Employment Law

Employment Contracts in Saudi Arabia

Employers hiring employees in Saudi Arabia are encouraged to draft strongly worded written employment contracts. In addition to describing the job and the employee's responsibilities, the employment contract should also describe the rate of compensation, any benefits, and agreements regarding resignation and termination. Contracts should be drafted in Arabic and all references to wages should be expressed in Saudi Riyals (SAR).

Saudi Arabian law allows for a trial period of up to 90 days. If the employer and the employee agree to extend the probation period, the probation period can be extended for another 90 days.

When an employee completes three consecutive fixed-term contracts or works for the employer for four consecutive years, his or her contract is automatically converted to an open-ended contract.

Remoly's Saudi Arabia PEOs provide compliant employment contracts that comply with Saudi Arabia's complex workplace regulations.

Fixed Term

Indefinite

Working Hours in Saudi Arabia

The typical working week in Saudi Arabia is 40 to 48 hours. Working hours are generally eight hours a day, six days a week. If employees work more than 40 hours per week, they are entitled to overtime pay, which is 1.5 times the regular hourly rate. There is no upper limit on overtime hours.

During Ramadan, the working day in Saudi Arabia is reduced to six hours. While this policy generally applies to all employees, only Muslim employees are required by law to make this adjustment.

Working Week in Saudi Arabia

Typical working hours in Saudi Arabia are 40 to 48 hours per week. Typically, this means that work-related tasks and responsibilities will be performed 8 hours a day, 6 days a week. If an employee works more than 40 hours per week, he or she is entitled to overtime pay at 1.5 times the regular wage. There is no upper limit on overtime hours.

During Ramadan, the working day in Saudi Arabia is reduced to six hours a day. While this policy generally applies to all employees, only Muslim employees are required by law to make this adjustment.

Saudi Arabia Holidays

Saudi Arabia celebrates two religious holidays, Eid al-Fitr and Eid al-Adha. These festivals last for three and four days respectively. Additionally, Saudi Arabia celebrates the Kingdom's Unity Day on September 23.

Employment Taxes in Saudi Arabia

Employers in Saudi Arabia must pay GOSI, or social insurance tax, on their employees. These payments are based on the employee's base salary, housing allowance and other specified allowances. Employers are also required to contribute 2% to employees' occupational hazard insurance (similar to workers' compensation).

Health Insurance

Saudi Arabia's national healthcare system provides healthcare and hospital care to the country's citizens. Foreign employees often receive supplemental health insurance as an additional benefit.

Holiday Policy

Take a Vacation

The minimum holiday in Saudi Arabia is 21 days, which can be taken after employees have worked for the company for at least one year. Starting from the sixth year of employment, the statutory minimum holiday is 30 days. Employers may have separate policies regarding carryover of unused time to the next year of service or limits on carryover of vacation time.

In addition, Muslim employees who have worked for the company for at least two consecutive years are also entitled to Hajj leave. The maximum period of leave is 10 days and can only be taken once within five years with the same employer.

Sick Leave

Employees are generally entitled to up to four months of sick leave if they provide their employer with a medical certificate. The first 30 days of sick leave are 100%, the 31 to 90 days are 75%, and the 91 to 120 days are unpaid.

Maternity and Paternity Leave

Female employees in Saudi Arabia are generally entitled to 10 weeks of paid maternity leave as long as they have been with their employer for at least one year. Four of these 10 weeks can be done before the baby is born, but at least 6 of the remaining 10 weeks must be done after the baby is born.

Maternity leave is entitled to half pay if the employee has worked for the employer for at least one year. Employees are entitled to fully paid maternity leave if they have worked for their employer for at least three years. Employees can take annual leave in the same year as they take maternity leave. However, if employees choose to do this, they will only receive half pay or no pay, depending on the length of maternity leave that has been granted.

Employers in Saudi Arabia are also required to pay for female employees’ medical expenses during pregnancy and childbirth.

Fathers can take up to three days of paid paternity leave.

Termination and Severance

Employees are generally entitled to receive notice before being dismissed. Employees with a written limited contract are entitled to receive 30 days' notice prior to termination. Those on unrestricted contracts are entitled to 60 days' notice. Alternatively, both the employer and employee can agree to indemnity instead of notice.

Make sure the contract has no notice period.

During the notice period, employees can use up to eight hours per week to find alternative employment.

Upon termination of the employment contract, the employee is entitled to severance pay, namely:

• Equal to half of one month’s average salary for each of the first five years of employment
• Equivalent to the salary for one full month of work every year after the fifth year

For companies expanding overseas for the first time, dealing with employee layoffs and dealing with severance packages can be complicated. Remoly's Saudi Arabia PEOs can reduce risk for foreign companies and provide guidance along the way.  

Salary and Benefits

Saudi Arabia Compensation Law

While there is no minimum wage in the private sector in Saudi Arabia, public sector employees must earn an annual salary of at least US$7,585, which is equivalent to approximately 28,444 Saudi Arabian Riyals (SAR). The wage law also stipulates that overtime pay is 100% of an employee's regular hourly wage, plus a 50% bonus. Any work performed on a Friday or public holiday is considered overtime.

Severance pay in Saudi Arabia is 15 days' wages for the employee's first five years of service and a full month's wages each year thereafter. For Saudi Arabian nationals, they are entitled to additional severance pay under their employment contracts.

Welfare Protection in Saudi Arabia

Employers must, at a minimum, provide their employees with the benefits specified in state employment regulations. These statutory benefits include:

• Muslim employees have reduced working days during Ramadan (six hours)
• 21 days of paid vacation per year
• Public holidays announced by the government every year

Although the statutory minimum number of days of paid leave is 21 days, it increases to 30 days after an employee has worked for the employer for six years.

Muslim employees are entitled to leave to perform Hajj after two years of employment with their employer. This form of leave may only be taken once within five years of employment and shall not exceed 10 days.

Saudi Arabia Benefits Administration

In Saudi Arabia, benefit administration plans should include supplementary benefits. This will enable businesses to attract and retain high-level talent. It is considered "normal" for employers to provide the following services to their employees:

• supplemental health insurance
• Flight ticket home for vacation
• money for education expenses
• retirement plan
• cell phone
• housing subsidy
• transportation subsidy

Benefits and Compensation Limitations

Employers in Saudi Arabia should pay attention to their employees’ sick leave. While employees are typically entitled to four months of sick leave, they need a medical certificate to take that long. If employees have a medical certificate, they are entitled to full salary for the first 30 days, 75% of salary for days 31 to 90, and unpaid leave for days 91 to 120.