Saudi Arabia ends Kafala; what it means for Indian workers and remittances

New Delhi: Saudi Arabia has scrapped the Kafala (sponsorship) system and moved to a contract-based regime that changes how foreign employees live and work in the Kingdom. 

The reform, announced to take full effect after its June 2025 rollout, is one of the biggest labour shifts in West Asia and is expected to affect more than 13 million expatriates, including an estimated 2.65 million Indians.

For India, the decision is more than a headline about labour rights. Saudi Arabia is among the largest overseas workplaces for Indian nationals across construction, contracting, facility management, hospitality, health care and domestic work. The corridor is also a major source of household income through remittances. 

A rules-based system that enables mobility, clearer exit procedures and access to redress is therefore a direct economic interest for Indian families and state governments that track migration closely.

Kafala concentrated power with the sponsor, or kafil. Indian workers who landed in Saudi Arabia often reported passport retention, limited job mobility without a no-objection letter and exit permits that depended on employer consent. 

These frictions made wage disputes, transfers and emergency travel difficult. Domestic workers were particularly exposed because their workplaces were private households and oversight was limited.

The contract-based framework aims to reverse that structure. Workers will be able to change employers on contract completion and, in specified circumstances, during the term without a sponsor’s clearance. 

Exit procedures have been liberalised so employees can seek final exit on contract expiry and manage re-entry and exit permits themselves, subject to compliance checks. 

Access to labour courts is positioned as a central pillar, with wage and contract disputes to be handled through state systems rather than sponsor discretion. 

Saudi authorities frame the shift as part of Vision 2030, which requires predictable labour rules to attract and retain skilled talent for large projects in infrastructure, technology, tourism and services.

Indian missions in Riyadh and Jeddah will now focus on translation of rules into day-to-day outcomes. The priority is practical detail: the documentation a worker must provide to seek a mid-term transfer, the timelines within which authorities process exit applications, and the steps to file a wage claim with reliable interpretation and prompt hearings. 

Clarity in bilingual contracts will matter because most Indian workers sign Arabic templates; a standardised English mirror will reduce disputes over terms, notice periods and end-of-service benefits. 

The Ministry of External Affairs and state migration departments are expected to align advisories, eMigrate workflows and pre-departure briefings with the new procedures so that workers understand their rights before they fly.

Recruitment practices in India will also come under closer scrutiny. With mobility improving at renewal, retention will depend more visibly on timely pay, safe housing and predictable leave. 

Licensed recruiting agents will have to align fee structures and documentation with the new regime, while crackdowns on informal intermediaries are likely to intensify because debt-linked recruitment weakens any reform on the ground. 

Employers and sub-contractors in Saudi Arabia will need tighter payroll and record-keeping to satisfy compliance checks and to avoid wage delays that often trigger disputes.

Implementation is the real test. Long-standing habits do not change overnight, especially in layered contracting chains where responsibility diffuses across multiple firms. Domestic work poses additional complexity because the workplace is a private home. 

Authorities will need consistent inspections and visible penalties to dislodge practices like passport holding, while workers will need accessible helplines and safe channels to report violations without risking their legal status. 

The speed at which old exit-permit processes are replaced in local offices will signal whether the change is structural or remains on paper.

Corporate India has a stake too. Indian engineering, construction and services companies that staff large Saudi projects will benefit from cleaner transfer rules and dispute resolution that does not stall sites for weeks. 

At the same time, compliance costs will be more transparent, and firms that relied on tight sponsor control to curb attrition will have to compete on wages, training and living conditions. Skill councils and state skilling agencies can use this window to align training pipelines with Vision 2030 demand in power, transport, healthcare support and hospitality.

For state governments that send large numbers of workers, Kerala, Telangana, Uttar Pradesh, Bihar and others, the metric is straightforward. 

The reform will be judged by how often passports remain with workers, how quickly unpaid wages are recovered, how many transfer requests are processed without obstruction and how exit applications move in emergencies. 

Consular teams will watch for early bottlenecks and publish process checklists so that families in India know what to expect if a problem arises.

Rights groups will track outcomes rather than announcements. They will look for a fall in absconding designations where the root cause is contractual, faster adjudication of wage claims and a measurable decline in complaints about document seizure. If those indicators move in the right direction, confidence will rise and disputes will fall, improving both worker welfare and project productivity.

Saudi officials describe the shift as both an economic and governance reform. For India, it is a structural change in a corridor that supports millions of households. 

The coming months will show whether the new system can displace entrenched practices and deliver predictable processes at scale. If it does, Indian workers will gain mobility and protection without losing work opportunities, and remittance stability will benefit families and state economies alike.