How To Hire And Pay Employees In Saudi Arabia

Emerald Technology's guide to hiring employees in Saudi Arabia

CURRENCY

Saudi Riyal is the official currency of Saudi Arabia. Its currency symbol is , SAR.

CAPITAL CITY

The capital and largest city Riyadh, home to Mecca and Medina.

LANGUAGE

Arabic is the official language of Saudi Arabia. English is also widely incorporated.

POPULATION The current population of Saudi Arabia is 35.34 Million 2021 based on World bank numbers.
PAYROLL FREQUENCY

Salaries are paid monthly or weekly.  Hourly/ Weekly workers must be paid at least once a week.

PUBLIC HOLIDAYS Saudi Arabia has 3 public holidays

GROW YOUR TEAM IN SAUDI ARABIA

NO ENTITY, NO PROBLEM

To start growing your team in Saudi Arabia, you must establish a local entity- including an account with a local bank, a local office and an address registered as a subsidiary. This allows you to manage payroll, tax, benefits and compliance for your employees, but can take several months. 

Emerald can hire and payroll your workers, quickly and compliantly with their ready to go entity. Make growing your team simple with Emerald as a global partner.

PROS AND CONS OF HIRING IN SAUDI ARABIA

Home to most of the Saudi royals, the capital city Riyadh is growing as one of the main economic hubs in the Middle East. With a recent pivot on the national business model, Saudi Arabia is becoming a good environment to foreign companies looking to get established in the region. By doing business in the country, companies have access to one of the most permissive tax regimes. 

Getting setup in Saudi Arabia can be a lengthy and expensive process – administrative and immigration processes are known to take long periods of time and the initial investment can be significative. With improving levels of English proficiency, Arabic is still expected for most of the official documentation and processes. 

Take into consideration that administrative processes take long amounts of time, a big investment is needed to start business in the country and the recurrent annual costs can be substantial, pairing up with an already established partner can be beneficial. 

Employee costs in Saudi Arabia are expected to be 10-15% of their salary. 

WHY SAUDI ARABIA IS GOOD FOR REMOTE WORKERS

The Saudi government has recently invested significatively in process digitalization and in information technology infrastructure. For example, all the country has access to fast internet. Since the COVID-19 pandemic, remote working is more common and accepted with companies offering fully remote options as hybrid alternatives to its workers. 

With more than a third of the country’s population being expatriates, Saudi Arabia has very good living conditions to offer if one is willing to adapt to the country traditions and rules.  

There are specific rules for foreign/Saudi individuals. Generally, income tax to employees is not applicable. Individuals might be subject to income tax if their work has generated qualifying Saudi-source income. 

START GROWING YOUR REMOTE WORKFORCE NOW

WORKING TIME AND OVERTIME IN SAUDI ARABIA

The typical working week in KSA is 48 hours (eight hours per day, six days per week). The working day may decrease to six hours per day during Ramadan. Fridays are usually considered a rest day. All work exceeding the standard weekly working hours must be paid at an overtime compensation rate, which is typically 150% of the employee’s average salary rate. Daily working time cannot exceed 11 hours.

ANNUAL LEAVE AND SAUDI ARABIA'S PUBLIC HOLIDAYS

The annual leave entitlement in KSA is dependent on the employee’s length of service, as follows: 1-5 years' service: 21 days of annual leave 5+ years' service: 30 days of annual leave Employees may carry over any untaken leave with the employer’s written consent. Employees may request ten additional days of unpaid leave per year, subject to the employer’s approval. 

There are 3 public holidays in KSA.

May 2nd: Eid Al Fitr

July 10th: Eid Al Adha

September 23rd: Saudi Arabia's National Day 

 

PROBATION PERIOD IN SAUDI ARABIA

The typical probation period in KSA is 90 days. This may be extended, subject to the employee’s written consent, but cannot exceed 180 days. One day’s notice is required to terminate the employment relationship during the probation period.

RESIGNATION AND DISMISSAL IN SAUDI ARABIA

The termination process is based on the type of contract and reason for termination. The employer must give a valid reason for the dismissal of an employee. If an employer cannot provide lawful reasoning, compensation may be issued. If an employee resigns, the employer must issue their final salary immediately.

The mandatory notice period is 30 days for employees on a fixed term contract and 60 days for employees on an indefinite contract. Employees are entitled to the following end of service benefits in the event of termination by the employer.

