- Overview: Saudi Arabia
- Global PEO and payroll
- Global HR Compliance
- Work permit for hiring expats via PEO
- Expand without a company set up
- Contractor vs. employee: which is better?
Global HR Compliance in Saudi Arabia
If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in Saudi Arabia Guide below will help you understand the nuances of labor legislation in the country.
Companies hire international workforce for various reasons but in most cases they are:
- entering the foreign markets to sell company products. To do so, the company hires sales representatives who would represent their product and sell it to their local client base.
- hiring a global talent with unique skills that is unavailable in the local market or costs the company less than the talent with similar skills hired in the home country.
Before entering a certain foreign market or engaging a global talent, it is crucial for the company to understand how it can make local hires and reward its workers on a monthly basis. Growing companies often face a challenge of paying benefits and bonuses to the commission-based independent sales representatives they are working with.
If you intend to hire and pay your foreign workforce in full compliance with labor laws and regulations of Saudi Arabia, then the Global Employer of Record service from Acumen International may be the best way for you to go. We are an International PEO company and we specialize in global employment, meaning we can employ your employees in Saudi Arabia and act as their legal employer on your behalf. We will payroll your foreign workforce monthly and provide benefits to them through our global network so you don’t have to set up your own legal entities there.
We are experts in global workforce employment in , and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.
Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.
With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Saudi Arabia.
See Hiring and Firing Workforce in Saudi Arabia Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Saudi Arabia or would like to get more details.
Hiring and Firing Workforce in Saudi Arabia Guide
# Employment Agreements
Permanent employment contracts
The employment contract for non-Saudis must have a limited period. If the contract does not specify the duration, the duration of the work permit shall be deemed as the duration of the contract. The fixed-term contract shall be terminated upon expiration of its term. If both parties continue to implement it, it shall be deemed renewed for an indefinite period, (exception non-Saudi workers).
Fixed-term contract – the maximum permitted duration of a fixed-term contract has been extended from three years to four years.
# Employment Termination and Severance Pay (Dismissal)
An employment contract is terminated in the following cases:
- If both parties agree to terminate it, provided that the worker’s consent is in writing
- If the term specified in the contract has expired, unless the contract has been explicitly renewed in accordance with the provisions of this Law, in which case it shall remain in force until the expiry of its term
- If the worker attains the age of retirement pursuant to the Social Insurance Law, unless the two parties agree upon continuing work after this age
- In Force majeure events
- If the establishment is permanently closed
- If the activity in which the worker is employed is terminated, unless otherwise agreed
- Any other case provided for by another regulation.
Differences between terminating cooperation with locals and expats
In the case of expatriate employees, usually, the employer forces the employee who resigns to continue working until a replacement is found since the employer has the power to issue an exit-only visa and the employee prefers not to initiate legal action against the employer. In the сase of Saudi nationals, there are no such restrictions.
# It is prohibited to dismiss
Unless the contract contains specific compensation against termination by either party for an illegitimate reason, the aggrieved party is entitled to compensation as follows:
- A fifty-day pay for the worker’s each year of service, if the contract is not of a fixed term
- The wage for the remaining period of the contract if the contract is of a fixed term.
# Notice period
Dismissal of employees bound to indefinite term employment contracts, in addition to a valid reason, requires that the employee receive written notice describing the reason for the dismissal. Employees who are paid monthly must receive the notice at least 60 days prior to the termination, whereas all other employees must receive such notice at least 30 days in advance. The employer may, however, forgo the employee’s respective statutory notice period in exchange for a payment to the employee equal to the employee’s wage for the duration of the notice period.
# Severance payments
Upon the end of the work relation, the employer shall pay the worker an end-of-service benefits of a half-month wage for each of the first five years and a one-month wage for each of the following years. The end-of-service benefits shall be calculated on the basis of the last wage and the worker shall be entitled to an end-of-service benefits for the portions of the year in proportion to the time spent on the job. If the work relation is terminated due to the worker’s resignation, he shall, in this case, be entitled to one third of the reward after a service of not less than two consecutive years and not more than five years, to two thirds if his service is in excess of five successive years but less than ten years and to the full reward if his service amounts to ten or more years. As an exception, the worker shall be entitled to the full reward if he leaves the work due to a force majeure. A female worker shall likewise be entitled to the full reward if she terminates her contract within six months from the date of her marriage or three months from the date of giving birth. Upon the end of the worker’s service, the employer shall pay his wages and settle his entitlements within a maximum period of one week from the date of the end of the contractual relationship. If the worker terminates the contract, the employer shall settle all his entitlements within a period not exceeding two weeks. The employer may deduct any work-related debt due to him from the worker’s entitlements.
