Employer of Record in Saudi Arabia

Businesses can only operate smoothly in Saudi Arabia if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Saudi Arabia below, to avoid any compliance issues.

Employment Contract Requirements

In Saudi Arabia, it is mandatory to have a formally signed employment agreement between the employer and employee. These contracts must include basic employment details, such as:

• Duration and potential renewal terms of contract
• Probationary period (if applicable)
• Workdays and working hours
• Basic salary and potential bonuses
• Annual leave entitlements
• Medical insurance and contributions to social security
• Coverage of recruitment and residency permit costs (for non-Saudi employees)
• Employer policies and guidelines
• Inclusion of a termination clause
• End-of-service benefits

Onboarding Process

We can help you get a new employee started in Saudi Arabia quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Saudi Arabia

In Saudi Arabia, a standard workweek consists of 8 hours per day over 5 days, totaling not more than 48 hours weekly. However, during the Ramadan period, daily working hours may be reduced to 6 hours.

Overtime in Saudi Arabia

The Saudi Labour Law (Article 148) prohibits employees from working more than 10 hours per day. Overtime, compensated at 150% of the regular salary, is applicable for work beyond standard hours, including on weekly rest days, holidays, and national holidays (Article 51).

Probation Period in Saudi Arabia

The duration of probationary periods in Saudi Arabia is based on the terms specified in the employment contract. Typically lasting for 90 days, these periods can be extended through written consent from both the employer and the employee, with the extension not surpassing 180 days.

Fiscal Year in Saudi Arabia

1 January - 31 December is the 12-month accounting period that businesses in Saudi Arabia use for financial and tax reporting purposes.

Payroll Cycle in Saudi Arabia

The payroll cycle in Saudi Arabia is usually monthly, with employees being paid by the 10th day of the following month.

Minimum Wage in Saudi Arabia

The minimum wage for employees in Saudi Arabia is typically 20.83 SAR per hour, amounting to ~4,000 SAR per month for a typical 48 hour work week.

Bonus Payments in Saudi Arabia

13-month payments in Saudi Arabia are not obligatory, but employers have the choice to issue performance-based bonuses as they see fit.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 2% - 12% on top of the employee salary in Saudi Arabia.

Employee Payroll Tax Contributions

In Saudi Arabia , the typical estimation for employee payroll contributions cost is around 10%.

Individual Income Tax Contributions

Saudi Arabia does not impose any income tax.

Pension in Saudi Arabia

To qualify for Saudi Arabia's old-age retirement pension, individuals must be at least 58 years old and have contributed for a minimum of 120 months to the General Organization for Social Insurance (GOSI). Those with 300 months of contributions are eligible for retirement at any age, and the minimum monthly old-age state pension is 1,984 SAR.

Mandatory Leave Entitlement in Saudi Arabia

The annual leave entitlement in Saudi Arabia is 21 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Saudi Arabia

Saudi Arabia acknowledges four public holidays each calendar year, which are separate from the regular annual leave. The following are the national public holidays in Saudi Arabia:

Paid Time Off in Saudi Arabia

According to Article 109 of Saudi Arabia's Labour Law, annual leave entitlement is based on seniority. Employees may request ten additional unpaid days annually with employer approval, and unused leave days can be carried over with employer consent. Leave duration is determined by following length of service:

• 1-5 years of service " 21 days of annual leave
• More than 5 years of service " 30 days of annual leave

Maternity Leave In Saudi Arabia

Pregnant employees who have completed 90 days of service are eligible for 10 weeks of paid maternity leave, including 4 weeks to be taken before the expected due date. During this period, the employee receives 100% of their usual wage, and the payment is provided by the employer.

Paternity Leave In Saudi Arabia

Fathers are eligible for 3 days of paid paternity leave following the birth of the child, as specified in Article 113 of the Labour Law.

Sick Leave In Saudi Arabia

In accordance with Article 117 of the Labour Law, employees are entitled to 120 days of sick leave annually, with the employer covering the payment, regardless of whether the illness is continuous or intermittent. Valid medical certificates must be provided for all sick days taken. The rates for sick leave pay are as follows:

• First 30 days of sickness: full pay
• Next 60 days of sickness: 1/3 of regular pay
• Further 30 days of sickness leave: unpaid

Parental Leave In Saudi Arabia

Saudi Arabia has distinct policies for maternity and paternity leave, but does not offer a shared parental leave policy.

Bereavement Leave

If an immediate family member passes away, the employee is granted a bereavement leave of 2 days.

Marriage Leave

An employee is granted 3 days of leave for their wedding.

Hajj leave/Pilgrimage Leave

After completing a minimum of 2 years of service, an employee is eligible for 10-15 days of leave to undertake Hajj or pilgrimage, which includes the Eid Al-Adha holiday. This provision is applicable only if the employee has not previously performed Hajj. The first 10 days of leave is paid.

Termination Process in Saudi Arabia

In Saudi Arabia, the termination procedure must be clearly outlined in writing, aligning with the terms of the employment agreement, and is based on the contract type and the reason for termination. This may potentially include the termination of visa sponsorship. Acceptable circumstances for termination include:

• Voluntary resignation by the employee
• Mutual agreement between both parties
• Unilateral termination by the employer (based on the probation period, specific grounds, disciplinary dismissal, or inadequate performance for the job)
• Expiration of the employment contract

Notice Period in Saudi Arabia

The notice period in Saudi Arabia varies based on the following types of employment contract:

• During the probation period: 1-day notice
• Termination or resignation of an indefinite contract (open-ended and paid monthly): 60 days' notice
• Fixed-term contracts: 30 days' notice

Severance in Saudi Arabia

End of Service Gratuity (EOSG) is granted upon termination. For employer terminations, the calculation involves adding half a month's salary for the first 5 years and 1 month's wage for each subsequent year of service. Fractional years are compensated based on the last salary. In case of employee resignation, the entitlement is as follows:

• 2-5 years of service: 1/3 of the award
• 5-10 years of service: 2/3 of the award
• More than 10 years of service: full award