Mudad Platform and the Wage Protection System in Saudi Arabia: A Comprehensive Analysis of Regulatory and Economic Impacts

Saudi Arabia is at the forefront of nations embracing comprehensive digital transformation to enhance its business environment and safeguard workers' rights. In this context, the "Mudad" platform and the Wage Protection System (WPS) stand out as fundamental pillars within the initiatives of the Ministry of Human Resources and Social Development (MHRSD), aiming to achieve transparency and compliance in the labor market. This report aims to provide an in-depth analysis of the Mudad platform and the Wage Protection System, reviewing their advantages, operational mechanisms, integration with other government platforms, and their impact on the Kingdom's economic and investment landscape.

1. Mudad Platform: The Digital Cornerstone of Wage Management

The Mudad portal is an integrated digital payroll management system, launched in 2020 as part of the National Transformation Program. It serves as the official operator of the Wage Protection System under the MHRSD.¹ The platform aims to streamline payroll management processes, store and process payroll data, and offer multiple services that support both employers and employees.¹

Key Features and Functions of the Mudad Platform

The Mudad platform offers a wide range of features that enhance efficiency and transparency in wage management:

• Integration with Government Entities and Banks: The platform seamlessly integrates with various relevant government entities, such as the MHRSD and the General Organization for Social Insurance (GOSI), in addition to direct linkage with approved local banks, including Riyad Bank, Arab National Bank (ANB), Alinma Bank, STC Pay, and Saudi National Bank.¹ This integration facilitates automated salary transfers and ensures their direct upload to the Wage Protection System, reducing the need for manual procedures.¹

• Payroll Management and Processing: Mudad provides a professional electronic system for companies to organize administrative operations related to monthly wages. This includes rapid processing of payroll data, with the ability to add allowances, deductions, and bonuses, ensuring data accuracy and detail.¹

• Compliance and Wage Protection System: The platform enhances establishments' commitment to uploading employee wage files, monitoring violations, and determining compliance rates.¹ The system displays the establishment's compliance rate, which is required to be no less than 80%, with a 20% margin for processing any adjustments.¹ In case of errors, deductions, or violations, the platform provides a section for the establishment to record its justifications, offering flexibility in addressing challenges.¹

• Contract Authentication System: Mudad offers a unified electronic contract authentication service, enabling employers to upload and update employee contract information.¹ Employees can verify the accuracy of their contract data and accept or reject them through the Absher system, enhancing contractual transparency and protecting the rights of both parties.¹

• Electronic Wallets: The platform provides the option to issue electronic wallets for employees who do not have traditional bank accounts, ensuring that wages reach all workers.²

Benefits of the Mudad Platform for Stakeholders

The Mudad platform has a positive impact on various stakeholders in the labor market:

• For the Workforce (Employees): The platform ensures that wages are paid on time and in the agreed-upon amount without delay or manipulation.¹ It also ensures that data registered by the employer matches that registered with GOSI, and provides an official reference for wage data in case of labor disputes, protecting employee rights and enhancing salary information transparency.¹

• For Establishments (Employers): Mudad helps make employee entitlements a top priority for employers and provides proof of wage payment without the need for receipt slips, limiting malicious complaints.¹ The platform provides accurate information to the Ministry, enabling it to publish labor market statistics and data that serve all parties, increasing market competitiveness and attractiveness for national competencies.¹

• For Society: The platform contributes to providing a healthy level of social welfare, psychological stability, and a safe work environment.¹ It also ensures the extension of social protection to all private sector employees after retirement or in cases of injury, by matching wage data registered with GOSI with actual wages paid.¹

• For the Economy: The platform contributes to increasing the productivity of private sector workers as a result of protecting their rights, and provides opportunities for establishing new economic entities and creating job opportunities for Saudi nationals by curbing cases of fictitious employers, illegal foreign labor, and commercial concealment.¹ It also provides real and updated data that accurately reflects the private sector's status and future needs, contributing to improving the investment environment in the Kingdom.¹

Mechanism for Uploading Wage Protection File via Mudad Platform

The Wage Protection File Upload service is a free electronic service that allows establishments to upload a digitally sealed file containing wage and settlement data for their registered employees.⁴ The steps for uploading the file are simple and direct:

