Remember the vile, cruel and extortionist Saudi `kafeel' in the well-known Malayalam novel, and the film based on the novel, Aadu Jeevitham (A Goat's Life) ? The Saudi Arabian authorities have put an end to the hated and much-abused 70-year-old labour sponsorship system that gave life-and-death powers to the kafeel.
Saudi Arabia’s abolition of the kafala system marks one of the biggest shifts in the Gulf’s labour landscape in decades. This reform, part of the Kingdom’s Vision 2030 plan, introduces new freedoms for nearly 1.5 crore migrant workers.
The move, effective from last month, replaces employer-tied sponsorships with a contract-based employment regime, giving migrant workers — including over 26 lakh Indians — unprecedented job mobility and legal protection.
For Indian businesses operating in the kingdom, the change brings a mix of compliance challenges, wage pressure and fresh opportunities in one of the Gulf’s largest economies. For Indian workers, it promises greater freedom, fairer treatment and a more transparent work environment.
The kafala system, in place since the 1950s, tied every foreign worker’s visa and legal status to a Saudi employer, known as the kafeel. Without the sponsor’s written consent, a worker could neither change jobs nor exit the country. Critics long argued that this system facilitated passport confiscation, unpaid wages and exploitation, particularly among low-wage labourers.
Under the new contract-based model, employment terms will now be registered digitally on the Qiwa platform, ensuring traceability and legal validity. Workers can switch employers after fulfilling contractual obligations or notice periods, and can leave and re-enter Saudi Arabia without the need for an employer-issued exit visa.
In addition, migrant workers gain access to labour courts and grievance mechanisms, enabling them to report abuse or non-payment without fear of deportation.
Saudi authorities have clarified that eligibility conditions — such as valid contracts, legal residency and clean records — will apply during the transition period. While domestic and informal workers may still have separate regulations, the reform officially ends the sponsorship era.
For employers and investors, the reform brings a dual reality: more flexibility, but also more responsibility.
Labour mobility and competition for talent will intensify. With workers now free to change jobs, companies in sectors such as construction, healthcare, hospitality and logistics — where Indians make up a large share of the workforce — must improve wages, benefits and career growth options to retain staff.
At the same time, the system opens the door to a wider talent pool. Indian professionals in skilled trades, healthcare, IT and engineering could now find it easier to pursue better opportunities within Saudi Arabia without being locked into restrictive contracts.
On the compliance front, businesses must quickly adapt HR policies to the new regime. All employment contracts, payroll systems and visa processes must align with digital Qiwa procedures and updated labour laws. Non-compliance could attract penalties or reputational risk, particularly for multinational firms under ESG scrutiny.
India remains Saudi Arabia’s largest source of expatriate labour, and thousands of Indian firms — particularly in construction, contracting, manpower, healthcare and facility management — operate in the kingdom.
For them, the reform means rewriting employee contracts, updating HR manuals and recalculating project costs. Low-margin businesses that relied on long-term, low-mobility labour could face higher turnover and wage inflation. However, the shift is also expected to reduce disputes and improve productivity, as employees feel more secure and valued.
The Indian embassy in Riyadh has welcomed the change, noting that it aligns with India’s ongoing efforts to protect its citizens in the Gulf through digital employment verification and welfare support. Labour attachés are already coordinating with Saudi authorities to ensure smooth transition for Indian workers.
For Indian professionals and skilled workers, the reform offers a significant psychological and economic boost — the ability to negotiate fairer terms, pursue promotions, or switch employers without risking deportation.
Analysts view the kafala abolition as part of Saudi Arabia’s Vision 2030 transformation — an agenda to diversify the economy and attract foreign investment. For Indian companies, this creates opportunities in HR consulting, digital compliance, and workforce training services.
In the short term, businesses must invest in contract audits, legal compliance checks, and digital upskilling for HR teams. Over time, however, the reform is likely to produce a more transparent and stable business environment, making Saudi Arabia a more attractive market for Indian exporters, service providers, and investors.
With the end of kafala, the rules of employment in the Gulf’s largest economy have been rewritten. For Indian businesses and workers alike, adapting early to the new system could turn this labour reform into a lasting competitive edge.
