Hire employees in Saudi Arabia

Saudi Arabia is the largest producer and exporter of oil in the world, but is also highly involved in the production of industrial goods like plastics and construction materials. The country is an absolute monarchy which is often perceived as authoritarian by the outside world.

In the past, the desert state was repeatedly criticized for its restrictive regulations towards women. However, recent reforms have granted women several new rights and freedoms, which they have long fought for, such as the right to drive.

Although verbal employment agreements are legally valid, the contract should be concluded in writing and a duplicate copy handed to each of the employment parties. The compulsory contract language is Arabic. Salary and other monetary compensation should be given in Saudi Riyals.

Employees can be hired based on either a fixed-term or open-ended employment contract. Fixed-term contracts turn into indefinite contracts after three consecutive renewals. The following information is mandatory:

• Identification of both parties (name, address, plus nationality of the employee)

• Proof of identification

• Basic salary as well as other compensation or benefits

• Type of work

• Workplace

• Date of commencement (and employment duration for temporary contracts)

Probation Period

Probation periods usually last 90 days, but may be extended to up to 180 days with the employee’s written consent.

Working Hours and Breaks

A normal work week in Saudi Arabia is 48 hours, spread over 6 workdays. However, during Ramadan, the work week for Muslim employees is reduced to 36 hours, i.e. 6 hours per day. The weekly rest days usually fall on Fridays.

Overtime

Overtime is defined as any work exceeding an employee’s regular weekly working hours (i.e. 48 hours), as well as work performed on the public holidays Eid Al Fitr and Eid Al Adha and while the employee is on holidays. Employees must be compensated for overtime work by a 50% wage supplement.

The frequency with which payroll must be processed depends on how the employee’s wages are determined. For workers with a monthly salary, payroll is processed once a month. In all other cases (daily-paid, weekly-paid or hourly-paid workers), weekly payments are required.

Minimum Wage

In 2021, Saudi Arabia raised the minimum wage for all workers to SAR 4,000 per month.

Sick Pay

Sick leave in Saudi Arabia is limited to 120 days per year. However, the amount of sick pay varies depending on the length of the sick leave:

• First 30 days: full pay

• Following 60 days: paid at one third of normal wages

• Last 30 days: no pay

Bonuses

A 13th month salary is not compulsory, but employers can offer performance-based bonuses.

Employees and employers in Saudi Arabia are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

20%

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• 20% corporate tax rate

• 15% VAT (standard rate)

Employees

0%

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Employees in Saudi-Arabia don’t pay tax on their employment income.

Social security

Employers

11.75%*

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11.75% covering social insurance, occupational accident insurance and unemployment insurance

Employees

9.75%

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9.75% covering social insurance and unemployment insurance

* For non-Saudi employees, employers only pay 2% towards occupational accident insurance.

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

Under Saudi Arabian labor law, employees are entitled to at least 21 days of paid annual leave. After 5 years of service with the same employer, an employee’s annual leave entitlement increases to 30 days.

The two national holidays Eid Al Fitr and Eid Al Adha, which last (at least) three days each, are also paid days off. Other official days off are  Foundation Day and National Day. Additional public holidays may be decreed by the government.

Maternity Leave and Paternity Leave

Female employees can go on maternity leave starting four weeks before the expected due date. The first six weeks after birth are also covered by maternity leave. This makes a total of 10 weeks of maternity leave.

If the employee has been with the company for more than one year, she is entitled to half her normal pay during this time – annual leave for that particular leave is then only paid at a rate of 50%. Employees whose length of service exceeds 3 years are entitled to full pay during maternity leave – in this case, annual leave for that particular leave is unpaid.

Fathers get 3 days of paternity leave.

Parental Leave

There are no legal provisions for further parental leave.

Additional Leave and Benefits

The local labor law provides for additional leave in the following cases:

• Marriage: 5 days of paid leave

• Death of family member: 5 days of leave

• Hajj: 10 to 15 days of paid pilgrimage leave for employees with more than 2 years of service

• Exams: paid leave to sit exams which are part of an educational program

Fixed-term contracts end automatically upon expiration of the agreed term. Open-ended contracts may be terminated by either of the employment parties upon presentation of a valid reason. Valid reasons for employment termination include:

• Mutual agreement

• Force majeure

• Business closure

• Redundancy

• Resignation

When terminating an open-ended employment contract, both employee and employer must give at least 60 days notice. In case the employee is hired on the basis of a fixed-term contract, the notice period is reduced to 30 days. Terminated employees can use up to 8 hours per week for searching for a new job.

If the employee is terminated for a reason other than misconduct, contract breach, negligence, unexcused absence, or during their probation period, they must receive severance pay. Severance pay increases with length of service:

• 1-5 years of service: half a month’s salary per year of service

• Over 5 years of service: one month’s salary per year of service