1. Log in: The establishment must log in to the "Mudad" platform.⁴

2. Select Establishment: The establishment is selected from the list of establishments linked to the ID or Iqama number.⁴

3. Upload Files: From the sidebar, click on "Upload Files" to go to the file upload page, then click the "Upload New File" button.⁴

4. Specify Data: Select the wage month and wage type.⁴

5. Choose File: Select the file to be uploaded by clicking the "Choose File" button.⁴

6. Approve and Upload: After agreeing to the declaration, click "Upload," and the file will be processed instantly.⁴

7. Monitor Compliance: The establishment can view its compliance status with the Wage Protection Program through the "Compliance Information" section in the sidebar.⁴

Service Requirements:

To benefit from this service, the establishment must be registered with the MHRSD and GOSI (with the main branch authenticated and the establishment owner or authorized person registered), and both the establishment and its registered employees must have bank accounts.4

2. Wage Protection System: Regulatory Framework and Compliance

The Wage Protection System (WPS) is a mandatory program aimed at ensuring that private sector workers' wages are paid on time and in the agreed-upon amount.¹ The implementation of this program began in phases, with the first phase covering giant establishments (more than 3,000 workers) in September 2013, and the final phase (establishments with 1-4 workers) concluding in December 2020, making it comprehensive for all private sector establishments.³

Objectives of the Wage Protection System

The main objectives of the system are:

• To ensure that workers' wages are paid on time and in the agreed-upon amount without delay or manipulation.³

• To prevent discrepancies between data registered by the employer and what is agreed upon and registered with GOSI.³

• To prove employee rights through transparent wage information and an approved reference in case of wage-related labor disputes.³

• To make employee entitlements a top priority for employers.³

• To provide accurate information to the Ministry, enabling it to publish labor market statistics and data that serve all parties.³

Compliance Rates and Penalties

Official reports show an increase in the compliance rate of establishments with the Wage Protection System, reaching 87.6% by the end of last year.⁷ The targeted compliance rate varies by establishment size: 90% for establishments with 30-99 workers, and 95% for establishments with 100 workers or more.⁶

In case of non-compliance, strict penalties are imposed:

• Fines: The establishment is penalized with a fine of SAR 10,000 for each month of delay in paying workers' wages on their due dates.³

• Service Suspension: All government services for the establishment may be suspended.³

• Service Transfer: Workers are allowed to transfer their services to another employer without the consent of the current establishment, even if the work permit has not expired.³

• Monitoring and Inspection: If the file upload is delayed by a month, or payment is delayed, or wages are paid in amounts different from what was agreed upon, an inspection visit to the establishment will be scheduled, and a violation will be applied according to Ministry regulations.³

• Prosecution: If non-payment of wages is proven, the Ministry will refer the establishment to judicial authorities for necessary action.³

Recent Amendments:

The MHRSD announced an amendment to the allowed period for uploading Wage Protection files in the Mudad platform to 30 days.8 This amendment provides establishments with greater flexibility in managing payroll operations.

3. Integration with Key Government Platforms

The Mudad platform and the Wage Protection System are part of a broader digital ecosystem in the Kingdom, integrating with several key government platforms to streamline procedures and enhance transparency.

Qiwa Platform

The Qiwa platform is a government platform affiliated with the MHRSD, serving as a communication point between private sector employees and the companies and institutions operating within it.⁹ It aims to streamline procedures, improve user experience, enhance transparency, and accelerate decision-making, in line with digital transformation.⁹

• Services Offered: Qiwa offers a wide range of services for business owners, including recruitment, current employee management, establishment management, establishment performance evaluation, new establishment registration, and business account management.⁹ It also provides services for employees such as career path management, current job management, and domestic worker management.⁹

• Integration with Wage Protection System: Qiwa monitors Saudization (Nitaqat) ratios and ensures compliance with the Wage Protection System.⁹ Contract authentication via Qiwa is a prerequisite for accessing full MHRSD services, including visa issuance, service transfers, and profession changes. Over 9 million contracts have been documented through the platform, indicating its widespread adoption.¹³

• Impact on Services: Establishments that authenticate 80% or more of their employees' contracts fully benefit from the Ministry's services, encouraging compliance and enhancing labor market stability.¹³

Absher Platform

The Absher platform is the comprehensive digital gateway for Ministry of Interior services, playing a vital role in identity verification and government document management.¹⁴

