I worked in Saudi Arabia for 5 years, and it is standard practice to take away an employee's passport and replace it with the Iqama, or local identity card.

When you are leaving the country, you hand back the ID and get your passport.

That's not the bad part. You have to have an "exit" visa to leave the country, so even if you have your passport in your possession, you can't just wander off. Many people who have a dispute with their employers end up in some kind of limbo. Fired, but without an exit visa.

Tip to anyone considering a job in Saudi...negotiate for a multiple exit/re-entry visa, especially if you plan frequent side trips to the UAE or Egypt.

Thanks for the info!
I didn't know it's part of an official policy... Nevertheless, it's unfair that one can't return to his/her home country freely.