Employer of Record in Saudi Arabia: A Comprehensive Guide for 2026

Introduction

Employment in Saudi Arabia's private sector is governed by the Labor Law (Royal Decree No. M/51 of 2005), enforced by the Ministry of Human Resources and Social Development (HRSD). All non-Saudi workers must hold written, fixed-term contracts tied to employer-sponsored work permits.

What sets Saudi Arabia apart is the Saudization system, known as Nitaqat, which assigns every private employer a compliance band based on their Saudi national headcount. The band directly controls work permit access, and falling below the required threshold means losing the ability to issue or renew permits for foreign hires.

An Employer of Record (EOR) in Saudi Arabia removes the entity requirement, acting as the legal employer so foreign companies can hire without setting up a local company first.

This guide covers employment contracts, statutory entitlements, Saudization, termination and end-of-service rules, work permits, payroll, and how an EOR supports compliant Saudi Arabia hiring.

Saudi Arabia at a glance

Population: 35.18 million

Currency: Saudi Riyal (SAR)

Capital: Riyadh

Languages: English and Arabic

GDP: 1.24 trillion USD

How does employment regulation work in Saudi Arabia?

Employment in the Saudi private sector is governed by the Labor Law (Royal Decree No. M/51 of 2005), which the Ministry of Human Resources and Social Development (HRSD) enforces. It sets the minimum standards for contracts, working hours, leave, and end-of-service, and an employer cannot contract below them.

The law covers private-sector employees, both Saudi nationals and expatriates, and excludes some categories such as domestic workers, who fall under separate regulations.

What are the types of employment contracts?

Saudi law recognizes two main contract types: indefinite (permanent) and definite (fixed-term). An indefinite contract runs without an end date and is available to Saudi nationals. A fixed-term contract runs for an agreed period.

For a non-Saudi worker, the contract must be written and fixed-term, and if it does not state a term, it is treated as running for one year and renews automatically while the work continues. Saudi law also recognizes part-time, temporary, seasonal, and flexible work models.

What are the statutory employee entitlements in Saudi Arabia?

Every private-sector employee is owed a set of statutory minimums.

What are the Saudi Arabia public holidays in 2026?

Public holidays are separate from annual leave and are paid. Saudi Arabia has four national holidays. The two Eid holidays follow the Islamic lunar calendar, so their dates shift each year. For 2026, they fall as below.

What is the difference between contractors and full-time employees?

An employee works under the company's management or supervision for wages, on a written contract. A contractor works independently, under Saudi's freelance framework, and carries their own arrangements.

A foreign national cannot operate as an independent contractor without a separate legal basis, and directing an expatriate worker under the company's supervision while treating them as a contractor risks reclassification as employment under the Labor Law, with the entitlements and end-of-service award that brings.

Whether you engage contractors for project-based work or hire full-time employees for ongoing roles, each model carries different authorization and compliance obligations. Skuad supports both hiring models from a single platform:

EOR for full-time employees

• Acts as the legal employer across 160+ countries, so you can hire without setting up a local entity
• Supports employment contract generation aligned with local labor laws across supported markets
• Facilitates statutory contribution workflows covering applicable social insurance and pension obligations
• Supports payroll processing in 70+ currencies with automated tax withholding and year-end reconciliation
• Helps administer statutory benefits, paid leave, and parental entitlements in line with local requirements
• Assists with termination and offboarding, including notice periods and severance calculations as required locally

Contractor management

• Helps onboard contractors with locally compliant agreements that reduce misclassification exposure
• Supports invoice generation, approval workflows, and payment processing
• Helps flag classification risk before it becomes a compliance issue with built-in worker classification checks
• Facilitates multi-currency payouts across 70+ currencies
• Helps manage contractor records, contracts, and payment history from a single dashboard alongside full-time employees

Full-time or contractor, Skuad supports both. See pricing.

What are the key things to know about hiring in Saudi Arabia?

Most hiring in Saudi Arabia runs alongside Saudization, the government rule that a set share of the workforce must be Saudi nationals, while expatriates are hired on employer-sponsored work permits.

