Guide to Hiring in Saudi Arabia

Employment trends and job market analysis

The economy of Saudi Arabia has a long history, but it is now a huge player on the global stage. The country is the world’s biggest exporter and producer of oil. 

More than 90% of Saudi Arabia’s non-oil exports are made up of electrical appliances, petrochemicals, construction materials, plastics and metal goods. 

Saudi Arabia’s unique location makes it central to Asia, Europe and Africa, making it a natural channel for worldwide trade routes, not to mention a popular location for international business expansion. 

Payroll and taxes

Saudi Arabia's federal government typically enacts all laws related to social taxes. This includes the occupational hazards branch and annuities contributions of the social insurance system.

There is no personal income tax in Saudi Arabia.

Employer contributions

Saudi Arabia has an extensive social security system which provides old age, disability and survivor benefits for its employed and self-employed workers.

Employers’ social security contributions must be calculated on a daily rather than a monthly basis and are charged at a rate of:

• 12% for employees who are Saudi nationals
• 1.5% for employees who are foreign nationals

This is based on minimum earnings of 400 SAR and maximum earnings of 45,000 SAR.

These contributions are assessed based on the total monthly remuneration of the following categories:

• Basic wage
• Housing allowance
• Commission payments

Employee contributions

Employees in Saudi Arabia pay the following contributions towards the social security system:

• Social insurance - 9%
• Unemployment insurance - 1%

Minimum retirement age

In Saudi Arabia, the official pension age is 58 for employees with a minimum of 120 months of credited or paid contributions.

Minimum wage

The monthly minimum wage in Saudi Arabia is 4,000 SAR.

Working hours

The work week in Saudi Arabia is usually six days, with Friday as a rest day. Working days are typically eight actual hours, but during Ramadan, this is reduced to six hours.

Any work that exceeds the 48-hour working week must be paid as overtime. This is regulated by the employment contract or collective agreement. Daily hours can never exceed 11 hours.

Overtime that exceeds 48 hours per week should be paid at an overtime compensation rate, which typically stands at 150% of the employee’s average salary rate. Employers must also pay the employee an additional wage for any type of work performed during weekly rest days or during official holidays.

Labour laws and employee rights

The labor law in Saudi Arabia is primarily regulated by the Labour Regulation, Royal Decree No M/51 of 23 Sha’ban 1426 Hejra. 

Labour laws to be aware of in Saudi Arabia include:

Saudization

Employers are obligated to attract and hire Saudi nationals, retain them in employment, and provide opportunities for them to showcase their suitability for the job through training. As per the labour law, at least 75% of the workforce in any organisation must consist of Saudi nationals. However, the Government has the authority to temporarily reduce this percentage in certain cases, such as when there is a lack of technically or academically qualified workers, or when a vacancy cannot be filled by a Saudi national.

In reality, Saudi nationals make up approximately one-fifth of the private sector workforce. To increase this proportion, the Government follows a policy called "Saudization," which includes the Nitaqat scheme. The Nitaqat scheme applies to private sector companies with six or more employees and sets quotas for the employment of Saudi nationals based on the company's size and sector. Every company must have at least one Saudi national employee. Depending on their compliance with the applicable quota, companies are classified as Platinum, Green (divided into High, Medium, and Low), or Red. Platinum companies are fully compliant, while Red companies are non-compliant. The classification of a company determines its privileges for obtaining visas and residence permits for foreign workers.

Under the Nitaqat scheme, a Saudi employee must be paid a minimum amount to count towards the company's quota. Currently, this amount is SAR3000 per month for full-time employees (as of October 2020).

Certain designated jobs can only be filled by Saudi nationals, including various clerical and supervisory roles, as well as positions in hospitality, tourism, retail, private security, healthcare, and HR.

Companies or individuals that recruit Saudi nationals to work abroad or foreign nationals to work in Saudi Arabia must obtain a license from the Ministry of Human Resource and Social Development.

