Payroll in Saudi Arabia: A Comprehensive Guide for 2026

Introduction

Payroll in Saudi Arabia runs on a monthly cycle in Saudi Riyals, paid electronically through the Wage Protection System (WPS), with no personal income tax to withhold from employee salaries.

The main statutory cost is the General Organization for Social Insurance (GOSI) contribution, which applies differently by nationality: An employer pays 11.75% for a Saudi national and 2% for an expatriate employee, on basic salary plus housing allowance up to SAR 45,000 per month. Saudi nationals contribute 9.75%, while expatriate employees contribute nothing.

The harder part is keeping four government portals in agreement. Mudad carries the WPS wage files, Qiwa holds contract and Saudisation data, Muqeem holds work permit and Iqama records, and GOSI holds social insurance. A mismatch on any one of them can freeze access and stop payroll until it is resolved, and missing a WPS or GOSI deadline can suspend work permits and Iqama renewals tied to the establishment.

In this guide, we cover Saudi Arabia's payroll processing phases, statutory components, public holidays, GOSI contribution rates for Saudi and expatriate staff, termination and end-of-service rules, and how foreign companies can run compliant payroll without setting up a local entity.

What is the payroll process in Saudi Arabia?

The payroll process in Saudi Arabia can be tricky to understand and implement. This is why payroll experts prefer to split this process into pre-payroll, payroll, and post-payroll phases.

Pre-payroll phase

Before paying employees in Saudi Arabia, you must have an established organization compliant with the country's employment laws.

Setting up the organization

Focus here on establishing and communicating clearly defined organizational policies.

• Business profile: You must register your business, apply for your tax identification number, and register for VAT (the Saudi value-added tax on selected goods and services) if applicable.
• In practice, this means completing the core registrations before you hire your first employee: commercial registration with the Ministry of Commerce, registration with the Zakat, Tax and Customs Authority (ZATCA) for tax and VAT, registration with the Ministry of Human Resources and Social Development (MHRSD), and registration with the General Organization for Social Insurance (GOSI). The next few items will help complete the pre-payroll phase.
• Work location: Forming a structure for each of your work locations is essential if you intend to set up your business across various regions in the Kingdom, from Riyadh to Jeddah. Pay attention to any local needs and also make it easy for company members to collaborate seamlessly, regardless of their location.
• Leave policy: Since employees can exercise their rights to days off, establishing a leave policy is essential. It helps you create a system whereby there are still knowledgeable personnel around, no matter who is absent for an extended period.
• Attendance policy: Before establishing payroll in Saudi Arabia, create measures that would allow employees to record near-perfect attendance consistently. Your attendance policy is also crucial to calculating payroll. Leveraging technology such as biometric devices to track attendance makes it easy to manage payroll and ensure that employees receive their earnings. In addition to incentives to encourage punctuality, establish disciplinary measures to discourage tardiness.

Statutory components

Comply with all Saudi laws and regulations regarding employee rights and benefits.

Salary components

Be sure to address such things as minimum wage and social insurance, and consider additional perks that might be of value to the highly skilled workers you wish to retain.

Pay schedule

Salaries in Saudi Arabia are paid monthly in Saudi Riyals, electronically through a corporate bank account at a local Saudi bank that's enrolled in the Wage Protection System (WPS). Pick a fixed payday in the calendar (typically the last working day of each month) and stick to it; the WPS monitors payment timing and flags any late or missed wage payments.

Employee information

Before you begin your payroll calculations, gather your employee information. Having this information is essential, and it will come in handy when it's time to calculate payroll. Needed are:

• Employee's legal name
• Position within the organization
• Department
• Current address

Payroll phase

This process involves calculating your employee's total earnings before determining applicable deductions. Your attendance policy comes in handy here, as the hours your employees spend working will determine how much they receive. After identifying the various voluntary and involuntary deductions, deduct them from the gross salary. You can disburse payments after calculating the net earnings.

Post-payroll phase

After completing the payroll calculation, there are still a few steps left to avoid costly errors during the process.

Salary payments

The Wage Protection System observes the processes of wage payment for all workers in the private sector, both Saudi nationals and foreigners, and verifies that establishments are paying salaries on time and at the amount previously agreed upon.

