The economy of Saudi Arabia has a long history, but it is now a huge player on the global stage. The country is the world’s biggest exporter and producer of oil.
More than 90% of Saudi Arabia’s non-oil exports are made up of electrical appliances, petrochemicals, construction materials, plastics and metal goods.
Saudi Arabia’s unique location makes it central to Asia, Europe and Africa, making it a natural channel for worldwide trade routes, not to mention a popular location for international business expansion.
Saudi riyal (SAR)
Payroll and taxes in Saudi Arabia
Saudi Arabia's federal government typically enacts all laws related to social taxes. This includes the occupational hazards branch and annuities contributions of the social insurance system.
There is no personal income tax in Saudi Arabia.
Saudi Arabia has an extensive social security system which provides old age, disability and survivor benefits for its employed and self-employed workers.
Employers’ social security contributions must be calculated on a daily rather than a monthly basis and are charged at a rate of:
12% for employees who are Saudi nationals
1.5% for employees who are foreign nationals
This is based on minimum earnings of 400 SAR and maximum earnings of 45,000 SAR.
These contributions are assessed based on the total monthly remuneration of the following categories:
Employees in Saudi Arabia pay the following contributions towards the social security system:
Social insurance - 9%
Unemployment insurance - 1%
Minimum retirement age in Saudi Arabia
In Saudi Arabia, the official pension age is 58 for employees with a minimum of 120 months of credited or paid contributions.
Minimum wage in Saudi Arabia
The monthly minimum wage in Saudi Arabia is 4,000 SAR.
Working hours in Saudi Arabia
The working week in Saudi Arabia is usually six days, with Friday as a rest day. Saudi employees typically work eight actual working hours per day, but during Ramadan, this is reduced to six hours.
Any work that exceeds the 48-hour working week must be paid as overtime. This is regulated by the employment contract or collective agreement. Daily hours can never exceed 11 hours.
Overtime that exceeds 48 hours per week should be paid at an overtime compensation rate, which typically stands at 150% of the employee’s average salary rate. Employers must also pay the employee an additional wage for any type of work performed during weekly rest days or during official holidays.
Employee Benefits in Saudi Arabia
Statutory benefits in Saudi Arabia include a shortened workday of six hours for Muslim employees during the period of Ramadan, 21 paid leave days and leave for public holidays.
To attract top talent to your business, it’s important to have a strong benefit management plan. It’s customary for employers in Saudi Arabia to offer the following supplementary benefits:
Additional health insurance
Plane tickets to go home during annual leave
Remuneration for educational training costs
Work mobile phones
Types of leave available in Saudi Arabia
Employers are required by law to provide 21 days of paid annual leave per year. Once an employee has worked for the company for five consecutive years, the leave must increase to 30 days.
All annual leave should be granted in full at the start of the year. However, employees will need to ask for permission before taking time off. All leave has to be taken in the year it was granted and employees are not allowed to forgo time off or receive any compensation in its place.
Employers are obligated to provide 90 paid sick days to all employees. This leave is paid at full wages for the first 30 days, reducing to three-quarters of the employee’s normal wage for the remaining 60 days.
If an employee has used all of their sick days, they can receive an additional 30 days of unpaid sick leave.
Maternity and paternity leave
Employees are entitled to ten weeks of paid maternity leave - four weeks prior to the due date and six weeks after the birth of a child. If the employee has worked at the company for less than 12 months, maternity leave is unpaid. Employees who have worked at a company for 1-3 years receive 50% of their wage during maternity leave, and those who have worked for more than three years receive their full wages.
Employees who take maternity leave at full wage can take their annual leave, but this must be unpaid. Those taking maternity leave at 50% of their wage are also entitled to annual leave, but this will be at half of their normal wage.
Employees who have returned from maternity leave are also entitled to periods of rest of up to one hour a day for the purpose of feeding their newborn child according to Article (153) of the Labor Law. This is in addition to rest periods granted to all employees and is calculated based on their actual working hours and will not be be subject to any reduction in wages.
Employers must legally provide employees on maternity leave with medical care during pregnancy and delivery.
New fathers are entitled to three days of paid parental leave.
Saudi workers who have never performed the ritual pilgrimage to Mecca and Medina are entitled to between 10 and 15 days of paid leave at one point during their tenure in order to perform the pilgrimage.
Employers must allow paid leave to all student workers on examination days on the condition that the employees are not repeating a school year. If a staff member does need to repeat a schooling year, they are entitled to unpaid leave on examination days.
The Saudi government grants newly married employees three days of paid leave.
In the event of the death of a spouse or child, employees are allowed 5 days of leave.
If a female employee’s husband passes away, she is entitled to 15-130 days of paid leave, depending on the conditions of her religion.
Public holidays in Saudi Arabia
Saudi Arabia observes the following public holidays:
To differentiate your company from others in Saudi Arabia, consider building an employee benefit program that enables your employees to grow within their careers as well as achieve a good work-life balance.
Career development opportunities
Employees who are high performers often seek ways to learn new skills and will be attracted to companies that offer opportunities for career development. You could offer training, professional development plans or one-to-one mentoring programs.
No matter how you choose to build these opportunities into your benefits package, it’s important to focus on offering prospective employees a clear vision of their professional pathway and how they might grow within your organisation.
Introduce policies that promote a strong work-life balance
Work-life balance is an essential construct of the quality of work-life for employees. When work begins to interfere with home life, it can have a detrimental effect on both morale and productivity.
Where possible, companies should provide flexible working conditions that enable their employees to stabilise their work-life balance, whether that’s through flexible working hours or remote and hybrid work environments.
Termination of employment in Saudi Arabia
Under Saudi Arabia's Labor Law, there are two types of contracts: fixed-term contracts and indefinite (open) contracts. A fixed-term contract typically includes a predetermined notice period stated in the employment contract; if this is not the case, the contract will expire once it reaches the end of its term without notice.
For indefinite employment contracts with an unspecified period, both the employee and employer must provide notice least 60 days in advance if they wish to terminate the employment relationship according to Article (75) of the Labor Law.
Employees are entitled to resign due to misconduct by their employer without providing any notice underArticle 81 of the Saudi Labor Law. Employers can also terminate a contract without notice if the termination is due to misconduct.
If an employee resigns during their probationary period, they must provide one day’s notice.
According to Saudi law, probationary periods must not exceed 30 days.
Employees in Saudi Arabia are entitled to End-of-Service awards following the below formula:
15 days of pay for each of the first five years of employment
A full month of pay for each year of service after that
The basis for this should be the employee’s last noted wage.
What are my options for hiring in Saudi Arabia?
If you’re looking to expand your business to Saudi Arabia, a company like Airswift can help you get started. We offer employment solutions designed to ensure you stay compliant across all local requirements, including tax, payroll, termination procedures and working hour obligations.
Our in-country teams have the expertise and knowledge necessary to save your organisation from unnecessary risk, freeing up your time to focus on the other prospects of international business growth.
Whether you want to hire for an urgent project or need to cover a staffing shortage, we are committed to finding a contractor to suit your needs. Our contract hire services are catered to organisations that need temporary hires to fulfil a range of requirements.
Finally, if you’re looking to hire candidates that can grow with your company, we have professional search services that provide access to highly skilled job seekers who are ready for work. We also take care of all the administrative processes, from shortlisting candidates to screening and onboarding them.
Employer of record
We can help you hire employees without setting up a local entity. Working with an Employer of Record in Saudi Arabia allows you to get up and running in as little as 72 hours. Once your employee has been given the green light, we will take care of everything from onboarding and benefits management to tax filings and annual leave allowance.
*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.
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