Settlement of labor violations: 80% reduction in fines and conditions for rectification

The Minister of Human Resources and Social Development, Engineer Ahmed bin Sulaiman Al-Rajhi, issued a significant ministerial decree that reshapes the compliance landscape in the Saudi labor market. The decree adopts new regulations and conditions for requests to settle violations of the Labor Law. It includes unprecedented facilitations aimed at easing the financial burden on private sector establishments, emphasizing the principle of "correction before fines.".

Details of the decision to reduce fines

Under the new decision, employers can now benefit from significant reductions in fines, up to 80%. This move is part of the ministry's strategy to incentivize businesses to comply with regulations rather than solely relying on financial penalties. The decision focuses particularly on first-time violations or multiple violations detected on the same date for the first time, giving businesses a "second chance" to rectify their legal status.

Strategic context and decision objectives

This decision aligns with the objectives of the Kingdom's Vision 2030 and the National Transformation Program, which aim to create an attractive and stable investment environment. Previously, accumulated fines posed a significant obstacle to the continuity of small and medium-sized enterprises (SMEs). Through this shift, the Ministry moves from a role of simply collecting fines to one of enabling and correcting them. The new mechanism aims to guarantee workers' rights and enforce regulations by requiring establishments to actually rectify the violation as a prerequisite for receiving the reduction, rather than merely paying the fine while the violation remains.

Terms and conditions for benefiting from the settlement

To ensure that establishments are serious about compliance, the ministerial decision specified a set of strict conditions for accepting a settlement request, which are:

• Time limit: The settlement request must be submitted within a period not exceeding 90 days from the date the establishment is notified of the administrative decision regarding the penalty.
• Correction of the violation: It is required that the violation be completely removed and the legal situation rectified before deciding on the settlement request, to ensure that violations are not repeated.
• Non-payment in advance: The fine to be settled must be unpaid at the time of application.
• Minimum: The settlement applies to fines of 1000 Saudi Riyals or more.

Expected economic impact

This decision is expected to have a broad positive impact on the local economy, as it will contribute to boosting companies' liquidity by reducing non-operating costs resulting from fines. It will also enhance labor market stability by minimizing closures or financial difficulties that businesses may face due to accumulated violations, thus benefiting the national economy and protecting jobs.

It is noted that this decision cancels the previous decision No. (75907) dated 19/05/1445 AH, and any other decisions that conflict with it. The Minister has directed the concerned authorities to take the necessary measures to implement it immediately.