The Labour Laws of Saudi Arabia regulate all employer-employee relationships in the Kingdom. Both parties should be aware of the regulations outlined by the Law to ensure compliance and legality. The sections below cover the major aspects of the Law to help both parties understand their duties and rights.
Employee Contract
Public and Provincial Holidays
Leave Information
Basic
The Labour Laws in Saudi Arabia recognize both written and verbal contracts. The written contract must be published in Arabic, and both parties should have a copy of the document.
Probation Period
The probation period in Saudi Arabia is a maximum of 90 days.
13th Month Pay
13th-month pay is not mandatory, although both parties can choose to include this on a collective agreement. But the employees get a bonus every year.
Employee Benefits
Employers in Saudi Arabia may provide the following benefits to their employees:
-
-
Social insurance.
-
Unemployment insurance.
-
Paid leaves.
-
Maternity leaves
-
Retirement benefits
Payroll Cycle
Employees in Saudi Arabia are paid in monthly or weekly cycles.
Minimum Wage
The minimum wage in Saudi Arabia is SAR 4,000 for Saudi citizens working in the private sector.
Overtime Pay
The standard working hours in Saudi Arabia are 8 hours a day and 48 hours a week, which can be increased to 9 or 7 hours a day for certain industries where the employee does not work continuously. The working hours for Muslim employees are reduced to 6 hours a day and 36 hours a week during the month of Ramadan.
Employer Payroll Cost:
| Employee type |
Contribution |
Tax rate |
| Saudi employees |
Occupational hazard |
12% |
| Saudi employees |
Social insurance |
9% |
| Saudi employees |
Unemployment insurance |
1% |
| Non-Saudi employees |
Occupational hazard |
2% |
Employee Payroll Cost:
| Employee type |
Contribution |
Tax rate |
| Saudi employees |
Social insurance |
9% |
| Saudi employees |
Unemployment insurance |
1% |
| Non-Saudi employees |
Occupational hazard |
2% |
Employee Income Tax
Saudi Arabia does not impose any income tax on wealth earned only via employment.
VAT
The standard rate of Value-Added Tax in Saudi Arabia is 5%.
Indefinite contracts can be terminated due to valid reasons, with a written notice in advance served to either party. Contracts can also be terminated due to mutual agreement, violations of terms in the agreement, the retirement of the employee, or force majeure.
The notice period, in case of indefinite contracts, is 30 to 60 days.
Severance pay
The End of Service Benefit (ESB) is given to employees after completing 2 consecutive years with the same employer. The rate of ESB pay is half a month’s wage for each of the first 5 years of service, and one month’s wage for each subsequent year after more than 5 years of service.
If the employee resigns from their job, the ESB is paid at the following rate:
| Length of service |
ESB pay |
| 2 – 5 years |
1/3rd of the entitled pay |
| 5 – 10 years |
2/3rd of the entitled pay |
| More than 10 years |
Full entitled pay |
Saudi Arabia allows visa-free stay to citizens of Bahrain, Kuwait, Oman, and the United Arab Emirates. Professionals of other countries must get residence and work permits before their first date of employment in Saudi Arabia. Foreigners who fulfil the eVisa requirements can enter Saudi Arabia with their digital permit. Others can visit the Embassy or Consulate of Saudi Arabia and apply via the traditional method. The individual must present a letter addressed to the Embassy/Consulate stating the reason for the visit, a letter of invitation from the Saudi employer, and the company registration documents.