Hiring in Saudi Arabia: A Comprehensive Guide for 2026

Introduction

Hiring remote employees in Saudi Arabia means working within the Saudi Labor Law, which was substantially amended in February 2025 and governs contracts, working hours, leave, and termination for every employment relationship in the country.

Foreign companies without a local entity typically hire through an employer of record (EOR) that holds the legal employment relationship and manages registration with the General Organization for Social Insurance (GOSI) on their behalf.

Saudi Arabia currently runs two parallel GOSI contribution systems depending on when a Saudi employee first registered, and the February 2025 amendment also changed maternity leave, paternity leave, and standard notice periods.

Content built before February 2025 often still describes the older framework: ten weeks of maternity leave instead of twelve, five days of paternity leave instead of three, and notice periods that no longer match the amended law. Applying outdated figures, or the wrong GOSI system to the wrong employee, creates real payroll exposure.

In this guide, we cover how to hire in Saudi Arabia with or without a local entity, what it costs, the country's core labor laws, the main compliance challenges, and how an EOR supports compliant hiring from day one.

How to Hire Remote Employees in Saudi Arabia?

Hiring remote employees in Saudi Arabia means working within the Saudi Labor Law (Royal Decree No. M/51 of 2005, substantially amended in February 2025), which governs contracts, working hours, leave, and termination for every employment relationship. Foreign companies cannot run local payroll directly.

They need either a registered local entity or an employer of record (EOR) that holds the legal employment relationship and manages registration with the General Organization for Social Insurance (GOSI) on their behalf.

Registering a local entity in Saudi Arabia means registering with GOSI, the Ministry of Human Resources and Social Development (MHRSD), and the local Chamber of Commerce, meeting Nitaqat Saudization quotas tied to company size and sector, and authenticating employment contracts through the Qiwa platform, before a single employee can be added to payroll.

Hiring contractors looks lighter on paper, but Saudi labor law doesn't clearly define contractor status, so misclassifying a contractor as an employee can trigger retroactive GOSI payments, Zakat, and VAT implications, on top of separate penalties of up to SAR 10,000 for visa-term violations involving foreign contractors.

There are three main ways to hire remote employees in Saudi Arabia:

• Setting up a local entity
• Hiring employees via EOR
• Hiring contractors via AOR

Here's what each option involves.

Setting up a local entity

Registering a local entity in Saudi Arabia means registering with GOSI, the MHRSD labor office, and the local Chamber of Commerce, meeting Nitaqat Saudization requirements, and opening a corporate bank account.

This route is usually time-consuming and paperwork-heavy, and it tends to make sense for companies planning a substantial, permanent operation, especially one bidding on government contracts or leasing premises, rather than a first hire.

How to hire employees through EOR in Saudi Arabia?

Setting up a local entity in Saudi Arabia means navigating GOSI registration, MHRSD labor office registration, Chamber of Commerce membership, and ongoing Nitaqat quota compliance, a process that can take several weeks before your first hire is on payroll.

Skuad helps remove that dependency. Skuad acts as the legal employer in Saudi Arabia, so your company can hire, onboard, and pay employees without entity setup, local legal counsel, or in-house Saudi Arabia payroll infrastructure.

Here is what Skuad helps with:

• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• 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
• Statutory benefit administration, including paid leave and end-of-service award accruals in line with local requirements
• Termination and offboarding support aligned with local labor requirements across supported markets
• Background verification covering identity, employment history, and criminal records before onboarding

See Skuad's Saudi Arabia employer of record guide for the full breakdown, and its Saudi Arabia work permit guide for Iqama sponsorship specifics.

How to hire contractors through AOR in Saudi Arabia?

Hiring independent contractors in Saudi Arabia carries real classification risk, since Saudi labor law does not explicitly define contractor status. A contractor functioning like an employee can trigger retroactive GOSI contributions, Zakat, and VAT obligations, and foreign contractors working outside proper visa terms face fines of up to SAR 10,000.

An Agent of Record helps reduce that exposure. Through Skuad's AOR and contractor management solution, you can engage contractors in Saudi Arabia on compliant terms, or move them into employment when the relationship requires it, without carrying the classification risk yourself.

