Employer of Record in Saudi Arabia

Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.

However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.

Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.

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.

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.

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 are reduced to 6 hours per day or 36 hours per week for Muslim employees.

Overtime applies when employees work beyond 8 hours per day. Employees cannot work more than 11 consecutive hours in one day (including overtime). Overtime, compensated at 150% of the regular salary or with additional paid leave if mutually agreed upon, is applicable for work beyond standard hours, including on weekly rest days, holidays, and national holidays.

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Setting up a local legal entity in Saudi Arabia can be time-consuming and expensive. It often involves complex paperwork, local representation, banking, registrations, and ongoing tax filings, which isn't cost-effective if you're simply looking to hire a few employees or test the market. An Employer of Record removes these barriers entirely. Instead of spending months establishing a presence, an EOR lets you hire and onboard employees within days while staying fully compliant.

This enables faster market entry and greater agility. Whether you’re launching a pilot program, supporting a regional client, or adding specialized talent, you don't need to commit to long-term infrastructure to explore new business opportunities. The EOR handles local employment logistics while you retain day-to-day oversight of your hires. This model lets you scale up or down based on business needs, giving you more flexibility with less overhead and risk.

Managing payroll in Saudi Arabia requires careful attention to the unique aspects of the Kingdom's employment tax system. While there is no personal income tax, employers must navigate social insurance contributions that vary significantly between Saudi and expatriate employees, comply with the Wage Protection System for timely salary payments, and ensure proper registration with government authorities including GOSI and the Ministry of Human Resources.

Key compliance areas include making monthly GOSI contributions by the 15th of each month, providing comprehensive medical insurance for all employees, and maintaining detailed payroll records. Using payroll management software can help employers consolidate payroll data and stay compliant in Saudi Arabia by automating calculations, generating required reports, and ensuring integration with the mandatory Wage Protection System.

One of the biggest risks in global hiring is payroll mismanagement. In Saudi Arabia, even small errors in tax reporting or social contribution payments can trigger audits, fines, or reputational damage. For companies without in-country expertise, the risk isn’t worth taking. An Employer of Record removes this burden by owning the legal responsibility of payroll, executing every step with built-in compliance.

Key Ways an EOR Supports Payroll in Saudi Arabia:

• Mitigates Compliance Risk: Oversees all legal obligations for payroll, tax filings, and recordkeeping.
• Local Regulatory Expertise: Interprets and applies Saudi Arabia’s latest labor and tax changes in real time.
• Free Processing: Reduces mistakes in wage calculations and reporting through built
• Payroll Record Management: Maintains compliant payroll audit trails and documentation for each employee.

In Saudi Arabia, work permits and visas are crucial for employers hiring foreign workers or relocating staff. Employers must secure proper authorization, including Employment Visas for long-term roles, Seasonal Work Visas for temporary positions, and Business Visit Visas for short-term activities. The process involves submitting applications, attesting documents, and meeting legal requirements such as medical tests and police clearances. Employers must also comply with Saudization policies and sponsor visas for international employees.

As of August 2025, the Saudi government has launched a new skill-based classification system for all long-term (Iqama-linked) work permits, categorizing them into three skill levels: high-skilled, mid-skilled, and low-skilled. The new system has applied to current foreign employees since June 18, 2025, and will be extended to new foreign national hires from July 1, 2025.

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 12 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 to be taken within seven days 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 5 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.

In Saudi Arabia, benefits play a central role in attracting and retaining top talent. Employees often expect more than just a paycheck – they're looking for stability, healthcare coverage, pension plans, and other perks that show a company is invested in their well-being. If you're not familiar with what’s standard or required, you risk falling short. An Employer of Record helps bridge that gap by administering a locally competitive benefits package that meets both legal requirements and employee expectations.

An EOR doesn't just check boxes, they make sure your employees receive benefits that are timely, properly communicated, and well-managed from the moment they’re onboarded. From managing healthcare contributions to adjusting for regional differences in leave or bonus entitlements, an EOR acts as both a legal and operational partner. The result is a better employee experience, less administrative burden on your internal team, and greater confidence that your offer is aligned with what top candidates in Saudi Arabia actually want and need.

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:

1. Voluntary resignation by the employee
2. Mutual agreement between both parties
3. Unilateral termination by the employer (based on the probation period, specific grounds, disciplinary dismissal, or inadequate performance for the job)
4. 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:

1. During the probation period: Termination without notice is allowed (probation period now extends to 180 days)
2. Termination or resignation of an indefinite contract (open-ended and paid monthly): 60 days' notice for employers, 30 days' notice for Saudi nationals
3. Fixed-term contracts: In contract, or no notice required if not specified (employees can now resign before contract ends, effective upon employer acceptance or after 30 days without response)

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:

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