• Identity Verification and Banking Linkage: Absher is used for digital identity verification for citizens and residents, and is essential for processes such as online bank account opening.¹⁹ Online bank account opening requires account activation via the Nafath portal (linked to Absher), which provides verification of the mobile number registered with the bank.¹⁹

• Residency and Visa Services: Absher integrates with the Qiwa platform to facilitate real-time issuance and renewal of residency permits and exit/re-entry visas, reducing the need to visit multiple government entities.¹²

General Organization for Social Insurance (GOSI)

The Mudad and Qiwa platforms integrate closely with GOSI to ensure compliance with social insurance laws and protect workers' rights.¹

• Automatic Registration and Data Matching: Employees are automatically registered in the social insurance system once their contracts are authenticated via the Qiwa and Mudad platforms.¹² This mechanism ensures that wage data registered with GOSI matches actual wages paid, providing social protection for workers after retirement or in cases of injury.¹

Saudi Central Bank (SAMA) and the Banking Sector

The Saudi Central Bank plays a pivotal role in regulating and developing the financial sector, including promoting digital banking services.

• Digital Payment Adoption: The Kingdom has seen remarkable growth in the adoption of electronic payments, with the share of individual electronic payments reaching 79% of total retail payments in 2024, up from 70% in 2023.This progress aligns with Vision 2030's goals of reducing reliance on cash and increasing digitalization in payments.²³

• Bank Account Opening for Foreign Companies: Opening a bank account for foreign companies in the Kingdom requires submitting documents such as a MISA license, Articles of Association, Board Resolution to open the account, copies of IDs/passports of shareholders and directors, along with the National Address and business license.

• Online Bank Account Opening for Individuals: Many Saudi banks (e.g., Al Rajhi, SNB, Alinma, ANB, Meem, STC Pay, D360 Bank) offer convenient online current account opening services. These processes typically require a valid National ID/Iqama, a registered mobile number, and an activated Absher account.²⁰

• Challenges: Despite the facilitations, non-residents may face challenges in opening bank accounts without a valid Iqama, as most banks require it.³⁰ However, some banks allow opening temporary accounts with a valid passport and work visa.³⁵

4. Nitaqat Program: Driving Saudization Through Dynamic Classification

The Nitaqat program is a vital initiative by the MHRSD aimed at developing the labor market and providing suitable job opportunities for the national workforce.¹³ The program underwent significant amendments in 2021 to simplify its mechanisms and increase its effectiveness.¹³

Key Amendments and Calculation Methodology

The amendments are based on three main pillars:

1. Nitaqat Simplification: By consolidating small and micro-economic activities with other economic activities.¹³

2. Fixed Saudization Plan: Publishing a Saudization plan for the next three years to provide regulatory stability for establishments.¹³

3. Smooth Relationship Between Workforce Count and Required Saudization Ratio: Transitioning from fixed bands to a smooth logarithmic relationship, which removes sharp jumps in Saudization requirements that hindered establishment growth when crossing certain size thresholds.¹³

The Saudization ratio for each range is calculated using the equation: y=m∗ln(x)+c.¹³

• "y" represents the minimum Saudization ratio for the range.

• "m" is the curve gradient and varies by economic activity.

• "c" is the y-axis intercept of the curve, and varies by economic activity and year.

• "x" is the total workforce in the establishment, and "ln(x)" is the natural logarithmic value of the total workforce.¹³

Classification Ranges and Their Impact on Government Services

The Nitaqat program classifies establishments into five levels: Red, Low Green, Medium Green, High Green, and Platinum.¹³ These ranges determine the services an establishment can benefit from via the Qiwa platform, with each service subject to its own regulations.¹³

Saudization Exemptions in Special Economic Zones and Regional Headquarters

The Kingdom offers investment incentives to attract qualitative investments, most notably Saudization exemptions in Special Economic Zones (SEZs) and Regional Headquarters (RHQs).³⁷

• Regional Headquarters (RHQ): The RHQ program grants a ten-year exemption from Saudization requirements, in addition to unlimited work visas for foreign workers.⁴³ This incentive aims to encourage multinational companies to establish the Kingdom as their operational hub in the MENA region, boosting FDI and contributing to economic diversification.⁴³

• Special Economic Zones (SEZs): SEZs (e.g., KAEC, Jazan, Ras Al-Khair, and Cloud Computing SEZ) offer tax, customs, and operational incentives, along with flexible and supportive regulations regarding foreign talent.³⁸ Although the Economic Cities and Special Zones Authority (ECZA) indicates that incentives are reviewed on a case-by-case basis and depend on each zone's strategic needs ³⁷, some sources explicitly confirm Saudization exemptions in these zones.³⁸ This approach indicates a government strategy to create attractive environments for high-value foreign investment, even if it requires flexibility in applying localization policies, with a focus on attracting advanced technologies and creating non-traditional, high-quality jobs.

