Saudi Arabia Restricts Staff Outsourcing to Licensed Providers

Source instrument

Ministerial Resolution issued by the Ministry of Human Resources and Social Development (MHRSD), signed by Minister Eng. Ahmed bin Sulaiman Al Rajhi, reference 60339, dated 1447/03/06 AH.

Legal basis cited in the resolution:

• Labor Law (Royal Decree No. M/51, 23/08/1426 AH, as amended)
• Council of Ministers Resolution No. 616 (20/08/1442 AH)
• Royal Decree No. M/44 (08/04/1443 AH)
• Minister of Labor Resolution No. 4786 (28/12/1436 AH, Schedule of Violations and Penalties)

The resolution enters into force on publication in the Official Gazette and supersedes any inconsistent prior resolutions, circulars, or instructions. This analysis does not state a Gregorian effective date beyond that publication trigger.

What the resolution requires

Licence-only manpower services

• Manpower services leasing, workforce supply, and staff outsourcing may be carried out only by establishments holding a valid MHRSD licence, under the applicable laws and regulations.
• No unlicensed establishment, including contracting, operation and maintenance, service, or supply companies, may engage directly or indirectly in manpower leasing, workforce supply, or staff outsourcing under any name or arrangement where a third party uses the labour for financial or other compensation.

No circumvention through contract labels

Contracts for contracting, operation and maintenance, services, or project management may not be used to circumvent the resolution. The substance of the relationship, how the work is performed, and who actually supervises the employee govern, not the title or form of the contract.

Buyer duties and payment block

• All government entities and private-sector establishments must not tender for, award, enter into, implement, or renew any contract involving manpower leasing, workforce supply, or staff outsourcing except with duly licensed establishments, and must verify the licence before signing and throughout the contract term.
• No financial entitlement, payment, interim payment certificate, or claim under such a contract may be approved or disbursed unless the service provider holds a valid MHRSD licence.

Liability, enforcement, and the 60-day window

• Any contract concluded in contravention is a violation of the Labor Law and its Implementing Regulations. All parties bear statutory liability: the service provider, the beneficiary establishment, and anyone who facilitated or enabled the violation, without prejudice to the rights of employees or bona fide third parties.
• MHRSD monitors and enforces, may impose the prescribed penalties, and refers matters needing further action to the competent authorities.
• Government entities and establishments have 60 days from the effective date to rectify their status. After that, statutory penalties apply.

Who this affects

• Foreign companies using employer of record (EOR), staff outsourcing, manpower supply, or secondment models in Saudi Arabia.
• Companies whose contracting, operation and maintenance, or services agreements are outsourcing in substance even if labelled differently on paper.
• Government suppliers and private-sector buyers that award or renew workforce supply contracts.
• Payroll and HR service providers whose client arrangements place third-party labour under the buyer's direction for compensation.

What it means for foreign companies

Your manpower, outsourcing, or EOR provider must hold a valid MHRSD licence for the activity. If it does not, the contract is exposed under the Labor Law, and your organisation shares statutory liability as the beneficiary establishment.

Payments and interim certificates tied to unlicensed providers should not be approved or disbursed under the resolution. That creates immediate finance and procurement risk for groups paying offshore or through local intermediaries without checking licence status.

Substance over form means relabelling a workforce supply arrangement as contracting, O&M, or project management does not remove the licensing requirement if a third party supplies labour for compensation and the buyer directs the work. This sits alongside your wider MISA licence and entity setup obligations: investment registration does not replace MHRSD manpower licensing for outsourced labour models.

What to do now

1. Obtain and verify your provider's current MHRSD manpower/outsourcing licence before signing or renewing.
2. Review existing contracts for substance-over-form exposure: who employs, who supervises, and who pays the workers.
3. Align procurement and finance controls so no payment or interim certificate is released without a valid licence on file.
4. Act within the 60-day rectification window from the resolution's effective date (publication in the Official Gazette).
5. Map ongoing payroll, Qiwa, and GOSI workflows to a licensed employer of record or in-house structure that matches the substance of the arrangement.
6. Run the review against your Saudi compliance calendar so licence checks are repeated at renewal, not only at onboarding.

How Incorporated helps

Incorporated supports foreign companies assessing Saudi employment and outsourcing structures. We help clients review provider licensing evidence, test contracts for substance-over-form risk, and align EOR, payroll, and compliance workflows with the resolution's buyer duties.

We do not state on this page that Incorporated holds a specific MHRSD manpower licence. Confirm licensing status directly with any provider, including Incorporated, before you contract. If you need a structured review of your current arrangement, we can scope advisory support and connect the analysis to your entity setup path where relevant.

Common questions