Professional Employer Organization (PEO) in Saudi Arabia

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What is a professional employer organization (PEO)?

Overseas companies hiring remotely in locations like Saudi Arabia often need a partner organization to help with the endeavor. One such organization is called a professional employer organization or PEO, and they enable foreign companies to run HR processes in countries where they want to outsource roles. A PEO in Saudi Arabia enters into a joint agreement with clients in which they become co-employers of any hired workers. In so doing, the PEO can help with functions such as:

  • Recruitment, hiring, and onboarding
  • Developing compensation packages
  • Payroll processing implementation
  • Statutory and supplementary benefits administration
  • Ensuring local labor law compliance

As the PEO and the partner client are co-employers, they share the responsibilities and liabilities for remote employees hired under their joint agreement. PEOs typically flexibly accommodate the needs of their clients in terms of how much of the HR functions they take off their clients’ hands. They can also usually offer robust digital infrastructure to support remote employee management as well as payroll. This is indeed one key advantage of partnering with a PEO.

The main value of signing on with a PEO in Saudi Arabia, however, is compliance management. Compliance with local employment legislation will always be one of the most critical speed bumps to successful outsourcing, and regardless of how many HR functions overseas companies need to efficiently run globally distributed teams, there will always be a need for compliance management. PEOs guarantee compliance so their partners can focus on their business and efficiently scale their degree of remote hiring.

Compliance is the first step that serves as the foundation to a successful outsourcing strategy, and in the Kingdom of Saudi Arabia, the primary sources of employment legislation are:

  • The Labor Law issued as per the country’s Royal Decree No. (M/51) along with its amendments
  • The Executive Regulations of the Labor Law issued as per the country’s Ministerial Resolution No. (70273)

These labor laws cover nearly all aspects of employment practice, from terms and conditions in contracts to types of leaves to data protection and employee privacy.

And if you’re keen on hiring in the Saudi Arabia market, you need to properly address all of the requirements laid out in these labor laws. The Saudi Arabian manpower outsourcing market is busy and growing: sources estimate its compound annual growth rate (CAGR) to reach 10.7% from 2021 to 2028, bringing in an impressive $5.487 billion in revenues by the end of that time span. Before the brunt of the pandemic, the local government had already been launching programs to attract further government investment, and sectors like e-commerce and entertainment are expected to benefit, while staple sectors in outsourcing like business services will continue to thrive.

To get a piece of that pie though, you’ll need to address compliance management. As you expand to other international markets, you’ll need to face the same compliance hurdles again and yet again..

Clearly, a reliable PEO that can unlock these markets is a strategic priority for your business.

What are the benefits of using a PEO in Saudi Arabia?

Offloading work-intensive processes like HR functions will always allow you to benefit from inherent outsourcing advantages, though for PEOs, compliance really is the value proposition.

  • PEOs ensure compliance with local labor laws. Labor laws in Saudi Arabia go into great detail about employment practices in the Kingdom. Outsourcing to the country entails careful consideration and absolute adherence to the mandatory guidelines laid out in these laws, which cover everything from onboarding to payment, and even more complicated issues such as intellectual property (IP) protections.
  • PEOs ensure efficient payroll processing and tax filing. With in-country legal expertise, PEOs make tedious functions like payroll and tax filing more efficient for clients. Even better, they guarantee strict adherence to statutory components detailed by local labor laws, and between compensation standards, taxation legislation, and deductions and benefits administration, there’s a lot of work that goes into it.
  • PEOs mitigate risks. Of course, one of the primary competitive advantages of guaranteed local labor law compliance is the mitigation of risks. Because PEOs guarantee that your HR functions will always adhere to strict guidance by local legislation, you are safeguarded from potential penalties and fines that would result from noncompliance.
  • PEOs administer competitive benefits. Beyond just offering the statutory benefits mandated by local laws, PEOs can help you develop appealing supplementary benefits to attract top talent to your job offers. Leveraging in-country knowledge on work culture and benefits expectations, PEOs can help you find the perfect candidates for the roles you require.
  • PEOs reduce employee costs. Simply put, all of these above mentioned issues can snowball into expensive overhead costs. PEOs help mitigate these expenses and also keep them in check once you expand your remote hiring to other international markets.

