Saudi Arabia has formally abandoned the decades-old Kafala (sponsorship) system that linked the employment and residency of foreign workers to their employers in a historic labour reform. As part of the kingdom's larger Vision 2030 reforms, the June 2025 announcement is anticipated to change the rights of over 10 million migrant workers, including more than 2.5 million Indians.
What was the system of Kafala?
Under the Kafala system, foreign employees had to have a Saudi sponsor, typically their employer, who managed their legal status and visa. This meant that without the sponsor's approval, employees could not change jobs, go abroad, or even renew their residency permits.

Human rights organisations have long maintained that because workers had few legal options if their employers refused to pay them or issue them passports, this arrangement frequently resulted in worker exploitation and abuse.

Prior to the 2022 FIFA World Cup in Qatar, the Kafala system garnered international attention since thousands of migrant workers—mostly from South Asian countries like India—perished while working in appalling conditions while building stadiums and other infrastructure.
Now, what's changed?

• The new labour reform program in Saudi Arabia allows international employees to:
• After finishing their contract or providing adequate notice, employees may change occupations without their employer's consent.
• go overseas without needing their sponsor's exit or re-entry authorisation.

For what reason did Saudi Arabia abandon the system?
The reform is in line with Saudi Crown Prince Mohammed bin Salman's Vision 2030, which seeks to lessen the kingdom's dependency on oil, modernise the economy, and draw in global investment.
Eliminating the Kafala system is also viewed as a step to satisfy international labour standards, especially those established by the International Labour Organisation (ILO), and improve Saudi Arabia's human rights record.

What effects will this have on Saudi Arabian Indian workers?
There are presently an estimated 1.34 crore foreign workers in Saudi Arabia. Due to the Kingdom's reliance on migrants for domestic work, construction, and agricultural, they make up nearly 42% of the population.

Most of the estimated 1.34 crore labourers are from the Philippines, Bangladesh, India, and Nepal.

One of the biggest expat communities in Saudi Arabia, the Indian community, stands to gain a great deal from the move:
Greater liberty and mobility: Employees who experience unfavourable working conditions or unfair treatment will find it easier to change jobs.
Decreased exploitation: There may be fewer instances of passport confiscation or unpaid salaries if employers have less control over exit permits and transfers.
Better job opportunities: More competitive compensation and working conditions may result from easier job switching between organisations.
But implementation is still crucial. According to experts, for workers to actually profit from the reforms, transparency in digital systems and enforcement is essential.