Privatization initiatives is now being pursued globally in a larger number of countries since 80s and becoming a business trend since policy-makers concluded that governments should focus on a small number of “core” activities which inherently belong to government (maintenance of public order, defense, market regulation, etc.) while leaving a greater number of decisions concerning resource allocation to the private sector plus the fact that private companies has higher efficiency compared to public sector entities.
Government of Saudi Arabia want to adopt this trend to boost its economy so in the first half of this year, the Saudi government has issued a set of regulations and guidelines to support the execution of Privatization program for Public Sector. Today we are going to assess the impact of this privatization initiative on Human Resources from legal prospective and on Human Experience Management from business application implementation prospective.
Private Sector Participation (PSP) Law was approved by the Council of the Ministers and will enter into force on 24 July 2021. This law regulates the privatization of public sector assets and aims to increase private sector participation in infrastructure projects and in the provision of public services to citizens and residents, by supporting Public-Private-Partnerships (PPP). The private sector’s contribution will boost the gross domestic product from 40 to 65 percent, which is a key goal of the Vision 2030 strategy.
National Center for Privatization (NCP) – the government entity that will regulate and lead the program - will support 16 sectors targeted for privatization in developing and launching a pipeline of opportunities and initiatives.
The achievement of this plan, will be contributing factors to realizing the Kingdom's Vision 2030, improving spending efficiency, economic diversification, sustainable development and increasing regional and international competitiveness. On the social side, create more job opportunities, and improving public services to citizens and residents.
The first step the Saudi government has taken towards such transformation was merging Ministry of Civil Service with Ministry of Labor followed by issuing a series of regulatory changes in both Civil Service and Labor laws to minimize the gap between both legislations to insure a smooth transition.
The PSP law regulates and covers many aspects such as Administrative remedies, Protection of foreign investors, LLC regulations, Fees/Revenue collection, Credit support, Compensation on termination, Permits and approvals, Dispute resolution and choice of law, etc. We will focus here on Human Resources aspect (Transition of Employment) as mentioned in Article #33:
With the approval of the Ministry of Human Resources, it is permissible to exclude any PSP project from some of the applicable provisions regulating personnel affairs, upon the request of the Contracting Authority and in coordination with NCP, including:
So exceptions can take place, however, such exceptions will be handled in a way that ensures the rights of the transferred employees under the PSP project, provided that the Ministry of Human Resources shall, in coordination with NCP, develop alternative provisions.
Ministry of Human Resources has also issued measures consist of 28 articles for how to deal with different cases of civil employees in the entities targeted for
Below is the summary of these cases:
Its also expected that resistance would exist which will lead to some cases such as the below:
Besides the above cases, the measures have also addressed cases for Labors who are not hired on Civile Service payscale (GOSI employees).
From the above legal framework shows clearly how Ministry of HR is keen to achieve a fare and smooth transition and leave no one behind.
Saudi Telecom Company (STC) is a very good example for Mobile Sector Privatization that can be considered as a flagship for other government entities. Seven years ago, STC has gone through implemented a unique change management methodology following global Public Sector Privatization transformation principles and executed process that helped the employees in accepting the change that takes place in their organization and adapting to that change. The process consists of 3 phases unfreezing, moving (change) and refreezing.
Both Transformation or Privatization, from HR perspective, implies applying/following Labor Regulations, which means the HR and payroll (HCM) solution that should be implemented must by legally compliant with Labor Law.
Many vendors in the market claim that they offer HCM solution (disregarding its OnPrem or Cloud) that are localized for Saudi private sector, however only SAP the only vendor that can claim offering a legally compliant HCM solution (with respect to Saudi Labor Law) from many angles, the breadth of localization (no. of features), the of localization depth (no. of business scenarios covered) and on top, up-to-date compliance (continuous delivery for legal changes).
Below is a summary for the key features of Saudi local version:
Localization scope is available OnPrem on top of SAP intelligent enterprise as well as on Cloud on top of SAP SuccessFactors which has taken HCM to next level to offer end-to-end Human Experience Management (HXM) which combines “Human Capital Management” with “Employee Experience” and we have shown how “Employee Experience” is critical to the success of Privatization/Transformation journey.
It also worth mentioning that STC has selected SAP as a strategic partner to support their transformation journey they started in 2014.
We wish that Saudi Government achieve a hassle-free transformation and achieve their targets (143 Bn non-oil revenue by 2025 ) by following non-aggressive and low-risk program, accordingly we don’t expect major changes in organization structure and remuneration policy, and no major labor law changes that interrupts HR transformation, on the other hand, we expect more merging of authorities with similar missions.
For example, the merge between General Organization Social Insurance (GOSI) and Public Pension Authority (PPA) has no impact on disbursement of insurance benefits mechanism and dates for beneficiaries, nor the progress of operations or transactions, the two institutions is committed to carry.
In all cases, we in SAP will keep an eye on updates from Saudi government and keep the promise of legal changes continuous delivery to support the Saudi market needs.
Government of Saudi Arabia want to adopt this trend to boost its economy so in the first half of this year, the Saudi government has issued a set of regulations and guidelines to support the execution of Privatization program for Public Sector. Today we are going to assess the impact of this privatization initiative on Human Resources from legal prospective and on Human Experience Management from business application implementation prospective.