Companies source candidates through referrals, direct applications, and online job boards. Common job boards include Bayt, Expatriates, and Gulf Talent.

What is Saudization (Nitaqat)?

Saudization, run through the Nitaqat program, and it is Saudi Arabia's workforce localization policy. The Ministry of Human Resources and Social Development classifies each private establishment into Platinum, High Green, Mid Green, Low Green, or Red, based on the share of Saudi employees and the total headcount.

The required share varies by sector and company size. The band matters directly for a foreign employer because it controls work-permit access.

Establishments at Mid Green and above can renew work permits for foreign employees and apply for new work visas, while a Red-band establishment cannot apply for new visas or renew work permits and loses access to Ministry services. Holding a Green band is what lets a company keep sponsoring and renewing its expatriate staff.

Saudization tightened through 2026 with a new phase and profession-level quotas. As one example, from January 2026, marketing and sales professions require a 60% Saudization rate at establishments with three or more such workers, with a minimum wage of SAR 5,500 for a Saudi to count toward that quota.

Saudization requires private-sector companies to maintain a set share of Saudi nationals, with the Nitaqat band directly controlling work-permit access. Every foreign hire must also clear a medical exam and biometrics before an Iqama is issued.

Skuad supports background checks as part of the hiring workflow, covering identity verification, employment history, criminal records, and education credentials, so you have a clear picture of who you are onboarding before contracts are signed.

What are the probation and termination rules in Saudi Arabia?

Ending an employment relationship in Saudi Arabia follows a set order: A probation window early on, notice rules and valid grounds when the contract ends, and an end-of-service award paid on the way out. The sections below cover each one and what an employer owes at each stage.

What is the probation period in Saudi Arabia?

Probation must be stated in the employment contract. It can run up to 90 days, and can be extended to a total of 180 days by written agreement. Eid al-Fitr, Eid al-Adha, and sick leave do not count toward it. Either party can end the contract during probation, unless the contract gives that right to only one side. If the contract ends during probation, neither side owes compensation, and the worker earns no end-of-service award.

How does termination of employment work in Saudi Arabia?

A Saudi employment contract can end in several ways: By mutual written agreement, at the expiry of a fixed term, by resignation, or by either party's decision in an indefinite contract. It can also end when the worker reaches the retirement age set under the Social Insurance Law, unless both sides agree to continue, or through force majeure, permanent closure, or a court ruling in bankruptcy.

Ending an indefinite contract needs written notice. For a worker paid monthly, the employer gives at least 60 days, and the worker gives at least 30 days. If the pay is not monthly, the notice is 30 days either way. A party that does not serve notice pays the other the wage for that period.

An employer can dismiss a worker without notice or an end-of-service award only on specific grounds set out in the law, such as assault, forged documents, a serious failure to perform the job, or disclosing work secrets, and only after giving the worker a chance to respond. A worker can likewise leave without notice and keep their entitlements if the employer breaches its obligations.

If a contract is ended without a valid reason, the affected party is owed compensation: 15 days' wages for each year of service on an indefinite contract, or the wages for the remaining term on a fixed-term contract.

How is the end-of-service award calculated in Saudi Arabia?

When a job ends, the employer pays an end-of-service award. It runs at half a month's wage for each of the first five years, and one month's wage for each year after that, based on the worker's last wage. It applies to Saudi and non-Saudi employees alike.

If the worker resigns, the award is reduced by the length of service. No award for below two years; one-third from two to five years; two-thirds from five to ten years; and the full award at ten years or more.

Ending an indefinite contract in Saudi Arabia requires at least 60 days' written notice from the employer, a formal written investigation before any dismissal for cause, and an end-of-service award at half a month's wage per year for the first five years and one month per year after that. Getting the settlement calculation wrong or bypassing the investigation step creates compensation liability equal to the wages for the outstanding period.

