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Employment Laws

/

Saudi Arabia

Employment Laws in Saudi Arabia

Updated on:
16 Jan, 2024
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EOR in 
Saudi Arabia
Monthly
$
599
/month
(billed annually)
Annually
Pay monthly at a discounted rate with a 12-month commitment
$
549
/month
(billed monthly)
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Table of Content

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Saudi Arabia has experienced significant economic growth and development in recent years. Its economy heavily relies on the petroleum sector, which accounts for as much as 40% of the country’s GDP. 

Fueled by its rising GDP, Saudi Arabia attracts companies seeking to capitalize on its economic growth. This has resulted in a booming job market, with opportunities multiplying across various sectors. If you're considering hiring in this dynamic nation, now's the perfect time to tap into its vast potential.

The primary legal document governing employment in Saudi Arabia is the Labor Law, issued by Royal Decree No. M/51 of 23 Sha’ban 1426 Hejra. It serves as the foundation for the employee-employer relationship, covering several aspects of employment. 

Learn about employment laws in Saudi Arabia and how to stay compliant with Skuad!

Contractual Agreements

Saudi Arabia has a unique legal system that follows both Islamic Sharia law. Both employees and employers must act ethically. Under the contract employment law in Saudi Arabia, misrepresentations nullify contracts.

Contracts are only acceptable when mutual consent is given between the employer and employee. Both oral and written contracts are acceptable under the labor laws of Saudi Arabia. For certain employments, written contracts are preferred for clarity and evidentiary purposes.

Types of Employment Contracts in Saudi Arabia

In Saudi Arabia, employment contracts take various forms, depending on factors such as the nature of employment, duration of the engagement, and specific terms agreed upon by the employer and employee. Some of the most common types of employment contracts in Saudi Arabia are

  1. Definite Term Employment Contracts
    • Definite-term or fixed-term contracts refer to agreements with an agreed-upon duration mutually decided by the employer and employee.
    • They are primarily used for foreign nationals with project-based work or to cover temporary positions.
  2. Unlimited Term Employment Contracts
    • Indefinite contracts have no fixed end date and are open-ended.
    • They are commonly used for Saudi nationals to form permanent employment relationships.

Obligations and Rights for Both Parties

As in any legal jurisdiction, contractual agreements in Saudi Arabia involve obligations and rights for both parties. 

  • Employers and employees must fulfill their respective contractual duties within the specified timeframe, as outlined in the agreement. 
  • Additionally, they are expected to act in good faith and deal fairly with each other throughout the contract duration.
  • Employers should provide health insurance and pay for sick or disabled workers.
  • Employees who get injured on work premises should be compensated by the employer.

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Working Hours and Overtime

Employment laws in Saudi Arabia establish fair working conditions while safeguarding employers' and employees’ rights. Some of the key aspects include

  1. Regular Working Hours
    • The standard working hours, according to Article 98 of the labor laws of Saudi Arabia, consist of 48 hours.
    • These working hours are typically spread over 8 hours a day.
  2. Overtime Regulations and Compensation
    • Overtime work is permissible in Saudi Arabia. However, it must adhere to particular standards to guarantee employee safety:
      • Article 101 of Saudi labor law states that overtime should not exceed 11 hours in one day.
      • In addition, employers are also prohibited from asking employees to work for 5 hours straight without providing a minimum of 30 minutes of break.
      • According to Article 107 of the Labor Law in Saudi Arabia, employees are entitled to 150% of the normal wage rate in overtime cases.

Minimum Wage and Compensation

Let’s look at the minimum wage requirements and the various labor regulations governing compensation for Saudi Arabia workers.

The Minimum Wage Rate in 2024

  • The minimum wage for citizens of Saudi Arabia working in the private sector is SR4,000. 

Factors Affecting Wage Determination

There are no provisions for wage requirements in Saudi Arabia. However, several factors contribute to how wages are determined, including

  • Education and skill levels

Employees with higher educational qualifications and specialized skills generally command higher wages. 

  • Experience and expertise

The number of years of relevant work experience can significantly affect wages. Experienced professionals may negotiate higher wages.

  • Cost of living

Wages may also vary based on the cost of living in different regions of Saudi Arabia. Urban centers with higher living costs may offer higher salaries.