5. Role of "Motaded Management Consulting" in Supporting Investors

"Motaded Management Consulting" provides comprehensive strategic support to foreign investors wishing to enter the Saudi market, aiming to simplify complex regulatory procedures and ensure full compliance with Saudi laws.¹³

• Company Formation and Government Relations Services: Motaded's services begin with legal consultations and document translation and authentication, then proceed to manage the entire incorporation process, including trade name reservation, drafting and notarization of Articles of Association, commercial registration, and Chamber of Commerce setup.¹³ It also facilitates the issuance of work visas for general managers, coordinating with MHRSD, Enjaz platform, and Saudi Embassies, and handles employment contract documentation and attestation.¹³

• Post-Establishment Operations Support: Motaded's support extends beyond initial setup to cover post-establishment operations such as registration with GOSI, tax and Zakat authorities, address registration, Saudization compliance, and Wage Protection System integration.¹³

• HR and Accounting Services: Motaded offers specialized HR services including HR operations, platform registration, Saudization compliance, and support for recruiting Saudi talent.¹³ It also provides accounting services covering bookkeeping, tax filings, and Zakat, Tax and Customs Authority (ZATCA) compliance.¹³

• Facilitating Bank Account Opening: Motaded assists with bank account opening as an integral part of the complete company formation process, from investment license to bank account.¹³

• Achievements and Commitment to Quality: Motaded's statistics show the establishment of over 750 companies, issuance of more than 380 investor visas, securing over 1500 government approvals, and serving over 750 clients, while maintaining a 98% client satisfaction rate.¹³ The firm emphasizes values of integrity, transparency, and a client-centric approach, striving to simplify complex procedures through innovation and technology.¹³

Conclusion and Recommendations

The Mudad platform and the Wage Protection System, along with the Qiwa and Absher platforms, and the Nitaqat program, form fundamental pillars in building a transparent and regulated digital labor environment in Saudi Arabia. This integrated system aims to protect workers' rights, enhance labor market attractiveness, and streamline procedures for employers, in line with Saudi Vision 2030's goals of economic enhancement and diversification.

The Kingdom has demonstrated a strong commitment to digital transformation in the government and financial sectors, leading to a significant increase in the adoption of electronic payments and the facilitation of company establishment and management processes. However, the ongoing challenge lies in ensuring full compliance for all establishments, adapting to continuous regulatory updates, and addressing any technical or procedural challenges that may arise.

Recommendations for Establishments Operating in the Kingdom:

• Proactive Compliance: Establishments should be proactive in understanding and implementing the requirements of the Wage Protection System and the Nitaqat program, and follow up on periodic updates to ensure continuous compliance and avoid penalties.

• Leverage Digital Platforms: It is advisable to make the most of digital platforms such as Mudad, Qiwa, and Absher to streamline administrative procedures related to payroll, contracts, and residencies, saving time and effort.

• Contract Authentication: Authenticating employment contracts via the Qiwa platform is crucial, not only for compliance but also to ensure full access to MHRSD services.

• Engage Experts: Given the complexity of some procedures and continuous updates, it is recommended to engage specialized consulting firms with local expertise, such as Motaded Management Consulting, to ensure smooth and effective compliance with Saudi laws and regulations.

• Understand Saudization Dynamics: Investors, especially in SEZs and RHQs, should understand the available incentives and exemptions regarding Saudization, and how these regulations can impact employment strategies and operational operations.

Investing in digital infrastructure and adopting policies that promote transparency and rights protection, as exemplified by the Mudad platform and the Wage Protection System, effectively contributes to building a more efficient and attractive labor market, and enhances the Kingdom's position as a leading global investment destination.