensation for domestic workers in the event of permanent total or partial disability resulting from a workplace accident. Additionally, the insurance will compensate the worker if they do not receive a salary due to the employer’s death or disability.

At the beginning of 2023, the MHRSD offered a similar, optional insurance package for domestic workers' contracts, but stopped the service “to work on improvement procedures for the service” - Opens in new tab. At the time, around 175,000 domestic worker contracts were insured. According - Opens in new tab to the latest statistics, there are currently around 3.73 million domestic workers in Saudi Arabia. This means that less than 5% of total domestic worker contracts in the country are insured.

Importantly, the new insurance scheme is not mandatory - Opens in new tab for current domestic workers when transferring services between employers.

While insured employers can recoup the recruitment fees and flight ticket costs in the above cases, it is unclear how much compensation domestic workers receive. Furthermore, the MHRSD has not specified the channels available for domestic workers to file a claim.

Labour agreements with Tanzania and The Gambia.

Saudi Arabia has recently - Opens in new tab signed labour agreements to recruit private-sector workers and domestic workers from Tanzania and The Gambia as part of efforts to increase the domestic labour supply in Saudi and lower recruitment costs.

According to the MHRSD, a joint technical committee is set to be established in coordination with sending countries, aiming to "monitor implementation, identify obstacles, and collectively work towards their resolution." These processes are part of various bilateral agreements that Saudi Arabia has signed with sending countries. Despite these efforts, such initiatives have not substantially improved working conditions for domestic workers, primarily due to a lack of monitoring and enforcement aspects

In recent years, Saudi Arabia has entered into several bilateral agreements, particularly with African nations, where labour and recruitment costs are cheaper compared to traditional sending countries such as the Philippines.

Lowering the upper ceiling for recruitment costs

In an additional effort to lower recruitment costs for Saudi employers, the MHRSD announced - Opens in new tab on 16 January 2024 that it has lowered the maximum price ceiling for recruiting domestic labour services from several countries.

Previously, Saudi Arabia had established limits on the recruitment costs for domestic workers of specific nationalities to prevent price gouging, especially in the months leading up to Ramadan. The MHRSD stated that this recent initiative is part of the Ministry's ongoing efforts to review recruitment costs and "ensure fair prices."

The following are the current upper ceiling for recruitment costs:

Sri Lanka: SAR 13,800 (previously SAR 15,000)

Uganda: SAR 8,300 (previously SAR 9,500)

Kenya: SAR 9000 (previously SAR 10,870)

Bangladesh: SAR 11,750 (previously SAR 13,000)

Philippines: SAR 14,700 (previously SAR 15,900)

Ethiopia: SAR 5,900 (previously SAR 6,900)

1,000 Saudi Riyal = 266 USD

The MHRSD has instructed recruitment agencies registered with Musaned to strictly adhere to these prescribed price ceilings. For additional information on nationality-based limits for recruiting domestic workers in Saudi Arabia, read our earlier piece.

The Saudi government has also declared that individuals holding a "Premium Residency" (privileged Iqama) will share the same status as Saudi citizens in terms of the annual levy payment for domestic workers. Both "Premium Residency" holders and Saudi citizens who employ more than four domestic workers must pay an annual fee of SR9,600 to the government for each domestic worker..

Conversely, migrants without Premium Residency are obligated to pay the same SR9,600 annual fee when they employ over two domestic workers.

Over the last several years, the Saudi government has concentrated its efforts on regulating recruitment costs rather than meaningfully advancing the rights of domestic workers. In October 2023, Saudi Arabia enacted a new law for domestic workers that will put some protections in place when the law goes into effect this year. However, the law does not adequately account for implementation and workers remain excluded from the Kingdom’s labour and immigration reforms.

Though the limited insurance coverage for domestic workers is similarly a welcome step forward, concerns remain about the workers' ability to navigate the claims process effectively due to the overall weak enforcement environment, compounded by language barriers and limited access to information.

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Saudi Arabia introduces mandatory contract insurance and other initiatives for domestic worker recruitment

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