Employee Benefits and Social Security

Some key aspects of employee benefits and social security in Saudi Arabia are as follows:

Statutory Benefits

Housing allowances

  • Employers must provide employees with housing allowances or residential accommodation, as specified in the employment contract. 

Medical/Health insurance

  • All employers in Saudi Arabia must provide health insurance coverage to expatriate employees.
  • To avail of these benefits, employees might be required to undergo a medical test at an approved medical center. 

Additional perks and benefits

Cost of air ticket

  • Employers must bear the cost of airfare for the workers from their homes to Saudi Arabia to join work. This also includes their return after the employment contract has successfully been completed. 

Social Security Contributions and Requirements

In Saudi Arabia, social security is administered by the General Organization for Social Insurance (GOSI). 

  • Contributions are paid every month. 
  • Non-Saudi employees with a monthly basic salary of SAR 45,000 are computed at 2%, borne by the employer. 
  • Saudi Arabia employees, on the other hand, are subjected to 22% and are paid both by employee and employer.

Vacations and Paid Time Off

Saudi labor law mandates paid vacation and leave benefits to employees. Learn about your unpaid leave, vacation leave entitlement here:

Annual Leave Entitlement

  • Employees in Saudi Arabia are entitled to 21 days of annual leave, provided they have completed one year of service. 
  • Longer-serving employees (5 years of service) are granted 30 days of annual leave. 

Medical Leave

  • Employees in Saudi Arabia are entitled to 30 days of fully paid medical leave.
  • An additional 60 days of sick leave are available at 3/4th of their wage. 
  • The next 30 days of medical leave within a year is without pay. 

Paternity Leave

  • Male workers in Saudi Arabia are granted three days of paternity leave during the first week after the birth of their child.

Maternity Leave

  • Female employees in Saudi Arabia get ten weeks of maternity leave. It is divided into four weeks before the expected delivery date and six weeks after birth. 

Public Holidays and Special Leaves

Public holidays are fully designated by the government. It includes,

  • Saudi National Day
  • Eid al-Fitr 
  • Eid al-Adha Day

Haj Leave

  • Employees who have completed two years of service and have not previously performed Haj are eligible for 10-15 days of period leave.

Bereavement Leave

  • In the event of the death of a spouse or children, employees are provided five days of bereavement leave. 
  • Female employees, in the event of the death of their husbands, are granted 15-130 days of leave, depending on their religion.

Termination and Severance

The Saudi labor law lists all the terms under which an employment contract can be terminated. It discusses the rights and obligations in the event of termination and the entitlements to severance pay. Here are some key aspects of the same.

Grounds for Termination by the Employer

  • Employers can terminate an employment contract without notice due to the following reasons
    • The employee’s inability to perform the job
    • Disobedience, violation of work-related obligations
    • Forgery to attain the job
    • Absence from work exceeding 20 days in one year, or for more than ten days consecutively.

Grounds for Termination by the Employee

Employees can also terminate their employment contracts

  • If they are subjected to cruelty at the hands of their employers
  • Employer fails to comply with statutory obligations
  • Employers deny or cannot take proper measures to remove serious health and safety hazards in the workplace.
  • Employers violate the terms of contracts, among others.

Notice Period and Severance Pay

The notice period for employees is a minimum of 60 days. However, it also depends on other factors, such as the type of employment contract and the length of service.

Severance pay, or end-of-service benefits (ESB), is computed using the employee’s basic salary.

Years of Service Salary Payment
One to five years Half month
Five years+ One month’s salary for subsequent years

Even if an employee resigns, they are provided with

  • 1/3rd of ESB for 2-5 years of service
  • 2/3rd of ESB for 5-10 years of service, and
  • Full award for 10 or more years of service

Discrimination and Equal Opportunity

  • In Saudi Arabia, the principles of non-discrimination and equal opportunity are enshrined in the country’s laws and regulations. 
  • The legal framework primarily includes provisions from the Saudi Labor Law, which prohibits discrimination on various grounds and promotes equal opportunities in the workplace.

Prohibitions against Workplace Discrimination

  • Article (3) of the labor law in Saudi Arabia prohibits discrimination against any citizen during work performance or hiring based on race, gender, age, disability, color, or lineage.

As a result, it is recommended that specialists handle labor law compliance management. This will help to limit the risk of incorrect classification, avoid high penalties, and preserve employee data.

