The End of the Kafala System? What Gulf Employers Need to Know About Labor Reforms

The Kafala system has been the Gulf’s go-to for managing foreign workers for years. But while it helped regulate labor, it also gave employers a bit too much control, especially in places like Qatar and Saudi Arabia. Now, with reform in the air and pressure mounting, the region is finally reworking the system to make it fairer and more modern.

The good news is change is underway. With pressure from inside and out, many GCC countries are rolling out big labor reforms to replace outdated systems with fairer, more worker-friendly rules. And it’s not just good for employees. It’s a win for employers, too, making it easier to attract and keep great talent. Here’s what’s shifting and what Gulf employers should know.

What Is the Kafala System?

The Kafala system, Arabic for “sponsorship”, has long defined how foreign workers and local employers interact in many Gulf countries. It ties a worker’s legal status to their boss, meaning the employer controls key things like job changes, visa renewals, and even leaving the country.

Countries like Saudi Arabia, Qatar, the UAE, Kuwait, and Bahrain have used versions of the Kafala system for years. It’s why forums like Kafala system Reddit often include stories of workers feeling trapped or voiceless. Critics argue that the system limits labor mobility and leaves expatriates vulnerable to abuse or exploitation.

In particular, the Kafala system in Saudi Arabia historically restricted Saudi Arabian workers from switching jobs without employer permission. Similarly, the Kafala system in Qatar also required exit permits before a worker could leave the country until reforms began shifting the tide.

Why Is the Kafala System Changing?

Moving away from the Kafala system isn’t just for show. It’s part of a bigger game plan. As Gulf countries look beyond oil, they’re modernizing their labor markets to match. Reforms like these support bold visions, like Saudi Vision 2030, by encouraging private sector growth and making the region more appealing to global talent.

Human Rights Watch and Amnesty International have both highlighted the need for reform, but the push is also coming from within. Labor reforms in Saudi Arabia, Qatar, and other nations are driven by the need to create fairer, more efficient labor markets that support economic competitiveness.

A big push behind the change? The International Labour Organization (ILO). Qatar teamed up with the ILO in 2017, which led to scrapping exit permits for most workers and rolling out a minimum wage in 2021. The ILO called it a “historic move” with a gentle reminder that the real work is in the follow-through.

In Saudi Arabia, changes to the Saudi Kafala system are driven by the Ministry of Human Resources and Social Development, which launched reforms in March 2021 that allow foreign workers to change jobs without employer consent under specific conditions, marking a huge shift in the Kingdom of Saudi Arabia labor law.

Key Labor Reforms by Country

Saudi Arabia

The new rules for expatriates in Saudi Arabia in 2021 shook things up in a big way. Under the updated KSA law, foreign workers can now change jobs without needing a “no-objection certificate,” and they can get exit and re-entry visas without their sponsor’s green light. These changes impact over 7 million expats and are part of Saudi’s push to modernize its labor market and boost transparency.

Qatar

Qatar has taken big steps to overhaul its Kafala system. In 2021, it introduced the region’s first non-discriminatory minimum wage of QAR 1,000 per month, along with food and housing allowances. Workers can now change jobs without needing employer approval as long as they give proper notice. Exit permits? No longer required for most private sector roles. The ILO and other watchdogs have praised these changes as a strong example of labor reform in action.

United Arab Emirates

The UAE may not have a formal Kafala system, but it has had similar features for years. That’s changing fast. With the Labour Law Federal Decree-Law No. 33 of 2021 (active since Feb 2022), the UAE introduced more flexible contracts, better leave policies, and stronger anti-discrimination rules. Now, workers can even switch jobs after six months without needing their employer’s permission.

Bahrain & Kuwait

Bahrain has moved away from the Kafala system and now uses a flexible work permit that lets migrant workers take jobs without being tied to a single employer. Kuwait hasn’t gone as far, but there are ongoing talks about making it easier for workers to switch jobs and leave the country.

What These Reforms Mean for Employers

The shift away from the Kafala system marks a new chapter for Gulf businesses. In locations like Saudi Arabia, Qatar, and the UAE, employers are now working within a more flexible, worker-friendly system that’s changing how talent is hired and managed.

Thanks to the labor reforms Saudi Arabia introduced in 2021, businesses can’t rely on old-school sponsorship rules to keep talent around. Now, workers can resign and switch jobs without employer approval as long as they finish their contract or give proper notice.

It might feel like less control, but the new rules in Saudi Arabia for expats are really a chance to build healthier, trust-based workplaces.

Benefits of Kafala Reforms for Employers

Let’s be clear: these reforms aren’t just a win for workers. They unlock real, measurable benefits for employers, too.

1. Access to a Larger Talent Pool

Since workers aren’t locked to one sponsor anymore, employers can hire from a bigger pool of skilled professionals already living and working in the country.

