Saudi Arabia Ends Kafala Sponsorship

After more than 70 years, Saudi Arabia has officially abolished the Kafala sponsorship system. It has brought sweeping changes to the lives of approximately 13 million migrant workers. 

Announced in June 2025 and implemented later in the year, this reform represents one of the most significant labor rights developments in the Gulf region’s modern history.

This marks the beginning of a new chapter for the millions of workers from India, Bangladesh, Pakistan, Nepal, and the Philippines who have built Saudi Arabia’s cities, hospitals, and infrastructure, 

But what exactly has changed, and what does it mean for workers on the ground?

Understanding the Kafala System, a 70-Year Framework

The Kafala system, which gets its name from the Arabic word for “sponsorship,” started in the 1950s during the Gulf’s oil boom. The system was created to manage the huge number of foreign workers needed to build modern Saudi Arabia.

Under this system, every foreign worker’s legal status was connected directly to a local employer, called a Kafeel. This sponsor controlled almost everything about the worker’s life, including their visa, where they could live, whether they could change jobs, and if they could leave the country.

Workers could not change employers or even go home without their sponsor’s written permission.

This unequal power created situations that human rights groups repeatedly said were unfair and abusive. Common problems included employers taking passports, not paying wages, stopping workers from moving freely, and workers having limited ways to get legal help.

For many workers, especially those working in homes and low-paid jobs, the system created a complete dependence that critics said was like modern-day slavery.

The New Contract-Based Employment Framework

Saudi Arabia’s reform replaces the old sponsorship model with a modern, contract-based employment system that grants workers substantially more freedom and legal protection.

• Freedom of Movement and Job Mobility

Workers can now switch employers freely once their contract ends or after providing the required notice period. The previous requirement for a sponsor’s “no objection certificate” has been eliminated, removing a major barrier to job mobility.

• Exit and Travel Rights

Exit and re-entry rights have been transformed. Workers no longer need their employer’s permission to leave Saudi Arabia or return. Applications for exit visas can be submitted directly through digital government platforms like Qiwa and Absher, cutting out employer control from the process.

• Digital Contract Management

Employment is now governed by formal contracts rather than informal sponsorship arrangements. These contracts are managed through the digital Qiwa platform, which aims to enhance transparency and reduce under-the-table practices that previously left workers vulnerable.

• Enhanced Legal Protections

Legal protections have been expanded significantly. Workers now have improved access to labour courts and complaint mechanisms, allowing them to report wage theft, abuse, or contract violations without fear of immediate retaliation or deportation.

• Worker Autonomy

Perhaps most importantly, workers retain control over their own passports and legal documents, ensuring they have the autonomy to make decisions about their own lives.

Who Benefits from This Reform?

Let’s understand.

The Scale of Impact

The abolition of Kafala directly affects over 13 million migrant workers in Saudi Arabia, who make up roughly 42% of the country’s total population. Among them, approximately 2.6 million are Indian nationals, making India one of the primary beneficiaries of this reform.

Sectors Most Affected

These workers are concentrated in sectors that have historically relied heavily on foreign labour: construction, agriculture, domestic work, hospitality, healthcare, and retail. 

Many have endured difficult working conditions, wage disputes, and restricted freedoms under the previous system.

Indian Workers and Government Support

For Indian workers specifically, the Indian Ministry of External Affairs has welcomed the reform and committed to working with Saudi authorities to ensure proper implementation and protection of Indian nationals’ rights.

The Broader Context: Vision 2030 and Regional Pressure

This reform doesn’t exist in isolation. IIt’s an important part of Crown Prince Mohammed bin Salman’s Vision 2030, a major plan to modernise Saudi Arabia’s economy, depend less on oil, and improve the country’s image worldwide.

The timing matters too. Saudi Arabia will host the 2034 FIFA World Cup, and the international criticism that came with Qatar hosting the 2022 tournament, especially about worker rights problems, has put pressure on Gulf countries to improve their labour practices.

Qatar made big changes to its Kafala system in 2019-2020, before the 2022 FIFA World Cup, with the International Labour Organisation saying these changes marked the end of kafala in the country. These changes, which started in 2020, set an example for the region’s labour markets.

Bahrain was the first Gulf country to announce changes to the system in 2009, when its Labour Minister publicly compared it to slavery, though actually making these changes work has faced continuing problems.

Saudi Arabia’s decision now puts pressure on other Gulf countries that still have restrictive sponsorship systems.

What This Means in Practice

For workers currently in Saudi Arabia or considering employment there, these changes bring both opportunities and questions.

New Opportunities for Workers

The opportunities are clear: Workers gain freedom to negotiate better terms, leave exploitative situations without penalty, and access justice when their rights are violated. 

The ability to switch jobs means employers must now compete for talent by offering fair wages and decent working conditions, rather than relying on captive labour.

Implementation Challenges Ahead

The questions centre on implementation: Legal reforms on paper don’t automatically translate into lived reality. Past promises of Kafala reform in Saudi Arabia and other Gulf states have sometimes fallen short of expectations. Key concerns include:

• Enforcement mechanisms to ensure compliance
• Worker awareness of their new rights
• Practical functioning of complaint systems

Important Caveats and Limitations

Some important caveats exist:

• Domestic workers may not immediately see full benefits, as they’re often excluded from standard labour law protections
• Gradual rollout with specific eligibility criteria:
  • Documented contracts
  • Minimum service period
  • Clean legal status
  • Verified job offers from compliant employers

Impact on Businesses and Employers

For companies operating in Saudi Arabia, the end of Kafala brings both opportunities and adjustments.

Businesses can now recruit from a wider talent pool, as workers from other companies can be hired without the previous employer’s consent. This increased labour market flexibility could improve overall productivity and attract higher-skilled foreign professionals.

However, employers will also face new pressures. Wage competition is expected to increase as workers gain mobility. Companies that relied on artificially low labour costs due to captive workforces will need to adjust their business models. 

Higher employee turnover is anticipated, requiring investment in retention strategies, training programmes, and competitive benefits.

Compliance requirements are also changing. All employment contracts must align with the new digital system, and companies need to remove any Kafala-related clauses from existing agreements. Failure to allow workers to change jobs or leave the country could result in penalties.

Navigate Saudi Arabia’s New Labour Reality with Tarmack

As Saudi Arabia transitions from the Kafala system to a contract-based employment framework, businesses need expert guidance to navigate new regulations around worker mobility, digital contract management, and compliance requirements.

Tarmack’s Employer of Record (EOR) and Professional Employer Organization (PEO) services help companies hire, manage, and pay talent across 150+ countries, including Saudi Arabia. 

Whether you’re expanding into the Saudi market or updating existing employment practices, we handle employment contracts, payroll processing, GOSI contributions, benefits administration, and compliance with local labour laws.

Our services include:

• EOR Solutions: Hire without establishing a legal entity
• Payroll & Compliance: Manage payments and regulatory requirements
• Talent Acquisition: Access Saudi Arabia’s skilled workforce
• Immigration Services: Handle work permits and visas

Contact our Saudi Arabia team to learn how Tarmack can help you navigate the post-Kafala employment environment with ease.

Also read: Employer of Record (EOR) Saudi Arabia