Fatima Muhammad

Saudi Gazette

JEDDAH — Several economists and job market analysts as well as Saudi employees have questioned the viability the mandatory Sanid (support) unemployment insurance plan that will come into force next month.



In a landmark decision in January, the Council of Ministers approved the unemployment insurance law, which will become mandatory on all Saudi men and women workers below 59 years of age.



The General Organization for Social Insurance (GOSI) is implementing the plan. All Saudi workers in both the private and public sectors will be charged 1 percent of their monthly salary as a subscription. Their employer will contribute an equal amount to the scheme.



According to the plan, those who lose their jobs will be entitled to up to 12 months of compensation, set at 60 percent of their average salary in the previous three years for an initial period of three months and then at 50 percent.



Benefits are capped at SR9,000 for the first three months and SR7,000 for the rest of the year. The minimum payment will be SR2,000.



Workers who resign from their jobs, have an alternative source of employment or income from investments, or have been paying into the scheme for less than a year are not eligible for compensation.



The contributory insurance plan has sparked a public uproar, with many Saudi employees reacting angrily as they will be forced to give up 2 percent of their wages, in addition to the huge contributions they are already making to the pension plan and the work-related accident insurance.



They said only those employees who lose their jobs for reasons beyond their control would benefit from the plan. Other employees cannot claim a refund of the amount they contributed.



Economist Sami Al-Nuwaisir said the Ministry of Labor should take responsibility for problems in the labor market instead of putting the burden on employees.



"When it comes to Saudization, the ministry puts the onus on the private sector," said Al-Nuwaisir. "Now, the insurance plan is forcing employees to give up 2 percent of their wages for the benefit of unemployed people. How could that be possible?” he asked.



Al-Nuwaisir said the authorities should carry out exhaustive studies before enforcing any new system in the labor market. He said the ministry should take measures to make private sector jobs more appealing to Saudis, rather than forcing businesses and workers to move to neighboring countries.



"The problem with our officials is that they make extempore decisions. Such decisions pave the way for corrupt people to manipulate the system as is the case with the Nitaqat program for Saudization," Al-Nuwaisir said, adding that the hasty implementation of the system led to numerous problems in the labor market.



He said that decision resulted in many unhealthy practices in the labor market, including businesses hiring ghost workers.



Al-Nuwaisir was referring to a practice in which Saudi employees are placed on a company’s payroll to make it appear as if the company is complying with the ministry’s Saudization requirements.



“At a time when people are not even satisfied with the civil insurance system, we are faced with the new Sanid plan that takes 2 percent of employees’ salaries. We were expecting an increase in salaries, but we get Sanid instead,” he said.



According to Ali Al-Tawati, another economist, Saudi employees were already giving 20 percent of their salaries to civil insurance and now another 2 percent is being added.



Al-Tawati said if this additional 2 percent was necessary, it should have been taken from the 20 percent already being deducted from salaries.



“This percentage should have been shared by the company and the employee with each giving 1 percent. However, employees will end up paying this amount on his/her own because there is no regulation that defines the relation between employer and employees and with the absence of both a salary increase system and minimum wage law, the employee will be just a victim of the system,” he said.



Al-Tawati also said the new system has not been studied before implementation. He added that employees in large companies are not going to benefit from the system because of the rules and regulations these companies implement. On the other hand, employees of small businesses will account for 40 percent of people benefiting from the new Sanid system.



“One major problem in this system is that people who did not leave their jobs will not be able to get back the 2 percent that is being taken from their monthly salary as opposed to the 20 percent taken for civil insurance which is given to employees after retirement,” he added.



Abdul Hamid Al-Amri, an economist who is active on Twitter, said the Kingdom is one of the countries with the lowest wages in the world.



“While they (officials) say that insurance is a system that is being implemented worldwide, they should first increase salaries so we can actually believe them,” he said.



It is estimated that nearly 1.5 million Saudi employees are registered in the civil insurance program. The average salary of people registered is SR4,500 while the revenue is put at SR1.7 billion. Economists expect that only 1 percent of registered people will benefit from the Sanid system. The average amount that Sanid will give to the unemployed will range from SR2,000 to SR9,000, based on their individual salaries prior to leaving their jobs.



Economists suggested that the Human Resources Development Fund (HRDF) should compensate the unemployed. The HRDF's current revenue is SR14 billion.



Religious scholars in the Kingdom have also raised their objection to this system. Sheikh Abdulaziz Al-Tiraif said if the employee is not being given the freedom to opt out of the program, it is forbidden to deduct any amount from his salary.



Husain Al-Sheikh, another scholar, said insurance is forbidden, especially if money is being taken from the employee without his consent. He said the Supreme Council of Scholars should look into the matter.