2. Improved Retention Through Better Workplaces

Without the crutch of restrictive contracts, businesses will be pushed to compete through culture, development, and pay. That’s a good thing. It creates a more motivated workforce and boosts retention in the long term.

3. Boosted Employer Reputation

Today’s investors and clients care about ethical labor practices. Embracing the end of the Saudi Kafala system and similar changes across the Gulf shows you’re serious about fair, modern workplaces, and that boosts your employer brand.

4. More Efficient Onboarding

Thanks to updates in KSA law, hiring expats already in the country is now quicker and more cost-effective. Companies that stay aligned with the Kingdom of Saudi Arabia's labor law are seeing fewer delays and less paperwork when it comes to transfers and visas.

Challenges Gulf Employers May Face

Change always brings a few bumps. As the Kafala system in Saudi Arabia and Qatar fades out, some employers might find themselves adjusting to a whole new way of managing talent.

1. Increased Competition for Talent

Without sponsorship restrictions, your competitors can now hire your employees more easily. Retention will depend on how well you treat and develop your people, not on legal barriers.

2. Adapting Internal Policies

HR teams used to the Kafala system now need to shift gears. Adapting to the new rules for expatriates in Saudi Arabia 2021 means updating contracts, visa steps, and job transfer policies—and that takes time, training, and a mindset refresh.

3. Risk of Non-Compliance

Failing to update your systems or misunderstanding the new laws could lead to legal trouble. The KSA law now requires more employer accountability for issues like unjust contract termination, worker mobility, and wage protection.

4. Managing Perceptions Internally

Some employers fear losing control, but the truth is that retaining talent in a post-Kafala system era will rely more on leadership quality and HR innovation than ever before. Culture will outweigh contracts.

How to Adapt Your HR Practices

1. Review All Employment Contracts

Check that your contracts match the latest Kingdom of Saudi Arabia labor law or your local GCC regulations. If there are old clauses blocking job moves or exits, it’s time to clean them out.

2. Strengthen Onboarding and Training

With the Kafala system fading out and job-hopping getting easier, first impressions matter more than ever. Build fast, engaging onboarding and show clear growth paths to keep great talent sticking around.

3. Invest in Compliance Tools

Running HR across Qatar, Saudi Arabia, and the UAE? Don’t rely on guesswork. Use smart HR tools or legal checkups to keep up with job-switch rules, notice periods, and wage laws. Your team will thank you later.

4. Focus on Fairness and Engagement

As the Kafala system fades, it’s time to lead with trust, not control. Ask for feedback, run engagement surveys, and invest in training. Want real talk? Check out Kafala system Reddit threads, as they’re packed with worker insights and cautionary tales.

Real-World Examples

From Restriction to Retention: How Gulf Companies Are Adapting

Between November 2020 and August 2022, Qatar’s labor reforms, specifically the removal of exit permit requirements and the introduction of a non-discriminatory minimum wage, led to over 350,000 workers changing jobs freely, compared to just 18,000 in 2019. These reforms marked a dramatic shift in the Kafala system Qatar, boosting job mobility and earning praise from the International Labour Organization as a milestone for worker rights.

Instead of relying solely on traditional hiring models, Saudi companies are increasingly turning to platforms like Taqat, a local talent mobility service, to support internal job transfers and upskilling. Global consultancies such as Mercer, Adecco, and Bayt are also stepping in with AI-powered solutions to help businesses adapt to the evolving Saudi Kafala system reforms. Additionally, firms like Arthur D. Little, PwC Middle East, and Bain & Company are actively advising employers on workforce planning, compliance, and digital transformation as part of Vision 2030.

How to Stay Compliant with GCC Labor Reforms

GCC rules are shifting fast. If you're not keeping up, you're probably already behind.

1. Stay on Top of the Legal Shifts

Don’t wait for surprises. Check your labor ministry site regularly. If you’re in Saudi Arabia, the HRSD portal is where the real updates drop first. New rules, FAQs, and changes. It’s all there.

2. Use Official Hiring Platforms

Hiring in Saudi? You’ll need to use Qiwa and Mudad to handle contracts and wages. Other Gulf countries have similar tools, so make sure your team’s clued in.

3. Conduct Regular HR Audits

Reassess your policies, onboarding documentation, and visa processes. Are they aligned with the current rules in Saudi Arabia for expats and Qatar? If not, revise them now to avoid issues later.

4. Educate Managers

Supervisors are your first line of compliance. Hold short training sessions to explain what the Kafala system reforms mean and how to treat mobile employees fairly under the law.

Conclusion

The Kafala system may still be here, but its influence is disappearing fast. For employers in the GCC, this shift isn’t just about compliance. It’s a real chance to modernize, attract top talent, and build a stronger workplace. Update your HR policies, lead with fairness, and stay ahead of the curve.