Skuad's Shield compliance layer helps your team stay aligned with termination and offboarding obligations across supported markets, without independently tracking every regulatory update. Here is what Skuad supports:

• Termination and offboarding support aligned with local labor requirements across supported markets
• Notice period and severance calculations in line with statutory obligations
• Employment documentation and record-keeping that supports compliant offboarding
• Monitoring of regulatory and labor law changes across supported markets
• Probation period tracking and contract management within a single platform

Why use an EOR in Saudi Arabia for hiring?

Hiring in Saudi Arabia means a foreign worker cannot work without an employer-sponsored Ministry of Human Resources and Emiratisation (MoHRE) work permit, and the ability to sponsor it depends on a company's Nitaqat band under Saudization. On top of that, wages have to run through the Wage Protection System (WPS), and every hire accrues an end-of-service award from day one.

Setting up a Saudi entity to carry all of this takes time, and it puts the company straight into Saudization from its first hire. An Employer of Record (EOR) is a company that already holds a Saudi entity and acts as the legal employer of a worker on another company's behalf. The hiring company directs the person's day-to-day work, and the EOR supports the parts of employment that need a local entity and a Qiwa file.

An EOR in Saudi Arabia typically supports the following:

• Work permit and Iqama applications for each foreign hire, through its own MoHRE-registered entity.
• Written, fixed-term contracts drafted and documented on Qiwa to meet the Labor Law.
• Payroll through the Wage Protection System, paid on time and matched to the documented contract.
• Statutory entitlements, including annual leave, sick leave, maternity and paternity leave, and the end-of-service award.
• Notice, termination, and final settlement within the timelines the law sets.
• General Organization for Social Insurance (GOSI) registration and Saudization tracking, so the company stays compliant as the rules shift.

Skuad acts as the legal employer across 160+ countries, so your company can hire in Saudi Arabia and support statutory requirements without setting up a local entity first. Here is what Skuad helps with:

• Employment contract generation aligned with local labor laws and statutory requirements across supported markets
• Statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Payroll processing in 70+ currencies with accurate tax withholding and statutory deductions
• Work permit and visa support for foreign nationals joining your team
• Termination and offboarding support aligned with local labor requirements across supported markets

Book a demo to see how Skuad supports EOR hiring in Saudi Arabia.

What are the types of visas in Saudi Arabia?

Saudi Arabia issues many visa types, including business visit and tourist visas, but the ones that matter for hiring are the employer-sponsored work visa, the self-sponsored Premium Residency, and the family visa.

What is the work permit process in Saudi Arabia?

The process is employer-driven and runs through Qiwa, the Ministry of Human Resources and Social Development (MHRSD) platform, along with the Ministry of Foreign Affairs (MOFA). It ends with the worker holding an Iqama, the residence permit that also authorizes work.

The steps run in the following order:

1. The employer secures work-visa authorization through Qiwa, based on its Nitaqat band and available quota.
2. The employer obtains MOFA authorization, and the worker has the employment visa stamped at a Saudi embassy in their home country.
3. The worker enters Saudi Arabia on an employment visa.
4. After arrival, the worker completes a medical exam and biometrics, and the employer issues the Iqama, the residence permit. A non-Saudi cannot work without this permit.

The work permit is the MHRSD's approval for a worker to work and is required for issuing or renewing the Iqama. An establishment in the Red or Yellow Nitaqat band cannot issue or renew work permits, which is another reason the band matters.

The employer covers the costs and fees for the work permit and its renewal, the Iqama, exit and re-entry visas, and the worker's return ticket home.

On mobility, the old picture of a worker tied to a single sponsor no longer holds. Under the 2021 Labour Reform, a worker can transfer to a new employer once the contract expires, without the current employer's consent, and can request exit and re-entry without the employer's approval.

The work permit and Iqama process runs through Qiwa and the Ministry of Foreign Affairs, requires the employer to hold an adequate Nitaqat band just to issue work visas, and the employer bears all associated costs and the worker's return ticket home.

