Saudi Arabia has long been one of the most popular destinations for workers seeking jobs, especially from countries like India, Bangladesh, and Pakistan. Over the decades, millions have migrated to Saudi Arabia to work in sectors such as construction, domestic services, healthcare, and the oil industry. Yet, behind this vast migration lay the controversial Kafala system — one of the most debated and criticized labour policies in the Gulf region. In this article, we take a closer look at what the Kafala system was, why it became controversial, and how its recent abolition marks a turning point in Saudi Arabia’s labour landscape.

What is the Kafala System?

In Arabic, Kafala means “sponsorship”, from which the Kafala System gets its name. It was introduced in the 1950s to regulate the employment of foreign workers across Saudi Arabia and other Arab countries. Under this system, a worker’s legal and residency status was directly tied to their employer, known as the kafeel.

This system gave employers a lot of control over their workers. Under the Kafala system, migrant workers could not change jobs, leave the country, or even renew their residence permits without the permission of their employer. Although it was first introduced to help manage foreign labour, it eventually created an unfair power balance between employers and workers.

What Makes It Controversial

Saudi Arabia has a relatively small local population but a fast-growing economy, especially in industries like construction, oil, and services. To keep its economy running, the country relied heavily on migrant workers from nations such as India, Bangladesh, Pakistan, and the Philippines. The Kafala system helped manage this huge foreign workforce and, for a long time, supported the country’s rapid development.

However, while the system benefited employers and the economy, it created serious problems for the workers who came to Saudi Arabia in search of better jobs and a good life. Under the Kafala system, a worker’s legal status was completely tied to their employer — meaning they couldn’t change jobs, leave the country, or renew their residence permits without permission.

This power imbalance often led to serious exploitation. Many employers confiscated workers’ passports, delayed or withheld wages, denied proper leave, and made them work long hours in poor conditions. Domestic and construction workers were among the most affected. Human rights organizations frequently raised concerns that the system allowed forced labour and even human rights violations to continue under legal cover.

What was once introduced as a system to organize foreign labour gradually became one of the most criticized and controversial employment models in the world.

Saudi Arabia Ends the Kafala System

Saudi Arabia is home to around 13.4 million migrant workers, making up nearly 42% of the country’s total population. A large number of them come from Bangladesh and India, with more than 498,000 Bangladeshi and over 426,000 other South Asian workers employed in the Kingdom as of 2023. Among them, domestic workers alone make up about 4 million, all of whom are foreign nationals. These workers contribute to key sectors such as construction, domestic services, hospitality, healthcare, and agriculture.

By abolishing the Kafala system, Saudi Arabia aims to build a fairer and more transparent labour market — one that aligns with its broader Vision 2030 reforms. The change is expected to reduce worker exploitation, improve living and working conditions, and give employees greater freedom and dignity. Migrant workers can now negotiate their employment terms more openly and move between jobs without fear of losing their legal status.

Experts believe this reform marks a historic turning point in the Gulf’s labour history — offering millions of workers more rights, flexibility, and respect, while also improving Saudi Arabia’s global image and investment appeal.

Why This Reform Matters

The end of the Kafala system is not just a legal reform — it represents a major cultural and economic shift for Saudi Arabia. The decision directly affects nearly 13 million migrant workers, including more than 2.6 million Indians working in the Kingdom.

For businesses, this move creates a more flexible job market where workers can change employers based on skill, performance, and fair contracts. But it also means that companies now have to improve their salary structures, HR policies, and employee benefits to keep talented workers who are free to explore better opportunities.

Impact on Businesses and the Economy

Greater Talent Mobility Companies can now hire experienced workers already living in Saudi Arabia. This opens up many opportunities but also increases competition among employers — especially in industries like construction, healthcare, and hospitality.

Higher Compliance and Transparency With digital employment contracts being introduced, all companies must follow the new labour rules strictly. This step makes the system more transparent and helps Saudi Arabia match global labour standards.

Wage and Cost Adjustments Businesses that earlier depended on cheap, restricted labour may now face higher costs, as workers have more power to negotiate. However, better working conditions are expected to attract skilled professionals, improve productivity, and raise the overall quality of work.

Improved Global Reputation By ending the Kafala system, Saudi Arabia shows the world that it is serious about fair labour practices and worker rights. This move can improve its global image and make it a stronger business hub in the Middle East.

Impact on Indian Workers and Companies

For India, this reform is especially important. With more than two million Indians working in Saudi Arabia, the new rules mean greater job mobility, better safety, and fairer treatment at the workplace.

Indian companies operating in Saudi Arabia — especially in construction, healthcare, IT, and service sectors — will now need to update their contracts and HR systems to follow the new regulations. In the long run, this will help create a more stable and transparent business environment and reduce legal risks.

A Step Toward a Modern Labour Market

The end of the Kafala system marks a historic turning point for Saudi Arabia’s workforce. It improves worker rights, supports economic modernization, and helps the country attract skilled talent from around the world.

For Saudi Arabia, this is not just a change in law — it’s a move toward equality, fairness, and shared growth. And for millions of workers and businesses, it represents hope for a more balanced and respectful work environment.

But the big question remains — will this historic reform truly attract more people to work in the Gulf?