Here is what Skuad helps with:

• Locally compliant contractor agreements that reduce misclassification exposure across supported markets
• Worker classification checks that flag risk before a contract is signed
• Invoice generation, approval workflows, and payment processing in local currency
• Multi-currency contractor payouts across 70+ currencies with no manual reconciliation
• Contractor records, contracts, and payment history in a single dashboard alongside full-time employees
• Support for converting a contractor to full-time employment through Skuad's EOR when the relationship changes

Compare AOR and contractor pricing for your Saudi Arabia hires

What is the Cost of Hiring Remote Employees in Saudi Arabia?

The cost of hiring remote employees in Saudi Arabia is rarely just the salary you agree on. Statutory contributions, the hiring method, and administrative setup can all increase the total cost. Here is how those costs break down:

• GOSI contributions: Saudi Arabia currently runs two parallel GOSI systems. For Saudi nationals registered before July 3, 2024, the combined rate stays at 21.5%, split as 11.75% employer and 9.75% employee. For Saudi nationals registered under the newer system, the rate is 22.5% as of early 2026, rising to 23.5% from July 1, 2026, under annual 0.5% increases on each side through 2028.
  Expatriate employees are enrolled in only one branch, Occupational Hazards, at a flat 2% paid entirely by the employer, with no pension or unemployment insurance contribution at all. All GOSI contributions are calculated against a contributable wage base capped at SAR 45,000 per month.
• Minimum wage: Employers must budget for the SAR 4,000 per month minimum wage, but only for Saudi nationals, since it's tied to Nitaqat Saudization compliance rather than a universal standard. Expatriate salaries, which make up most private-sector hiring, aren't subject to an official minimum.
• Income tax: Saudi Arabia has no personal income tax for employees, which meaningfully offsets some of the GOSI and compliance overhead compared to markets with both employer contributions and employee income tax withholding.
• End of service award: Under Article 84 of the Labor Law, terminated employees are entitled to an end of service award, calculated at half a month's wage per year of service for the first five years and a full month's wage per year after that, an ongoing accrual that needs to be budgeted for regardless of hiring route.

Skuad's Saudi Arabia payroll guide breaks down how these obligations come together in practice, and Skuad's employee cost calculator helps estimate the total cost of employing someone in Saudi Arabia, including salary, employer contributions, benefits, and taxes.

Estimate the total cost of your Saudi Arabia hire

What are the employment laws in Saudi Arabia?

The Saudi Labor Law (Royal Decree No. M/51 of 2005) is the primary legislation governing the employee-employer relationship, most recently amended by the Council of Ministers on August 6, 2024, with the changes taking effect February 19, 2025. Several of the figures below reflect that amendment, so older content describing the pre-2025 framework should be treated as outdated.

The maternity and paternity leave changes are the ones most likely to trip up content or planning built before February 2025, since the older 10-week maternity and 5-day paternity figures still circulate widely despite being superseded. Skuad's Saudi Arabia employment laws guide covers contract types and additional termination grounds in more detail.

What are the challenges of hiring in Saudi Arabia?

Saudi Arabia's Nitaqat system ties every hiring decision to a Saudization quota, and falling into the Red or Yellow band blocks new work visas, iqama renewals, and occupation changes outright. That quota pressure, layered with GOSI contributions, Wage Protection System compliance, and compounding end-of-service gratuity obligations, creates three areas that trip up most foreign employers:

1. Saudization quotas that affect visa issuance, not just hiring mix

Companies with a local entity must meet Nitaqat Saudization requirements, hiring a minimum share of Saudi nationals based on company size and sector. Falling short doesn't just miss a target; it can restrict visa issuance and renewals for the foreign hires already on the team. Skuad's guide to hiring contractors in Saudi Arabia covers how the Nitaqat program can indirectly affect international hiring even outside direct employment.

2. A payroll compliance stack spread across four government portals

Saudi payroll runs through Mudad for wage submissions, Qiwa for contract registration and Saudization tracking, Muqeem for work permit and Iqama data, and GOSI for social insurance. A data mismatch across any one of these portals can freeze access and stop payroll entirely until it's resolved, which is why most employers run a full reconciliation before every monthly wage submission.