The employer submits monthly payroll data such as salary base, allowances, deductions, and the total amount paid per employee through the Mudad platform or directly through their Saudi bank. The bank transfers the salaries to employee bank accounts, and a confirmation file flows back to Mudad, where it's matched against contract data held with MHRSD and GOSI.

Payroll accounting

After paying employees, you want to make sure that you have the records to show that you performed this transaction. Thus, carry out payroll accounting to manage the company's accounts, balance the books, and have evidence that you disbursed employees' payments. This makes it easy to trace payments, retract certain earnings, and troubleshoot issues with delayed payments.

Payroll reporting and compliance

Saudi payroll reporting runs through three parallel channels each month:

• WPS submissions via Mudad confirming the salary payments made
• GOSI submissions confirming social insurance contributions for each employee
• ZATCA reporting for any VAT or zakat obligations the entity carries

There's no personal income tax to file for employees, but missing the WPS or GOSI deadlines can suspend government services tied to the establishment, including work permit issuance, contract registration on Qiwa, and Iqama renewals for expatriate staff.

What is payroll management in Saudi Arabia?

Non-compliance with payroll or labor laws in Saudi Arabia may come with harsh penalties. Proper payroll management can help you avoid this.

This process involves ordering every step involved in paying employees their earnings in a timely fashion and keeping their financial records securely.

Running payroll in Saudi Arabia means a monthly cycle in Saudi Riyals through the Wage Protection System, GOSI deductions applied separately for Saudi nationals and expatriate employees, payslips issued in Arabic, and wage files uploaded to Mudad before the deadline.

Employment contracts and records must also be maintained in Arabic, with translated copies attached for foreign nationals. Records should be kept for the retention period set by Saudi labour law.

Skuad's global payroll platform helps keep these components aligned from a single system, covering payroll processing in 70+ currencies, statutory contribution workflows, and employment documentation across supported markets, without your team rebuilding the calculation logic every time rates change.

What is payroll compliance in Saudi Arabia?

The Saudi government keeps making efforts to make the country a promising environment for employers and employees. Thus, they implement measures to protect employee rights and ensure they get their deserved payments and other benefits. To comply with payroll in Saudi Arabia, you must take the following vital steps:

• Collect your employees' data and make sure they are accurate
• Understand how pensions, insurance, and payroll taxes in Saudi Arabia work
• Communicate your payroll process to employees to manage their expectations
• Keep up with payroll compliance laws in Saudi Arabia
• Automate your payroll processes
• Process payroll and remit deductions and taxes to government agencies before the deadline.

Saudi payroll compliance runs across four connected government portals: Mudad for WPS wage submissions, Qiwa for contract registration and Saudisation quota tracking, Muqeem for work permit and Iqama data, and GOSI for social insurance contributions.

A data mismatch across any of these portals freezes access and stops payroll until it is resolved, which is why most employers run a monthly reconciliation before submitting the WPS file.

Skuad's Shield compliance layer helps your team stay aligned with statutory obligations across supported markets, covering contribution workflows, regulatory monitoring, and employment documentation, without independently tracking every regulatory update.

What are the main payroll components in Saudi Arabia?

Compensation

The Saudi Riyal (SAR) is the country's official currency, and the minimum monthly wage is 4,000 SAR. The minimum monthly salary in Saudi Arabia increased from 3,000 SAR to 4,000 SAR.

The SAR 4,000 figure is the minimum monthly wage a Saudi national must be paid to count toward the employer's Saudisation (Nitaqat) quota; there is no separate statutory minimum wage for expatriate employees, whose pay is set by individual employment contract.

Working hours

A worker may not actually work for more than nine hours a day if the employer uses the daily work criterion, or more than forty-five hours a week if the employer uses the weekly criterion. During the month of Ramadan, the actual working hours for Muslims shall be reduced to a maximum of seven hours a day or thirty-five hours a week.

The official weekend in Saudi Arabia is Friday and Saturday for government workers and many private establishments.

Overtime laws

Any employee who works more than the standard daily or weekly working hours is to be paid for overtime. The employer shall pay the worker for overtime working hours an additional amount equal to the hourly wage plus 50% of his basic wage. All working hours performed during holidays and Eids shall be deemed overtime hours. Recent amendments also allow employers to offer time off instead of paid overtime, subject to the employee's consent.