# Employee Benefits and Contributions
Mandatory benefits required by law to be provided by an employer
Minimum annual paid holiday, sick leave, payment on termination. A worker shall be entitled to a paid leave 10-15 days to perform Hajj only once during his service. To be eligible for this leave, the worker shall have spent at least two consecutive years of service with the employer. Saudi Arabia does not have obligatory state or employer-contribution insurance schemes.
Non-mandatory benefits that are offered by an employer
Annual bonus, Airline tickets, Transportation & Housing Allowances, International schools.
# Minimum statutory salary
Currently, Saudi Arabia has no official minimum wage for the private sector.
# Probationary period
Probation period can not exceed ninety days. In addition, under a written agreement between the worker and the employer, this probationary period may be extended by an additional 90 days and make no more than one hundred and eighty days. Such probationary period is exclusive of Eid al-Fitr and Eid al-Adha holidays and sick leaves. Each party is entitled to terminate the contract during this period, unless the contract includes a clause giving the right of termination of the contract to only one of them. A worker may not be subject to a probationary period more than once by the same employer.
Employees should not work more than five consecutive hours without a break of at least 30 minutes in any working day and should not remain at the workplace for more than 11 hours in total. Working hours do not include periods designated for rest, prayers and meals. Overtime is payable at 100% of the employee’s usual hourly wage, plus a bonus rate of 50% of basic pay. All work on Fridays and public holidays is considered to be overtime.
# Work hours
As per the labor law, working hours are 8 hours daily and 48 hours per week. During the month of Ramadan, working hours in are reduced to six hours a day and 36 hours a week for Muslim workers. For jobs involving “intermittent works” working hours shall not exceed 10 hours/day. This is reduced to 8 hours/day during Ramadan. For those who are employed as Guards and Janitors, working hours shall not exceed 12 hours/day. This is reduced to 10 hours/day during Ramadan. Friday is the weekly rest day which may be replaced with any other day of the week. 30 minutes rest period during work day should be provided and the worker shall not be made to work for more than 5 hours continuously. In no case, total working hours should be 12 hours per day. Friday is the Muslim day of rest and if company has a five-day working week, other day off would probably be either Thursday or Saturday. Saudi Arabia now enjoys a Sunday-Thursday work week, with Friday-Saturday its official weekend.
# Annual Leave
Minimum paid holidays entitlement
A worker has a right for annual leave of at least twenty-one days, to be increased to a period of not less than thirty days if the worker spends five consecutive years in the service of the employer.
Unpaid vacation entitlement
A worker, subject to the employer’s consent, may obtain unpaid leave for a duration to be agreed upon by both parties. The employment contract shall be deemed suspended for the duration of the leave in excess of twenty days, unless both parties agree otherwise.
# Sick Leave
Entitlement to paid time off
A worker whose illness has been proven can be entitled to a paid sick leave for:
- The first thirty days – full amount
- Next sixty days – 75% of the wage
- Following thirty days – without pay
- During a single year, whether such leaves are continuous or intermittent. A single year shall mean the year which begins from the date of the first sick leave.
# Parental Leave
A female worker is entitled to maternity leave with full pay for a period of ten weeks, distributed as she wishes; up to a maximum of four weeks before the likely date of delivery, which date of delivery shall be determined by a health certificate certified by a health authority. It is prohibited to employ women after the birth in any way during the next six weeks and with the right to extend the leave for one month without pay. When a female worker returns to work following a maternity leave, she is entitled to take a period or periods of rest not exceeding one hour per day in addition to the rest periods granted to all workers. Such period or periods shall be calculated as part of the actual working hours and shall not entail any reduction in wages.
Employees are entitled to one day’s paternity leave for the birth of a child. However, in many multinationals it is market practice to offer male employees an additional period of leave.
Acumen International can help you fast-track your possibilities of entering and expanding your business in Saudi Arabia by providing you with our Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any need to set up a legal entity first or afterwards.