Skuad's Saudi Arabia work permit guide covers the Kafala sponsorship system this creates.

3. Two parallel GOSI systems running at once

Saudi Arabia currently operates two GOSI contribution systems side by side: one for Saudi nationals registered before July 3, 2024, holding at 21.5%, and a newer one for those registered after, currently 22.5% and rising 0.5% annually on each side through 2028.

Applying the wrong system to the wrong employee is a genuinely easy mistake with real payroll consequences. Skuad's Saudi Arabia payroll guide breaks down which system applies based on registration date.

4. Contractor misclassification with no statutory definition to fall back on

Saudi labor law does not explicitly define contractor status, which leaves classification resting entirely on how a working relationship actually functions. A contractor treated like an employee can trigger retroactive GOSI contributions, Zakat, and VAT obligations, plus fines of up to SAR 10,000 for foreign contractors working outside proper visa terms.

5. Sponsorship-dependent work authorization for every foreign hire

Foreign employees need a work visa and Iqama residency permit tied to a sponsoring employer, arranged through the Ministry of Labor and Ministry of Foreign Affairs before the employee can even travel to Saudi Arabia.

This sponsorship dependency means the employment relationship and the immigration status are tightly linked, so losing sponsor status affects the employee's legal right to remain and work.

Hire in Saudi Arabia without setting up an entity

Saudi Arabia offers access to a large, well-resourced market and a workforce increasingly shaped by Vision 2030 reforms, but getting there means clearing Nitaqat Saudization quotas, running payroll across four connected government portals, and applying the right one of two parallel GOSI systems to every Saudi hire.

Skuad gives companies a practical way to add employees in Saudi Arabia without building a local hiring setup from scratch. Payroll, employment administration, and related compliance workflows can be managed through one platform, while GOSI-related payroll requirements remain part of the local employment process.

Contractor engagements can also require closer attention to classification, particularly when working arrangements begin to resemble employment. Skuad provides classification support as part of the contractor workflow, helping teams review these risks before onboarding.

For international hires, immigration can become another planning factor. Skuad supports Saudi Arabia work permit and Iqama processes, which can make it easier to coordinate the documentation and employment steps around a foreign hire.

This gives companies a more centralized way to manage Saudi hiring while avoiding the need to build every employment process internally.

Book a demo to see how quickly Skuad can onboard your first Saudi Arabia hire

FAQs

1. What is an employer of record in Saudi Arabia?

An employer of record in Saudi Arabia is a licensed local entity that acts as the legal employer for your workers, handling Qiwa-authenticated contracts, GOSI registration, and Mudad payroll, so foreign companies can hire without registering their own entity or navigating Nitaqat Saudization quotas directly.

2. What is the minimum wage in Saudi Arabia?

Saudi Arabia's SAR 4,000 per month minimum wage applies specifically to Saudi nationals, tied to Nitaqat Saudization compliance rather than a universal labor standard. Expatriate employees, who make up the large majority of the private-sector workforce, have no official minimum wage, though fair wage principles under the Labor Law still apply.

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

Foreign companies can typically hire in Saudi Arabia through an EOR without registering a local entity, since the EOR holds the legal employment relationship, manages GOSI registration and Mudad payroll, and sponsors Iqama residency permits for foreign hires on the company's behalf.

4. What compliance risks should employers know about in Saudi Arabia?

Companies with a local entity must meet Nitaqat Saudization quotas, hiring a minimum share of Saudi nationals based on company size and sector, or risk restricted visa issuance and renewals. Contractor misclassification is also a real risk, since a contractor functioning like an employee can trigger back-dated compliance obligations.

5. Is an EOR or a local entity better for hiring in Saudi Arabia?

This usually depends on scale and intent. An EOR generally suits smaller teams or companies testing the market, since it sidesteps Nitaqat quota management and entity setup entirely. A local entity tends to make more sense for larger, permanent operations, especially ones bidding on government contracts or leasing premises.

6. How long does it take to onboard an employee in Saudi Arabia through an EOR?

Onboarding a Saudi national through an EOR generally takes a few days to one to two weeks once GOSI registration and the employment contract are in place. Hiring a foreign national who needs Iqama sponsorship and a work visa usually extends that timeline considerably.