Saudi Council of Ministers approves new social insurance law

published on 1 August 2024 | reading time approx. 3 minutes

The Council of Ministers has approved a new social insurance law that applies exclusively to new employees. Furthermore, it has affirmed the continuation of the existing civil pension and social insurance laws for current contributors, with certain exceptions pertaining to the statutory retirement age and retirement eligibility age for specific groups.

In a recent development aimed at restructuring the social insurance landscape in Saudi Arabia, the General Organisation for Social Insurance (GOSI) has unveiled crucial details regarding the new Social Insurance Law. Approved by the Council of Ministers, this legislation marks a pivotal shift, predominantly affecting new civil employees entering both public and private sectors.

Key among the stipulations clarified by GOSI is the law's exclusive application to individuals without prior contribution periods under the current Saudi Arabia Cabinet Decision No. 939/1393 on the Approval of the Civil Retirement Law or Saudi Arabia Cabinet Decision No. 199/1421 on the Approval of the Social Insurance Law.

Existing contributors will continue to operate under the provisions of these established laws, albeit with notable exceptions concerning statutory retirement age and pension eligibility periods for specific categories, as per the decree.

The amended law introduces a phased increase in the statutory retirement age, now set to range between 58 and 65 years. This adjustment commences with an incremental addition of four months to the current retirement age, determined by the contributor's age at the time of the law's enactment. Additionally, early retirement provisions will require a contribution period spanning 25 to 30 years, with an initial extension of 12 months to the existing eligibility period, contingent upon the contributor's tenure when the amendments take effect.

For current subscribers aged 50 Hijri years or older or with 20 or more years of contribution as of the law's effective date, GOSI affirms the continuity of benefits under the existing regulations, ensuring stability for this demographic without alterations.

Effective from 27.12.1445 H (corresponding to 3.7.2024 G), the new law and its associated provisions concerning retirement age and contribution periods will come into force, marking a critical milestone in Saudi Arabia's social insurance framework.

Furthermore, the reform aims to facilitate workforce mobility for new entrants, enabling seamless transitions between public and private sectors. Over a span of four years, starting from the second year, GOSI contribution rates will undergo gradual increments of 0.5 percent, promoting financial sustainability and equitable support within the labor market.

This legislative update not only underscores Saudi Arabia's commitment to modernizing its social insurance system but also reflects efforts to bolster economic resilience and empower the nation's workforce, especially considering evolving demographic and economic dynamics.

For further details and updates, we at Roedl & Partner are the right contact to provide you with comprehensive awareness on the new regulatory framework and to ensure compliance with it for you.