Saudi Arabia to cut private sector salaries by 40%

Saudi Arabia has issued a ministerial decision allowing private sector companies to cut salaries by up to 40 per cent, according to media reports, citing daily newspaper Asharq al-Awsat. 

The directive also allows the possible termination of contracts in view of the economic challenges in the aftermath of the Covid-19 spread.

Saudi Arabia’s Ministry of Human Resources and Social Development has agreed to the changes to the country’s labour system that would allow an employer to reduce an employee’s salary by up to 40 per cent of the actual wage for a period of six months. It would also enable firms to terminate employee contracts after six months of the Covid-19 pandemic period.

However, according to the directive, the three conditions that are a prerequisite to terminate any employee include: the passing of six months since a salary cut has come into effect, the reduction of pay, annual leave and exceptional leave have all been used, and a company proves that it is facing financial hardships due to circumstances surrounding the outbreak.