Saudi Privatization Background
Private Sector Participation (PSP) Law was approved by the Council of the Ministers and will enter into force on 24 July 2021. This law regulates the privatization of public sector assets and aims to increase private sector participation in infrastructure projects and in the provision of public services to citizens and residents, by supporting Public-Private-Partnerships (PPP). The private sector’s contribution will boost the gross domestic product from 40 to 65 percent, which is a key goal of the Vision 2030 strategy.
Privatization Strategy and Objectives
National Center for Privatization (NCP) – the government entity that will regulate and lead the program - will support 16 sectors targeted for privatization in developing and launching a pipeline of opportunities and initiatives.
The achievement of this plan, will be contributing factors to realizing the Kingdom's Vision 2030, improving spending efficiency, economic diversification, sustainable development and increasing regional and international competitiveness. On the social side, create more job opportunities, and improving public services to citizens and residents.
Preparation for Privatization
The first step the Saudi government has taken towards such transformation was merging Ministry of Civil Service with Ministry of Labor followed by issuing a series of regulatory changes in both Civil Service and Labor laws to minimize the gap between both legislations to insure a smooth transition.
Privatization Regulatory Framework
The PSP law regulates and covers many aspects such as Administrative remedies, Protection of foreign investors, LLC regulations, Fees/Revenue collection, Credit support, Compensation on termination, Permits and approvals, Dispute resolution and choice of law, etc. We will focus here on Human Resources aspect (Transition of Employment) as mentioned in Article #33:
With the approval of the Ministry of Human Resources, it is permissible to exclude any PSP project from some of the applicable provisions regulating personnel affairs, upon the request of the Contracting Authority and in coordination with NCP, including:
- Saudization requirements
- The provisions of termination of employment contract by the employer
- Duration of employment contract
So exceptions can take place, however, such exceptions will be handled in a way that ensures the rights of the transferred employees under the PSP project, provided that the Ministry of Human Resources shall, in coordination with NCP, develop alternative provisions.
Ministry of Human Resources has also issued measures consist of 28 articles for how to deal with different cases of civil employees in the entities targeted for
- Transformation (from Civil Service to Labor Regulations) with respect to the criteria in article #3
- or Privatization (from Public Sector to Private Sector) with respect to the criteria in article #12
Below is the summary of these cases:
Its also expected that resistance would exist which will lead to some cases such as the below:
Besides the above cases, the measures have also addressed cases for Labors who are not hired on Civile Service payscale (GOSI employees).
From the above legal framework shows clearly how Ministry of HR is keen to achieve a fare and smooth transition and leave no one behind.
Privatization Success Story
Saudi Telecom Company (STC) is a very good example for Mobile Sector Privatization that can be considered as a flagship for other government entities. Seven years ago, STC has gone through implemented a unique change management methodology following global Public Sector Privatization transformation principles and executed process that helped the employees in accepting the change that takes place in their organization and adapting to that change. The process consists of 3 phases unfreezing, moving (change) and refreezing.
- In the first stage, a motivation for change is created and together with it a climate in which change is possible by involving all employees and make them realize the need for change and share with them the vision for the future of the organization post transformation.
- In the moving stage, new information (procedures) is uncovered about new ways of doing things (operations) while keeping adequate workload to avoid less-secure and less-satisfied feels. Tools (i.e. interviews) where used to assess how employees’ psychology is affected by the change and the degree of accepting new work practice (Employee Experience), teams can be formed and foster the culture of creativity and openness.
- In the final stage of refreezing the change is integrated into employee’s day-to-day organizational life, in other words, stabilize.
Privatization of HR into Implementation
Both Transformation or Privatization, from HR perspective, implies applying/following Labor Regulations, which means the HR and payroll (HCM) solution that should be implemented must by legally compliant with Labor Law.
Many vendors in the market claim that they offer HCM solution (disregarding its OnPrem or Cloud) that are localized for Saudi private sector, however only SAP the only vendor that can claim offering a legally compliant HCM solution (with respect to Saudi Labor Law) from many angles, the breadth of localization (no. of features), the of localization depth (no. of business scenarios covered) and on top, up-to-date compliance (continuous delivery for legal changes).
Below is a summary for the key features of Saudi local version:
Localization scope is available OnPrem on top of SAP intelligent enterprise as well as on Cloud on top of SAP SuccessFactors which has taken HCM to next level to offer end-to-end Human Experience Management (HXM) which combines “Human Capital Management” with “Employee Experience” and we have shown how “Employee Experience” is critical to the success of Privatization/Transformation journey.
It also worth mentioning that STC has selected SAP as a strategic partner to support their transformation journey they started in 2014.
Futuristic Expectations
We wish that Saudi Government achieve a hassle-free transformation and achieve their targets (143 Bn non-oil revenue by 2025 ) by following non-aggressive and low-risk program, accordingly we don’t expect major changes in organization structure and remuneration policy, and no major labor law changes that interrupts HR transformation, on the other hand, we expect more merging of authorities with similar missions.
For example, the merge between General Organization Social Insurance (GOSI) and Public Pension Authority (PPA) has no impact on disbursement of insurance benefits mechanism and dates for beneficiaries, nor the progress of operations or transactions, the two institutions is committed to carry.
In all cases, we in SAP will keep an eye on updates from Saudi government and keep the promise of legal changes continuous delivery to support the Saudi market needs.
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