Saudi banks have asked local companies to provide approved lists of their expatriate labor force in order to meet requirements of the Ministry of Labor’s directive that says firms must pay workers through their own bank accounts.
Informed sources in the Saudi banking sector said yesterday that under the old system it was possible for companies to pay their staff in cash. “These traditional methods still put additional burden on commercial banks,” the sources said.
“The Ministry of Labor’s directive regarding payment to expats through their bank accounts will take much pressure off the commercial banks, which usually get crowded near the end and beginning of every month,” the sources added.
Salem Ba Ajaajah, professor of accounting at Taif University, said the decision to deposit salaries in current accounts would increase the money supply at banks that have many expatriate worker accounts.
“The wage protection system launched by the Ministry of Labor will further reassure expat workers that they will get their monthly paychecks on time. That in turn will increase productivity and motivate everyone to work harder.”
Meanwhile, the wage protection system for small and medium enterprises will be applied soon, after the large companies have adopted the system. Most of the country's eight million expatriates work for small and medium enterprises. The bank move comes after a severe crisis hit the branches around 18 months ago as a result of the Hafiz initiative. It lasted for 90 days.
The reason was that Hafiz beneficiaries had to open bank accounts to get their monthly payments. This resulted in long queues at banks.