Saudi Arabia is working towards strengthening jobs for young nationals in the private sector. Last year the IMF stated that Gulf States had to create an additional 600,000 jobs by 2018 in order to retain the percentage of locals working within the private sector. Even though the private sector is experiencing growth, unemployment still remains a concern.
As reported by Reuters, the current unemployment rate is approximately 12 percent. The labor force participation of adults is somewhere between 30 to 40 percent as most young nationals choose to work for the public sector. Reforms are underway to increase participation by Saudi nationals in the private sector.
A strategy recently adopted by the government to improve employment and participation of nationals in the private sector includes making unemployment insurance mandatory for all citizens. Currently young Saudi nationals prefer government jobs over private sector because of the benefits and starting salaries they receive. With the new rule, the Saudi government is aiming to attract more nationals towards the private sector because the unemployment insurance will grantee them financial security in case job loss.
The insurance will be mandatory for all nationals working in the private and public sector. The project will be handled by a government organization, specifically established to deal with allocating unemployment insurance. It is expected to be up and running within the next six months. Nationals will have to pay one percent of their monthly salary towards unemployment insurance with contributions from the employer.
If Saudi nationals lose their job, they will get a 12 month compensation because of the insurance policy. The compensation will be based on their average salary. For the first three months, nationals will receive 60 percent of their average salary in the past three years. For the rest of the nine months, they will receive 50 percent.
Nationals are also expected to collect up to SR 9,000 in benefits during the first three months of unemployment. In the following 9 months they will receive SR 7,000.
The insurance will only cover nationals who have lost their jobs and not those who resigned from their positions. Also, Saudi nationals who have another source of income or haven’t completed a full year of paying 1 percent of their salary towards the scheme, will not be eligible for the benefits.
As reported by Arabian Business, in 2011 the private sector in Saudi Arabia grew to approximately SR 700bn. However, majority of the jobs were taken up by expatriates rather than nationals. Hopefully, with current reforms underway, such as the unemployment insurance, the appeal of private sector jobs will increase amongst the local population in the coming years.
Souqalmal.com is a financial comparison engine allows you compare credit cards, personal loans, mortgages, car loans, bank accounts and insurance based on benefits, fees and charges.
Sources: Reuters; Arabian Business