Health and Safety Regulations

  • Employers are responsible for taking precautions against workplace hazards, occupational illnesses, and unsafe machinery.
  • Mention safety instructions in Arabic and other relevant languages at the workplace.
  • Employers cannot charge employees for required safety equipment.

Stay Compliant with Skuad

Trusted by leaders worldwide, Skuad is one of the most sought-after platforms for helping businesses manage their workforce. From regulatory compliance monitoring and payroll compliance to leave management and employee records management, Skuad has been a game-changer for companies dealing with international hires. 

However, do not just take our word for it. Try Skuad today for fully compliant hiring in Saudi Arabia and find out for yourself!

FAQs

Q1: What are the employment rules in Saudi Arabia?

Ans: Saudi Arabian Labor Law governs employment rules in Saudi Arabia. It lays down various regulations related to employment contracts, working hours, leave entitlements, overtime, and end-of-service benefits. 

Q2: What is Rule 81 in Saudi Labor Law?

Ans: Rule 81 of the Saudi Labor Law lists specific reasons why an employee can leave without notice. It includes factors such as when an employer assigns work to an employee without his consent, if the employer fails to fulfill their statutory obligations, and mistreatment at the hands of employers, among others.

Q3: What is the termination law in Saudi Arabia?

Ans: Saudi Arabia termination laws vary based on the contract type. Indefinite contracts require notice (60/30 days) or compensation for valid reasons, like performance issues. Fixed-term contracts end naturally or for cause with notice/compensation. Probation allows termination without notice. Mutual consent and labor courts also play a role.  

Q4: What is the workplace culture in Saudi Arabia?

Ans: The workplace culture in Saudi Arabia often reflects a hierarchical structure. Respect for authority and seniority is important, and top management often makes decisions.

limited-offer-banner
EOR in 
Saudi Arabia
Monthly
best value
Annually
Pay monthly at a discounted rate with a 12-month commitment
$
549
/month
(billed annually)
G2 badge

Employ contractors and employees in 160+ countries

G2 badge
limited-offer-banner
EOR in 
Saudi Arabia
Monthly
$
599
/month
(billed annually)
Annually
Pay monthly at a discounted rate with a 12-month commitment
$
549
/month
(billed monthly)
G2 badge

Employ contractors and employees in 160+ countries

G2 badge

Table of Content

Building a remote team?

Employ exceptional talent, anywhere, anytime!

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Employment Laws in Saudi Arabia

Employment Laws in Saudi Arabia

Building a remote team?

Employ exceptional talent, anywhere, anytime!

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Saudi Arabia has experienced significant economic growth and development in recent years. Its economy heavily relies on the petroleum sector, which accounts for as much as 40% of the country’s GDP. 

Fueled by its rising GDP, Saudi Arabia attracts companies seeking to capitalize on its economic growth. This has resulted in a booming job market, with opportunities multiplying across various sectors. If you're considering hiring in this dynamic nation, now's the perfect time to tap into its vast potential.

The primary legal document governing employment in Saudi Arabia is the Labor Law, issued by Royal Decree No. M/51 of 23 Sha’ban 1426 Hejra. It serves as the foundation for the employee-employer relationship, covering several aspects of employment. 

Learn about employment laws in Saudi Arabia and how to stay compliant with Skuad!

Contractual Agreements

Saudi Arabia has a unique legal system that follows both Islamic Sharia law. Both employees and employers must act ethically. Under the contract employment law in Saudi Arabia, misrepresentations nullify contracts.

Contracts are only acceptable when mutual consent is given between the employer and employee. Both oral and written contracts are acceptable under the labor laws of Saudi Arabia. For certain employments, written contracts are preferred for clarity and evidentiary purposes.

Types of Employment Contracts in Saudi Arabia

In Saudi Arabia, employment contracts take various forms, depending on factors such as the nature of employment, duration of the engagement, and specific terms agreed upon by the employer and employee. Some of the most common types of employment contracts in Saudi Arabia are

  1. Definite Term Employment Contracts
    • Definite-term or fixed-term contracts refer to agreements with an agreed-upon duration mutually decided by the employer and employee.
    • They are primarily used for foreign nationals with project-based work or to cover temporary positions.
  2. Unlimited Term Employment Contracts
    • Indefinite contracts have no fixed end date and are open-ended.
    • They are commonly used for Saudi nationals to form permanent employment relationships.