  • 50% of salary for each year served for the first five years
  • 100% of salary for each year served after the first five years

Employees who resign are entitled to the following end of service benefits:

  • Under two years' service: no payment 
  • 2-5 years' service: one third of accrual
  • 5-10 years' service: two thirds of accrual
  • 10+ years' service: full accrual

RESTRICTIVE COVENANTS

Restraints that protect the employer's legitimate business interests may be enforced if reasonable. Non-compete clauses are honoured as long as they are in writing and clearly specify place, duration (no longer than two years), and type of work. If there is no written agreement, or an express non-compete clause is not included in an employment contract, the law will not impose any restrictions. Confidentiality clauses must also be in writing and clearly specify place, type of work, and duration, although there is no specific time limit on these restrictions. If an ex-employee breaches a non-compete or confidentiality clause, the former employer may sue them within one year after discovering the breach. Customer non-solicit clauses are permissible in narrow circumstances and employee non-solicit clauses are acceptable.

READY TO HIRE YOUR EMPLOYEES IN SAUDI ARABIA?

CONTRACT OF EMPLOYMENT IN SAUDI ARABIA

The Ministry of Human Resource and Social Development has drawn up a standard employment contract that complies with the Labour Law. In addition to the core terms in this standard employment contract, the employer and the employee may agree to add any other terms and conditions as long as they do not conflict with the Labour Law. Any provision in an employment contract that contradicts the provisions of the Labour Law is deemed null and void. Employment contracts must be in Arabic (as must all employment-related records and files, and instructions issued by employers to workers). If another language is used alongside Arabic, the Arabic text prevails. Employers are required to upload all employment contracts to an online portal run by the General Organisation for Social Insurance (GOSI) for authentication.

SAUDI ARABIA'S MATERNITY LEAVE

Expectant mothers are entitled to 10 weeks’ paid maternity leave commencing four weeks before their due date. The payment of maternity leave is dependent on the employee’s length of service, as follows:

  • 1-3 years' service: 50% of employee's normal salary rate
  • 3+ years' service: 100% of employee's normal salary rate

Employees receiving the full maternity leave entitlement may not also take the payment of annual leave in the same year. In contrast, an employee receiving 50% of their salary as a maternity benefit may also take an annual leave entitlement of 50% in the same year.

Fathers are entitled to 3 days’ paid paternity leave for the birth of a child.

SICKNESS LEAVE IN SAUDI ARABIA

Employees are entitled to 365 days of sick leave (1 year). The first 20 days of sick leave are paid by the employer. After the first 20 days the sick pay is then paid by social security. After one year, if the employee is not fit to return to work, they can apply for a disability pension. To qualify for the social security fund sick payments, an employee must have at least 3 months continuous service.

SOCIAL SECURITY

For non-Saudi employees, the employer is required to contribute 1.5% Social Insurance Tax, which covers occupational hazard (minimum earnings 400 SAR, maximum earnings 45,000 SAR). For Saudi employees, the employer is required to contribute 12% Social Insurance Tax, which covers occupational hazard, pension, and unemployment (minimum earnings 1,500 SAR, maximum earnings 45,000 SAR). All Social Insurance Tax contributions must be calculated on a daily rather than a monthly basis.

HEALTHCARE AND INSURANCE

Sponsor employers must provide foreign employees with medical insurance. Healthcare in KSA is currently provided free of charge to all Saudi citizens and expats working in the public sector.

Employment of

FOREIGN NATIONALS IN SAUDI ARABIA

A foreign national wishing to acquire a work visa in KSA must be sponsored by an employer. The employer must be registered with the Ministry of Interior, where a file will be opened with all the information on the employer’s foreign employees. Saudi Arabia’s quota system and nationalisation program can make the process of employing a foreign national relatively complex and restrictive. Applicable procedures involve a home-country consular process, followed by several post-arrival steps before final residency rights are granted. This does not apply to citizens from Bahrain, UAE, Kuwait, and Oman, who may enter KSA with their ID.
Salary Taxes

MINIMUM WAGE IN SAUDI ARABIA

The national minimum wage in KSA is 4,000 SAR per month.

SAUDI ARABIA'S INCOME TAX

No personal income tax is payable in KSA.

SALARY PAYMENTS IN SAUDI ARABIA

The payroll frequency is weekly or monthly. The employer must make the payment for weekly employees once a week and for monthly employees, at least once a month.

SOCIAL SECURITY CONTRIBUTIONS IN SAUDI ARABIA

Non-Saudi employees are required to contribute 10% Social Insurance Tax to cover occupational hazard, in addition to an employer contribution of 1.5%.

WORKER MISCLASSIFICATION IN SAUDI ARABIA

Similar to other countries, Saudi Arabia has strict rules on classifying individual contractors and full-time employees differently. Misclassifying your workers can put your business at risk of fines.

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