Employment contracts in Saudi Arabia should be written and in the Arabic language. If the employee is a foreigner, then a translated copy should be attached to the Arabic contract. There are three types of employment contracts in Saudi Arabia: definite term, temporary and indefinite term. The definite-term contract expires either by the expiration date or by work completion. It can be renewed for the same period only three times. It automatically becomes an indefinite-term contract after the expiration of the third renewal or when the employee continues the work after its expiration without the employer renewing the contract. Temporary contracts are for specific hours per day or specific days per week and should not exceed 90 days. The indefinite contract does not have an expiration date and can be terminated by either party.

Employment contracts for non-Saudi nationals are deemed to be fixed term. If the employment contract does not specify its duration, it is deemed to be equal to that of employees’ residency visa and work permit.

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

The working week in Saudi Arabia is typically 48 hours, 8 hours per day, 5 days per week. The working day may decrease to 6 hours a day during the period of Ramadan.

Overtime

All work exceeding the standard working hours per week is to be paid as overtime and is regulated by employment contracts/collective agreements. Daily hours cannot exceed 11 hours. From the 8th hour the worker must be paid at a rate of 150% salary. Timesheets are required when an overtime set up is required.

Exemptions are in place depending on the type of worker e.g. persons occupying high positions of authority in management and policy.

In accordance with Article 117 of the Labor Law, employees are entitled to 120 days of sick leave per year whether sickness is continuous or intermittent, as follows:

• Full pay for the first 30 days of illness

• 1/3 pay for the next 60 days of illness

• Unpaid leave for a further 30 days of illness

Sick leave is paid by the Employer.

Employees are required to provide a medical certificate for all sick days.

Maternity Leave

Female employees are entitled to 10 weeks of paid maternity leave commencing four weeks before the expected due date. It is not permitted to work during the 6 weeks immediately following the birth.

Payment of maternity leave is made by the Employer, at a rate dependent on the employee’s seniority. Employees with at least 1 year service are paid at a rate of 50% pay. Employees with at least 3 years of service are paid at a rate of 100% regular pay.

Employees receiving full pay during maternity leave are not permitted to also take the payment of annual leave in the same year. However, employees receiving 50% pay may also take half of their paid annual leave entitlement in the same year.

Paternity Leave

The father/partner is entitled to 3 days of paid paternity leave after the child’s birth (Article 113 of the Labour Law).

Parental Leave

There are no provisions in the law regarding parental leave.

In Saudi Arabia (Article 109 of the Labor Law), the annual leave entitlement is dependent on the employee’s seniority as follows:

• 21 days of annual leave for employees with one to five years of service

• 30 days of annual leave for employees with more than five years of service

Employees may carryover any untaken leave to the following vacation leave with the employer’s written consent.

Employees may request ten additional days of unpaid leave per year, subject to the employer’s approval.

Depending on the collective agreement/employment contract terms, an employee may be allowed additional leave types, once approved between the employer and employee, for the following:

Bereavement leave: In the event of the death of an immediate member, an employee is entitled to 2 days of bereavement leave.

Marriage leave: An employee is entitled to 3 days of leave in the event of their wedding.

Hajj leave/Pilgrimage leave: As per Article 114 of the Labor Law, an employee is entitled to 10 to 15 days (including the Eid Al-Adha holiday) to perform Hajj if the employee has completed at least 2 consecutive years of service with the employer. However, this entitlement arises only if the employee has not performed Haj previously.

The local government decides each year if holidays falling on the weekend are lost or moved to a working day in lieu.

Religious holidays are determined by the lunar cycle and will show as tentative until they are confirmed nearer the date of the holiday.

Date Day Holiday Notes

13 Feb 2024 - Tuesday - National Sports Day - Final

8 Apr 2024 - Monday - Eid al-Fitr Holiday

9 Apr 2024 - Tuesday - Eid al-Fitr Holiday

10 Apr 2024 - Wednesday - Eid al-Fitr Holiday

11 Apr 2024 - Thursday - Eid al-Fitr Holiday

17 Jun 2024 - Monday - Eid al-Adha (Feast of Sacrifice) - Tentative

18 Jun 2024 - Tuesday - Eid al-Adha Holiday - Tentative

19 Jun 2024 - Wednesday - Eid al-Adha Holiday - Tentative

18 Dec 2024 - Wednesday - National Day - Final

Saudi Arabia provides citizens with healthcare, while companies offer expat employees supplementary private healthcare insurance.

The termination process varies according to the employment set up and is based on the type of employment contract and reason for termination, which must be specified in writing.

The justifiable reasons for dismissal include misconduct, unauthorized absence, failure to perform job duties deemed essential, failure to comply with rules for health and safety, assaulting the employer, disclosure of industrial or trade secrets. When using fixed term contracts, justified dismissal can also be by non renewal of the contract at the end date, termination as specified in the contract’s terms, conversion of the contract to an indefinite term or expiration of the work permit (for expatriate employees). When dismissal is due to disciplinary reasons, a process must be followed which includes notifying the worker in writing of the allegation within 30 days of the employer discovering the alleged offence followed by a meeting to question the employee on the allegation and allow the employee to defend themselves. If disciplinary sanction is found, the employee must be notified in writing within 30 days of the investigation completion.

Where the dismissal reason given is found to be illegitimate, additional compensation must be paid at 50 days pay for each year of the worker’s service when on an indefinite term contract or the outstanding wages for the remaining period of a fixed term contract; in both cases the minimum compensation may not be less than two months’ wages.

It is also possible to end employment via a Mutual Termination Agreement providing there is written consent from the employee.