Skuad's global immigration platform helps support the work permit and visa process for foreign nationals joining your team, so your HR team does not need to track each step independently. Here is what Skuad helps with:

• Supporting work permit and visa applications for foreign employees joining your team
• Helping coordinate immigration documentation with relevant local authorities
• Assisting with visa conversions and work permit renewals as required by local immigration law
• Helping track documentation requirements and deadlines across the full permit lifecycle
• Helping keep your team aligned with compliance requirements as immigration rules and sponsor duties evolve

How do payroll and taxes work in Saudi Arabia?

Saudi Arabia has no personal income tax, so the obligations sit with the employer. Pay wages through the Wage Protection System, and contribute to social insurance (GOSI). Business-level taxes, VAT and corporate tax, sit alongside payroll and are not deducted from pay.

Does the employer pay social insurance in Saudi Arabia?

Social insurance runs through GOSI, the General Organization for Social Insurance, and what the employer owes depends on the worker's nationality.

For an expatriate, the employer pays 2% of basic salary plus housing allowance for occupational hazard cover, and the worker pays nothing. For a Saudi national, the employer pays 9% for pension and 2% for occupational hazard, plus 0.75% for unemployment (SANED), with the employee matching on pension and SANED. That combined 21.5% is the legacy rate for Saudis who first registered before 3 July 2024. A Saudi hired from that date falls under the reformed track, which carries a higher rate that is rising in stages under the 2025 reform.

Contributions apply to basic salary plus housing allowance, capped at SAR 45,000 a month, and the rate for Saudis hired from July 2024 is rising in stages under the 2025 pension reform. Since most hires through an EOR are expatriates, in practice the employer's GOSI cost is the 2% occupational hazard contribution.

How does payroll get paid in Saudi Arabia?

Private-sector salaries run through the Wage Protection System, submitted to MHRSD through the Mudad platform. The ministry uses it to confirm every worker, Saudi or expatriate, is paid in full, on time, and in the amount agreed in the contract. Late or missing payments show up as violations that can hurt the company's Nitaqat band and its ability to issue visas.

Saudi Arabia has no personal income tax, but employer costs still run above gross salary. GOSI contribution rates differ by nationality and are rising under the 2025 pension reform, and wages must clear the Wage Protection System on time each month.

Skuad's employee cost calculator helps estimate the cost of hiring across supported markets, including employer social and statutory contributions and net-to-gross conversion, so finance teams can model headcount costs before committing to a hire.

How to set up a subsidiary in Saudi Arabia?

A foreign company cannot register a Saudi entity straight away. It first needs an investment registration from MISA, the Ministry of Investment, under the Investment Law, for the activity it plans to run. With that in place, it registers the company with the Ministry of Commerce and receives a Commercial Registration.

The most common vehicle is the limited liability company (LLC), managed and represented by one or more managers. Full foreign ownership is available in most activities, though a few set a minimum Saudi share or a high capital floor.

What are the steps to incorporate a subsidiary in Saudi Arabia?

1. Register the investment with MISA for the chosen activity. Capital requirements depend on the activity. For example, a 100% foreign trading company needs SR 30 million, while many service activities have no fixed minimum.
2. Reserve a trade name and register the company with the Ministry of Commerce to receive the Commercial Registration (CR).
3. Notarise the Articles of Association, the company's establishment contract.
4. Complete the post-registration steps: Chamber of Commerce, tax registration with Zakat, Tax and Customs Authority (ZATCA), GOSI, a national address, a corporate bank account, and the MHRSD and Qiwa file needed to hire staff.

Setting up a Saudi entity means clearing MISA investment registration, Ministry of Commerce company formation, ZATCA tax registration, GOSI registration, a Qiwa file, and a national address before a single work permit can be filed. A 100% foreign-owned trading company also requires SAR 30 million in registered capital.

For teams that need to hire in Saudi Arabia without that commitment, Skuad acts as the legal employer, so you can onboard employees without incorporating a local entity.

Customer story: How OpenSolar scaled internationally with Skuad?

