MOL allows 40% salary reduction in private sector

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On April 6, 2020, the Ministry of Labor introduced Article 41 in Saudi Labor Law according to which employers were allowed to deduct salaries. Now the Ministry has issued some further guidance on the implementation of Article 41. 

Article 41 of the Saudi Labor Law

Agreement for deduction

The employer is not required to seek any permission. The employee does not have a right to object to the deduction as long as the reduction is 40% of the total salary.

أبرز الاستفسارات حول أحكام المادة (41) بناءً على ماورد في المذكرة التفسيرية. pic.twitter.com/taViN1mXux

— وزارة الموارد البشرية والتنمية الاجتماعية (@HRSD_SA) May 4, 2020

Deduction for working full time

If there is no reduction in the working hours from the employer, he is not allowed to deduct the salary of his employees. As per Article 41 of Saudi Labor Law, the salary will be reduced in accordance with the working hours.

Maximum salary reduction

The Ministry of Labor has clarified that as per Article 41 of Saudi Labor Law, there is no limit to the reduction of hours of work, and the maximum limit for reduction of wages is 40%.

How long the salary can be deducted?

As per Article 41 of Saudi Labor Law, the employer is allowed to deduct salaries of his employees for a period of 6 months starting from April 2020. After 6 months, business owners must return to paying full wages to their employees. 

Annual Leave

Article 41 of Saudi Labor Law also allows employers to dictate the timings of their employees’ annual leave depending upon the work.

• However, the employee is entitled to get a full salary during the annual leave period.
• The employee is also allowed to request unpaid leave during the 6 months period.

Termination of contract

During the period of 6 months starting from April 06, 2020, the employer is not allowed to terminate the employment contracts of their workers.

The Notification on April 6, 2020

The Ministry calls the COVID19 pandemic as force majeure in which the employer may take any of the following actions for a period of 6 months;

1. Agree with the worker to reduce the worker’s wages in proportion to the actual number of working hours.
2. Send employees on a fully paid forced annual leave (if the employee has an annual leave balance).
3. Send employees on unpaid leave under article 116 of Saudi Labor Law. (explained below)

If the employer takes any of these actions, he would not be able to terminate the employee later before his contract completion.