Sick leave

Employees in Saudi Arabia can take up to four months of sick leave in a calendar year. Sick leave is usually paid, but the compensation reduces as the number of days increases. To be granted paid sick leave, you need a doctor's report, test results, or any relevant medical certificate.

A worker whose illness has been proven is eligible for paid sick leave at full wage for the first 30 days, three-quarters of the wage for the next 60 days, and without pay for the following 30 days, during a single year, whether such leaves are continuous or intermittent. A single year begins from the date of the first sick leave.

Parental leave

The working woman has the right to maternity leave with full pay for a period of twelve weeks, of which the six weeks following the delivery are mandatory, and she may distribute the remaining six weeks as she deems fit, starting from four weeks before the likely date of delivery. The likely date of delivery shall be determined by a medical certificate certified by a health authority. The working woman has the right to extend this leave for one month without pay.

A worker is entitled to a three-day paid leave in the case of childbirth, to be taken within seven days following the birth.

How many public holidays are there in Saudi Arabia?

Saudi Arabia recognises four statutory public holidays under the Labour Law: The two Eids extend across multiple working days; the two national holidays are single-day observances.

If a public holiday coincides with a weekly rest day, the worker is compensated with the previous or following day.

What are the payroll taxes in Saudi Arabia?

Payroll taxes in Saudi Arabia fall into three categories:

GOSI social insurance contributions that the employer pays on top of the gross salary, GOSI contributions withheld from the employee's gross pay (Saudi nationals only), and the corporate income tax or Zakat that applies to the employing entity.

Income tax withholding

Employees in Saudi Arabia don't have personal income tax withheld from their salaries. There is no individual income tax scheme in Saudi Arabia, so the full gross amount is paid to the employee, subject only to GOSI deductions where applicable.

Social Insurance (GOSI) Contributions

GOSI contributions are paid monthly on basic salary plus housing allowance, with an upper limit of SAR 45,000 per month.

For Saudi employees:

Employer pays 11.75%, made up of 9% social insurance + 2% occupational hazard + 0.75% unemployment insurance (SANED - Arabic for support)

Employee pays 9.75%, made up of 9% social insurance + 0.75% unemployment insurance (SANED)

For non-Saudi employees:

Employer pays 2% for occupational hazard (this is not social insurance, and expats aren't covered for pension or SANED)

Employee pays nothing

Where do these contributions go?

GOSI contributions for both Saudi nationals and expat workers are paid monthly to the General Organization for Social Insurance. Corporate income tax, Zakat, and VAT filings go separately to the Zakat, Tax, and Customs Authority (ZATCA).

Corporate income tax and Zakat

Saudi Arabia applies a 20% corporate income tax on the net adjusted profits attributable to non-Saudi and non-GCC (Gulf Cooperation Council) ownership, and a 2.5% Zakat assessment on the Saudi or GCC-owned portion of company equity.

In a mixed-ownership company, the foreign portion is taxed at 20% on profit, and the Saudi/GCC portion pays 2.5% on the Zakat base.

The total employer cost in Saudi Arabia varies significantly depending on the employee's nationality. Saudi nationals attract a GOSI employer contribution covering social insurance, occupational hazard, and SANED unemployment insurance, while expatriate employees attract only the occupational hazard contribution with no pension or SANED exposure. Both are capped at a monthly base of SAR 45,000.

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

What are the employment contract and termination rules in Saudi Arabia?

Saudi employment runs on a structured contract framework: Three contract types under the Labour Law, a probation window of up to 180 days, defined notice periods, and a statutory end-of-service award.

Employment contract

Employers typically hire workers on a contractual arrangement due to its flexibility and ease of employment law compliance. The three forms of employment contracts in Saudi Arabia are temporary, indefinite, and fixed-term employment.

• Temporary employment. It lasts for 90 days and is for certain working hours per day or week.
• Definite employment. There's usually a stipulated period for these appointments, and the job automatically ends at the predetermined date. It can be renewed; if the contract is renewed for three consecutive terms, or if the original contract term and the renewal period amount to four years, whichever is less, and the parties continue to implement it, the contract becomes an indefinite-term contract.
• Indefinite employment. A tentative appointment has no expiration date and can only end at the request of either party.

