Saudi Gazette report

RIYADH — Saudi Arabia's new skill-based work permit system marks a major shift in the Kingdom’s labor market regulation, aligning directly with the goals of Vision 2030 to foster a knowledge-based economy, attract global talent, and boost economic diversification.

Under the new classification, expatriate workers are grouped into three main categories — high-skill, skilled, and basic — based on a detailed assessment of qualifications, work experience, technical ability, wages, and age.

The system, which came into effect for existing workers on June 18 and for new arrivals from July 1, is already prompting businesses across the Kingdom to adapt their workforce planning and recruitment strategies.

Speaking to Saudi Gazette, Haider Hussain, Partner at Fragomen, called the system as a “deliberate and sophisticated recalibration” of Saudi Arabia’s human capital approach.

“This ensures the inflow of specialized expertise critical for developing emerging sectors while reducing reliance on traditional industries,” Hussain said.

He noted that the measure enhances Saudi Arabia’s position as a global business hub by introducing greater transparency and meritocracy in the labor market, ultimately improving governance and supporting foreign direct investment.

With reclassification already underway for the current expatriate workforce, Hussain urged employers to conduct immediate and thorough workforce audits.

“Every expatriate must now be assessed against the new criteria—academic credentials, certifications, experience, wages, and age,” he said, warning that delays could risk compliance and operational disruption.

The second phase of implementation, beginning August 3, applies to new foreign hires.

According to Hussain, HR departments must ensure all applicant documentation, including employment contracts and qualifications, meet the new requirements.

“Recruitment strategies must now integrate these classifications from the outset,” he said.

Looking ahead, Hussain predicted long-term operational and financial shifts for businesses.

He expects reduced reliance on low-skilled labor, with companies re-evaluating workforce structures and potentially increasing investment in automation and the upskilling of local talent.

“The focus will shift from hiring in volume to sourcing specialized talent with a strategic fit,” he said, adding that a more skilled workforce is likely to deliver stronger productivity and innovation.

Over time, he noted, the new system will simplify immigration processes and speed up permit approvals for qualified applicants.

However, Hussain warned that compliance may present challenges. Vague interpretations of terms like “technical ability” or appropriate “wage level” could lead to classification errors.

He advised companies to establish internal mechanisms for regular assessment and reclassification to stay aligned with evolving roles and job market standards.

He also stressed the importance of proactive internal communication.

“Employers must explain the rationale behind the new system to their employees, reassure them of the company’s support, and address any concerns about job security or residency status,” he said.

The system reflects a broader vision to build a future-ready labor market in Saudi Arabia—one that prioritizes expertise, encourages innovation, and strengthens the Kingdom’s competitiveness on the global stage.