It is not permitted to terminate workers whilst they are on maternity or medical leave.

Notice Period

In Saudi Arabia, the notice period is dependent on the type of contract in place.

For termination or resignation of an indefinite term contract (open-ended and paid monthly), 60 days’ notice is required. For fixed-term contracts, 30 days notice is required.

During the probation period the notice period is 1 day.

Severance Pay

End of Service Benefits (EOSB) is payable only at the end of the employment relationship, not before. Both Saudi and Non-Saudi employees are entitled to EOSB.

If the employer ends the employment, the benefit is calculated by adding ½ a month’s wage for each of the first 5 years and 1 month’s wage for each subsequent year of service. For fractions of a year, the employee is entitled to proportionate EOSB. EOSB is calculated on the basis of the employee’s last salary.

If the employee resigns, they are entitled to 1/3 of the award after service of no less than 2 consecutive years and not more than 5 years of service. 2/3 if their service is in excess of 5 successive years, but less than 10 years; and to the full award if their service amounts to 10 or more years.

If an employee is called to military service or cannot work because of force majeure, they are entitled to EOSB. Female employees are entitled to EOSB if they resign within 6 months of marriage or within 3 months of childbirth.

Probation Period

In Saudi Arabia, the probation periods may vary depending on the employment contract in place. However, the probation period is typically 90 days and may be extended subject to the employee’s written consent but cannot exceed 180 days.

Employer Payroll Contributions

9.00% - Social Insurance Tax for Saudi employees, includes pension applied on income between 1,500 and 45,000 SAR monthly. Foreign workers are exempt from contributions to social insurance.

1.00% - Unemployment Insurance Tax for Saudi employees, applied on income between 1,500 and 45,000 SAR monthly. Foreign workers are exempt from contributions to unemployment insurance.

2.00% - Occupational Hazard

2% to 12.00% - Total Employment Cost

Employee Payroll Contributions

9.00% - Social Insurance Tax for Saudi employees, includes pension, applied on income between 1,500 SAR-45,000 SAR. Foreign workers are exempt from contributions to social insurance.

1.00% - Unemployment Insurance Tax for Saudi employees, applied on income between 1,500 SAR-45,000 SAR. Foreign workers are exempt from contributions to unemployment insurance.

9.75% Total Employee Cost

Employee Income Tax

0.00% - There is no individual income tax regime in Saudi Arabia, earnings from employment are not subject to income tax

Payroll Cycle

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

13th Salary

13th-month payments are not mandatory. However, employers can pay performance-based bonuses at their discretion.

For an employee to acquire a work visa in Saudi Arabia, a third-party national must be sponsored by an employer. The employer must be registered with the Ministry of Interior and a file is opened with all the information on the employer’s foreign employees. Saudi Arabia’s quota system and nationalization 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.

Business travelers typically apply for a Business Visit Visa at a Saudi consular post once they receive a government-approved letter of invitation from a sponsor in Saudi Arabia. Business Visit Visas are usually valid for three months (single entry) or 12 months (multiple entry), or up to five years (multiple entry) for citizens of countries that signed bilateral visa agreements with Saudi Arabia. The maximum allowable duration of stay under a single-entry visa for three and six months is 30 days; for visas with other validities it is 90 days.

There is no longer a short-term work option in Saudi Arabia. For long-term work, foreign nationals can apply for a Work Permit and Resident ID Card, which is valid for up to one year with the possibility of extensions.

This does not apply to citizens from Bahrain, United Arab Emirates, Kuwait, and Oman. Citizens from these countries may enter with their ID.

There is a new short-term work visa for certain foreign nationals, available via an online platform, Qiwa. This new visa enables qualified employees to work in Saudi Arabia for a visa-sponsoring entity for up to 90 days per visa issuance in one year. During the course of the one-year period (i.e. from the date of first entry into KSA), it will be possible to reapply for new temporary work visas at the end of each 90-day period. To apply, employers will need to be classified as at least “medium-green” in the Saudisation scheme, comply with obligations in the Wage Protection System, and ensure that foreign workers have valid work authorization. The quota will be limited to 50 visas per employer and visas will not be transferrable to other entities. It is expected that many employers will take advantage of the new temporary work visa, as businesses in the KSA have been seeking a legally compliant solution for short-term work assignments. More foreign national-friendly programs are expected in Saudi Arabia in the future as additional foreign labor will be needed to fill positions in the NEOM – a cross-border city in northwest Saudi Arabia that is planned to be built by 2025.

The standard of VAT in Saudi Arabia is 15%.

Setting up a legal entity

Login to the Ministry of Commerce online system used for registration here and follow the registration process:

• Access the service.

• Enter your username and password.

• Select [My Commercial Registrations] and then select [Issue Commercial Registry].

• Choose the activity level (First, Second or Third).

• The commercial registration period between one to five years.

• Record all data related to fiscal year, capital, facility address and contact information.

• Confirm the request and select [send].

• A payment bill will be issued, and you will receive a text message on your phone.

• After-Submission: When the payment is completed, you can benefit from the service by simply printing the commercial registry without having to visit any of the branches of the Ministry.

Registration as an employer

Employers must register with the regional GOSI office within two weeks of initiating activities by filing Form 1. Employers must register all new workers by the 15th of the month following the month in which the new workers were hired.

New Employee Registration

Employees must be registered as soon as the employment contract has been signed. Expat employees are registered during the visa application process and must also be registered with GOSI. The GOSI registration process is completed through an online GOSI portal and each entity has a unique GOSI number. Saudi employees must be added as part of the onboarding process on the first working day.