Obligations and Rights for Both Parties

As in any legal jurisdiction, contractual agreements in Saudi Arabia involve obligations and rights for both parties. 

  • Employers and employees must fulfill their respective contractual duties within the specified timeframe, as outlined in the agreement. 
  • Additionally, they are expected to act in good faith and deal fairly with each other throughout the contract duration.
  • Employers should provide health insurance and pay for sick or disabled workers.
  • Employees who get injured on work premises should be compensated by the employer.

One platform to grow your global team

Hire and pay talent globally, the
hassle-free way

Talk to an expert

Working Hours and Overtime

Employment laws in Saudi Arabia establish fair working conditions while safeguarding employers' and employees’ rights. Some of the key aspects include

  1. Regular Working Hours
    • The standard working hours, according to Article 98 of the labor laws of Saudi Arabia, consist of 48 hours.
    • These working hours are typically spread over 8 hours a day.
  2. Overtime Regulations and Compensation
    • Overtime work is permissible in Saudi Arabia. However, it must adhere to particular standards to guarantee employee safety:
      • Article 101 of Saudi labor law states that overtime should not exceed 11 hours in one day.
      • In addition, employers are also prohibited from asking employees to work for 5 hours straight without providing a minimum of 30 minutes of break.
      • According to Article 107 of the Labor Law in Saudi Arabia, employees are entitled to 150% of the normal wage rate in overtime cases.

Minimum Wage and Compensation

Let’s look at the minimum wage requirements and the various labor regulations governing compensation for Saudi Arabia workers.

The Minimum Wage Rate in 2024

  • The minimum wage for citizens of Saudi Arabia working in the private sector is SR4,000. 

Factors Affecting Wage Determination

There are no provisions for wage requirements in Saudi Arabia. However, several factors contribute to how wages are determined, including

  • Education and skill levels

Employees with higher educational qualifications and specialized skills generally command higher wages. 

  • Experience and expertise

The number of years of relevant work experience can significantly affect wages. Experienced professionals may negotiate higher wages.

  • Cost of living

Wages may also vary based on the cost of living in different regions of Saudi Arabia. Urban centers with higher living costs may offer higher salaries.

Employee Benefits and Social Security

Some key aspects of employee benefits and social security in Saudi Arabia are as follows:

Statutory Benefits

Housing allowances

  • Employers must provide employees with housing allowances or residential accommodation, as specified in the employment contract. 

Medical/Health insurance

  • All employers in Saudi Arabia must provide health insurance coverage to expatriate employees.
  • To avail of these benefits, employees might be required to undergo a medical test at an approved medical center. 

Additional perks and benefits

Cost of air ticket

  • Employers must bear the cost of airfare for the workers from their homes to Saudi Arabia to join work. This also includes their return after the employment contract has successfully been completed. 

Social Security Contributions and Requirements

In Saudi Arabia, social security is administered by the General Organization for Social Insurance (GOSI). 

  • Contributions are paid every month. 
  • Non-Saudi employees with a monthly basic salary of SAR 45,000 are computed at 2%, borne by the employer. 
  • Saudi Arabia employees, on the other hand, are subjected to 22% and are paid both by employee and employer.

Vacations and Paid Time Off

Saudi labor law mandates paid vacation and leave benefits to employees. Learn about your unpaid leave, vacation leave entitlement here:

Annual Leave Entitlement

  • Employees in Saudi Arabia are entitled to 21 days of annual leave, provided they have completed one year of service. 
  • Longer-serving employees (5 years of service) are granted 30 days of annual leave. 

Medical Leave

  • Employees in Saudi Arabia are entitled to 30 days of fully paid medical leave.
  • An additional 60 days of sick leave are available at 3/4th of their wage. 
  • The next 30 days of medical leave within a year is without pay. 

Paternity Leave

  • Male workers in Saudi Arabia are granted three days of paternity leave during the first week after the birth of their child.

Maternity Leave

  • Female employees in Saudi Arabia get ten weeks of maternity leave. It is divided into four weeks before the expected delivery date and six weeks after birth. 