Explore Skuad’s services in Saudi Arabia and find out how you can reap these benefits too. Let Skuad focus on the compliance angle; you just focus on what you do best and grow your business.

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What are the differences between an EOR and a PEO?

Like PEOs, employers of record (EORs) are organizations that help overseas companies to hire talent in remote locations. There are several variations as to how PEOs and EORs operate, and these mostly stem from a few key differences:

Considered a legal representative of an employer and, as such, held legally liable to manage employment services by hiring, onboarding, and paying employees and independent contractors for an employer Only liable to employers insofar as agreed-on conditions included in service contract state and, as such, bears no legal responsibility for — and is not considered a legal representative of — employers when carrying out any agreed-on HR functions
Strategizes HR functions end to end and, in doing so, exercises more control over employees and independent contractors in all outsourced HR functions Is limited to functional, as opposed to strategic, levels of managing and providing HR functions and, as such, has much less control over employees and independent contractors
Brought in because of extensive legal expertise and service network to manage employment services in multiple jurisdictions Hired because of niche expertise in one or a few labor markets and, as such, has limited expertise (and value) when employers expand into more markets
Crafts end-to-end contracts as part of an integrated employment service and, as such, is held fully liable for each HR activity provided under service contract Does not usually handle contract drafting or agreements, leaving contracting matters to client organizations

Hiring in Saudi Arabia with a PEO

The Kingdom of Saudi Arabia offers a skilled talent pool with remarkably low unemployment rates and a strong economy. Furthermore, its location makes it ideally situated for business expansion especially for companies looking to establish relations with its neighbors. Companies looking for talent also have a rather diverse talent pool from which to hire, as 7.4 million legal immigrants are foreign workers exploring opportunities in the Kingdom.

The foremost hurdle is finding the right partner to help manage compliance.

For many, that partner is Skuad. Skuad’s services in Saudi Arabia lets you jumpstart your remote hiring efforts in the Kingdom. Skuad ensures complete compliance with Saudi Arabian labor laws as well as a cutting-edge digital platform for remote management and payroll processing.

Payroll in Saudi Arabia is challenging. It’s easy when you use a PEO.

Even without compliance concerns, payroll processing can be quite challenging to handle. Paying globally distributed teams each with their own compliance hurdles understandably makes payroll processing a headache too great for many companies that want to hire internationally.

After all, local employment legislation in Saudi Arabia governs key components of payroll, such as:

  • Compensation structure and minimums
  • Working hours and overtime
  • Different types of leaves
  • Taxation and deductions
  • Benefits

Few companies can handle all that in-house with the expectation to smoothly do the same for future expansions into other international markets. Especially if noncompliance not only leads to penalties and fines, but also to strained relationships with remote employees and higher churn rates.

Partners like Skuad are highly sought after as service and platform providers that can address all of these concerns. Request a demo from Skuad’s experts to know more.

What a PEO in Saudi Arabia can and cannot do for you

Understandably, you need to clearly understand the limitations of a partnership with a PEO in Saudi Arabia before you take the plunge. Here’s a simple breakdown of the bottom-line concepts:

A PEO can

  • Offer streamlined HR management and payroll processing services for remote workers in Saudi Arabia and other markets, as well as compliant digital infrastructure
  • Help you recruit, onboard, and manage your Saudi Arabian employees, and extend the same services for other international markets
  • Reduce the overhead costs that come with with remote HR management of globally distributed teams
  • Protect you from any and all risks associated with noncompliance to local labor laws

A PEO cannot

  • Hire employees on your behalf as the sole legal employer
  • Take full control of your company
  • Make the call on important decisions like hiring or firing employees

Businesses big and small can find value in partnering with a PEO in Saudi Arabia

The foundation of successful outsourcing is formed by compliance to the local labor laws of the markets in which you want to operate. You need to understand and comply with the statutory guidelines and standards set forth in Saudi Arabian legislation to legally run the HR and payroll processes required to hire remote teams in the Kingdom.

Finding the right partner is the key to doing that.

Attempting to muscle your way to building a globally distributed team will inevitably slow down your international aspirations. What you need is a reliable PEO in Saudi Arabia that can help you with your goals by ensuring compliance to local legislation so you can allocate precious in-house business resources to pursue other objectives.

Book a demo with Skuad today.

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