Saudi Arabia is capping the number of expats companies can employ and is ready to fine those flouting the rules.
In a bid to develop local skills and talent, the Saudi government will impose financial penalties on companies with more expat employees than locals.
The law is specifically number based, and includes workers at all levels.
The labour ministry enacted the policy at the start of the Islamic new year earlier the month.
For firms, taking on expats in favour of Saudis will cost £400 a year for each foreign worker over and above the 50% quota.
Saudi Arabia has relied on expat expertise both as manual labour and for oil and engineering expertise for many years, which has resulted in a swelling population of well-educated middle class Saudis frustrated at the lack of job opportunities.
In another recent policy decision, the government has pledged to set up a number of enterprise zones to employ women.
Unemployment among Saudis has breached 10%.
A labour ministry spokesman said: “This policy is aiming to promote the competitive advantage of local workers by reducing the gap between the cost of expat labour and local labour.”
Exemptions to the Saudi only rules include workers with Saudi mothers or expats from other Gulf Co-operation Council (GCC) countries, including the United Arab Emirates, Qatar, Kuwait and Bahrain.
Expats feel under pressure as they can see the Saudis want to restrict the number of foreign workers in all jobs and sectors.
Expat job fears
Many with contracts in Saudi are concerned that they will be cancelled or will not be renewed – leaving a flood of expats seeking employment in a smaller market.
Another fear is other GCC countries will also bring in similar laws which will severely limit the number of tax-free expat jobs available in the Middle East.
The Saudi labour ministry argues that the policy of putting locals before expats in the employment market created 400,000 jobs during the past year – although some firms are critical of the caps because they struggle to match some skills and their wage bills have increased.
Generally, Saudi Arabia and some other GCC states, like Abu Dhabi, are encouraging companies to employ local workers as cash paid to expats tend to flow abroad.
Abu Dhabi has given 12 month notice that all public sector workers must live within the emirate rather than commute from nearby Dubai to boost the local economy.