Public Holidays and Special Leaves

Public holidays are fully designated by the government. It includes,

  • Saudi National Day
  • Eid al-Fitr 
  • Eid al-Adha Day

Haj Leave

  • Employees who have completed two years of service and have not previously performed Haj are eligible for 10-15 days of period leave.

Bereavement Leave

  • In the event of the death of a spouse or children, employees are provided five days of bereavement leave. 
  • Female employees, in the event of the death of their husbands, are granted 15-130 days of leave, depending on their religion.

Termination and Severance

The Saudi labor law lists all the terms under which an employment contract can be terminated. It discusses the rights and obligations in the event of termination and the entitlements to severance pay. Here are some key aspects of the same.

Grounds for Termination by the Employer

  • Employers can terminate an employment contract without notice due to the following reasons
    • The employee’s inability to perform the job
    • Disobedience, violation of work-related obligations
    • Forgery to attain the job
    • Absence from work exceeding 20 days in one year, or for more than ten days consecutively.

Grounds for Termination by the Employee

Employees can also terminate their employment contracts

  • If they are subjected to cruelty at the hands of their employers
  • Employer fails to comply with statutory obligations
  • Employers deny or cannot take proper measures to remove serious health and safety hazards in the workplace.
  • Employers violate the terms of contracts, among others.

Notice Period and Severance Pay

The notice period for employees is a minimum of 60 days. However, it also depends on other factors, such as the type of employment contract and the length of service.

Severance pay, or end-of-service benefits (ESB), is computed using the employee’s basic salary.

Years of Service Salary Payment
One to five years Half month
Five years+ One month’s salary for subsequent years

Even if an employee resigns, they are provided with

  • 1/3rd of ESB for 2-5 years of service
  • 2/3rd of ESB for 5-10 years of service, and
  • Full award for 10 or more years of service

Discrimination and Equal Opportunity

  • In Saudi Arabia, the principles of non-discrimination and equal opportunity are enshrined in the country’s laws and regulations. 
  • The legal framework primarily includes provisions from the Saudi Labor Law, which prohibits discrimination on various grounds and promotes equal opportunities in the workplace.

Prohibitions against Workplace Discrimination

  • Article (3) of the labor law in Saudi Arabia prohibits discrimination against any citizen during work performance or hiring based on race, gender, age, disability, color, or lineage.

As a result, it is recommended that specialists handle labor law compliance management. This will help to limit the risk of incorrect classification, avoid high penalties, and preserve employee data.

Health and Safety Regulations

  • Employers are responsible for taking precautions against workplace hazards, occupational illnesses, and unsafe machinery.
  • Mention safety instructions in Arabic and other relevant languages at the workplace.
  • Employers cannot charge employees for required safety equipment.

Stay Compliant with Skuad

Trusted by leaders worldwide, Skuad is one of the most sought-after platforms for helping businesses manage their workforce. From regulatory compliance monitoring and payroll compliance to leave management and employee records management, Skuad has been a game-changer for companies dealing with international hires. 

However, do not just take our word for it. Try Skuad today for fully compliant hiring in Saudi Arabia and find out for yourself!

FAQs

Q1: What are the employment rules in Saudi Arabia?

Ans: Saudi Arabian Labor Law governs employment rules in Saudi Arabia. It lays down various regulations related to employment contracts, working hours, leave entitlements, overtime, and end-of-service benefits. 

Q2: What is Rule 81 in Saudi Labor Law?

Ans: Rule 81 of the Saudi Labor Law lists specific reasons why an employee can leave without notice. It includes factors such as when an employer assigns work to an employee without his consent, if the employer fails to fulfill their statutory obligations, and mistreatment at the hands of employers, among others.

Q3: What is the termination law in Saudi Arabia?

Ans: Saudi Arabia termination laws vary based on the contract type. Indefinite contracts require notice (60/30 days) or compensation for valid reasons, like performance issues. Fixed-term contracts end naturally or for cause with notice/compensation. Probation allows termination without notice. Mutual consent and labor courts also play a role.  

Q4: What is the workplace culture in Saudi Arabia?

Ans: The workplace culture in Saudi Arabia often reflects a hierarchical structure. Respect for authority and seniority is important, and top management often makes decisions.

Building a remote team?

Employ exceptional talent, anywhere, anytime!

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

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