OpenSolar is a solar energy and cleantech company focused on accelerating the global shift from fossil fuels to renewable energy. As the company expanded into multiple markets across Asia-Pacific (APAC) and Europe, the Middle East, and Africa (EMEA), it needed a compliant way to hire across borders without building local entities in each market. Skuad supported its international expansion through its EOR platform, helping with cross-border onboarding and workforce management across supported markets.

Skuad has been a key partner in our international expansion. Their onboarding process and compliance support have allowed us to focus on our core mission, which is to accelerate the world's transition from fossil fuels to solar energy.

Lavinia Davison, Global Head of Talent & Operations, OpenSolar

Read the full case study.

What is a Professional Employer Organization (PEO) in Saudi Arabia?

A Professional Employer Organization (PEO) manages HR functions for a company, such as payroll, benefits, and day-to-day administration. A PEO acts as a co-employer, sharing those responsibilities with the company rather than taking them over entirely. An EOR acts as the legal employer of the worker.

What is the difference between a PEO and an EOR?

Working with a PEO means the company keeps its own legal entity in Saudi Arabia, and the PEO supports it with HR and payroll. Working with an EOR means the company can hire straight away, because the EOR is already the legal employer.

A worker's work permit and Iqama sit with a single registered employer, so a PEO arrangement only works when the company has its own Saudi entity to hold them. A company without an entity that still wants to hire uses an EOR, which supplies the entity as the legal employer.

Want to build a team in Saudi Arabia without the Saudization math?

Saudi Arabia's Nitaqat system assigns every private employer a compliance band based on how many Saudi nationals they employ, and that band directly controls whether you can issue or renew work permits for foreign hires. If employers fall below the required threshold, they lose access entirely.

On top of that, every hire accrues an end-of-service award from day one, wages must clear the WPS each month, and GOSI contributions vary depending on whether the employee is a Saudi national or an expatriate. For a foreign employer without a local entity, all of this lands on you from the moment you bring someone on board.

An EOR acts as the legal employer, so rather than working through MISA, tracking Saudization from your first hire, and maintaining a local entity to hold work permits, you can start building your Saudi team without that overhead.

Start hiring in Saudi Arabia without entity setup. Book a demo.

FAQs

1. What is an Employer of Record (EOR) in Saudi Arabia?

An Employer of Record (EOR) in Saudi Arabia is a company that holds a Saudi entity and Qiwa file, and employs staff on your behalf. It supports the work permit and Iqama, processes Wage Protection System payroll, and supports GOSI contributions and end-of-service award administration, so you hire without your own entity.

2. Can a foreign company hire in Saudi Arabia without a local entity?

A foreign company cannot sponsor a Saudi work permit without a local entity and a Qiwa file, so direct hiring means registering through MISA and the Ministry of Commerce first. An Employer of Record (EOR) removes that step by acting as the legal employer, sponsoring the Iqama and running payroll.

3. How does Saudization (Nitaqat) affect hiring foreign staff?

Nitaqat, Saudi Arabia's Saudization system, assigns each employer a band based on its Saudi headcount, and the band controls work permit access. With an Employer of Record, the Saudization obligation sits with the EOR's entity, though the EOR still needs an adequate Nitaqat band to sponsor your foreign hires.

4. Does an employer pay social insurance (GOSI) in Saudi Arabia?

General Organization for Social Insurance (GOSI) depends on nationality. For an expatriate, the employer pays 2% of basic salary plus housing allowance for occupational hazard cover, and the employee pays nothing. Saudi nationals carry a higher combined rate covering pension, occupational hazard, and unemployment.

5. How is end-of-service pay calculated in Saudi Arabia?

When a job ends, the employer pays an end-of-service award to Saudi and non-Saudi employees alike. It runs at half a month's wage per year for the first five years, then one month's wage per year after, based on the worker's last wage. Resignation can reduce it.

6. How does an EOR differ from a PEO in Saudi Arabia?

An Employer of Record (EOR) acts as the legal employer through its Saudi entity, so you can hire with no entity of your own. A Professional Employer Organisation (PEO) is a co-employment model, which only works if your company already holds a Saudi entity to sponsor work permits and register GOSI.