For non-Saudi nationals, employment contracts must be written and of a fixed term. Following the February 2025 amendments, if a non-Saudi national is employed on an indefinite-term contract, the contract duration is deemed to be a one-year fixed term commencing on the date when employment started, renewed for the same period thereafter

The percentage of Saudi workers employed by an employer shall not be less than 75% of the total number of his workers; the Minister may temporarily reduce this percentage in case of the lack of adequate technically or academically qualified workers.

In practice, Saudisation compliance is managed through the Nitaqat programme, which sets industry-tiered Saudi national quotas tracked through the Qiwa portal.

Probation period

Following the February 2025 amendments to the Saudi Labour Law, the parties can agree that the probation period will be a total of 180 days from the outset of employment, which must be stated in the written contract. During probation, either party can terminate the contract without prior notice, compensation, or an end-of-service award.

Contract termination

Either party can terminate the agreement in writing, provided they state the reasons.

Under the February 2025 amendments, the notice period for terminating an indefinite-term contract is 60 days when the employer initiates termination, and 30 days when the employee initiates termination (resignation). For non-monthly-paid indefinite contracts, the notice period is at least 30 days.

According to Saudi employment law, an employer must compensate for canceling an employment contract without reasonable cause.

Severance pay

Upon the end of the employment relation, the employer shall pay the worker an end-of-service award equivalent to 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 award is calculated on the basis of the last wage, and the worker is entitled to a pro-rated award for any partial year of service.

There are cases where the employer can withdraw severance pay, such as assault, breach of contract, forgery, and battery.

Ready to manage payroll in Saudi Arabia?

Saudi Arabia's payroll is not one set of rules; it is several running at the same time. GOSI contributions differ based on whether the employee is a Saudi national or an expatriate. At least 75% of your workforce must be Saudi nationals. Payroll runs through four government portals, and if any one of them has mismatched data, payments stop. Miss a WPS or GOSI deadline, and work permits freeze. For a foreign employer managing this remotely, one gap in any of these areas creates a problem that takes time and local knowledge to fix.

An Employer of Record model helps simplify this by enabling companies to run payroll in Saudi Arabia without setting up a local entity, while Skuad supports payroll processing in 70+ currencies, statutory contribution workflows, employment contracts, and compliance across supported markets through its EOR capabilities.

The next step is to align your hiring plans and evaluate how an EOR setup can support compliant payroll operations in Saudi Arabia without the overhead of entity registration.

Start running payroll in Saudi Arabia without entity setup. Book a demo.

FAQs

1. What deductions come out of a Saudi Arabian pay slip?

Saudi Arabia has no personal income tax, so no tax is withheld from salaries. A Saudi national has a 9.75% General Organization for Social Insurance (GOSI) contribution deducted (9% pension and 0.75% unemployment insurance, SANED). Expatriate employees have nothing deducted, since GOSI does not cover them for pension or SANED.

2. How much does it cost an employer to run payroll in Saudi Arabia?

Employer cost depends on nationality. For a Saudi national, the employer pays an 11.75% GOSI contribution (9% pension, 2% occupational hazard, and 0.75% SANED). For an expatriate employee, the employer pays 2% for occupational hazards only. Both are capped at a monthly base of SAR 45,000.

3. When are GOSI contributions and WPS submissions due in Saudi Arabia?

GOSI contributions are paid monthly, by the 15th of the following month, through the SADAD payment system. Wage payments must be submitted to the Wage Protection System (WPS) through Mudad each month on the establishment's fixed payday. There is no income tax return to file for employees.

4. What happens if you miss a payroll deadline in Saudi Arabia?

Missing a GOSI or WPS deadline does more than trigger fines. It can freeze government services tied to the establishment, including work permit issuance, contract registration on Qiwa, and Iqama renewals for expatriate staff. Late GOSI contributions also draw penalty interest, and repeated breaches affect the Nitaqat rating.

5. Can a foreign company run payroll in Saudi Arabia without a local entity?

Running payroll in Saudi Arabia requires commercial registration plus enrollment with GOSI, the Wage Protection System, and Qiwa, which assumes a local entity. Companies without one typically use a global Employer of Record, which acts as the legal employer, holds the registrations, processes WPS payroll, and supports GOSI contributions.

6. How long does it take to set up payroll for a new hire in Saudi Arabia?

It depends on whether the entity and registrations exist. An employer must register a new hire with GOSI within 15 days of their start date and add them to Qiwa, after which they join the monthly WPS payroll. Through an Employer of Record that holds the registrations, onboarding takes days.