Hiring foreign nationals

According to the labour law, work is a fundamental right granted to Saudi citizens. Non-Saudi individuals can engage in employment under specific conditions outlined in the Law. Saudi nationals typically receive priority in employment, and certain positions are exclusively reserved for them. Foreign nationals (excluding citizens of Bahrain, Kuwait, Oman, and the United Arab Emirates) are prohibited from working in Saudi Arabia unless they have a valid residence/work permit. Such permits are exclusively granted to workers who have an employment contract with a Saudi Arabian employer and fall under their responsibility.

Foreign nationals working in Saudi Arabia must have sponsorship from an employer, typically a domestic or multinational company in the country. To employ foreign nationals, the sponsor employer needs a "block visa" from the Ministry of Human Resource and Social Development, followed by authorisation from the Ministry of Foreign Affairs. The sponsor employer can then apply for a work visa on behalf of the specific foreign national. Visas are only granted to individuals with professional and academic qualifications that are necessary in Saudi Arabia and not readily available among Saudi citizens, or individuals in occupations required by Saudi Arabia.

Foreign nationals must have written employment contracts with fixed terms. If the contract doesn't specify the term, it is considered to be the duration of the residence permit.

Foreign nationals are limited to working in the occupation specified in their residence permit. Generally, changing employers requires the original sponsor's approval, but certain circumstances waive this requirement. These include non-payment of wages for three consecutive months or non-compliance with Nitaqat obligations.

Sponsor employers are responsible for providing medical insurance to foreign employees. However, employers should not hold onto foreign employees' passports unless explicitly requested.

Employers of foreign nationals are responsible for all recruitment costs, including work visas, residence permits, their renewal, and return tickets to the employee's home country upon employment termination. Moreover, employers face higher "expat fees" if they employ more foreign nationals than Saudi citizens.

During employment, foreign nationals cannot enter or exit the country without the employer obtaining a permit from the Ministry of Human Resource and Social Development. When employment ends, the sponsor must arrange a final exit visa after settling any outstanding debts, fines, and resolving pending cases in the Labour Court.

The labour law doesn't apply to non-Saudi nationals performing specific tasks for two months or less.

Discrimination laws

Employees are prohibited from discriminating in recruitment and advertising job positions based on sex, disability, or age.

An employer who violates the labour law's prohibition of discrimination against Saudi nationals based on factors like sex, disability, and age can be fined SAR20,000 by the Ministry of Human Resource and Social Development. These fines serve as the primary penalties for other statutory violations related to discrimination and equality, including the rules on investigating complaints of abusive behaviour. Employees who report such breaches by their employers may receive a reward of up to 25% of any fine imposed by the Ministry.

Individuals might have the option to file claims of unlawful discrimination in the Labour Court or civil courts to seek damages, although there is limited evidence of this occurrence. The prohibition of discrimination was recently introduced to the labour law in 2019, making it a relatively new area of law. In case of a discriminatory dismissal, an employee could potentially claim compensation in the Labour Court on the grounds that it is an invalid reason for termination. 

Employment contracts

An employment contract is defined by the labour law as a contract between an employer and an employee. The employee agrees to work under the management or supervision of the employer for a wage. An employer is any natural or corporate person employing one or more workers for a wage, while an employee is any natural person working for an employer under its management or supervision for a wage, even if they are not under its direct control.

In general, an employment contract should be in writing and in duplicate, with each party retaining a copy. However, if there is no written contract, the employee can still establish the existence of a contract and their entitlements using any necessary proof. Certain contracts, such as those of foreign nationals and part-time workers, must always be in writing.

Employment contracts and related records must be in Arabic, as outlined by regulations. If any other language is used alongside Arabic, the Arabic text takes precedence. Employers are obligated to upload employment contracts to an online portal managed by the General Organisation for Social Insurance (GOSI) for authentication. Employees are notified when their contract is uploaded and have the right to raise objections if it does not align with their expectations. Any clause in an employment contract that contradicts the provisions of the labour law is considered void. Similarly, any release or settlement of employee rights under the law during the contract term is only valid if it benefits the employee more than the law's provisions.

Trade unions

Although trade unions are neither explicitly prohibited nor recognised by the labour law in Saudi Arabia, employees do not possess the right to form or join independent trade unions or partake in their activities. The sole authorised form of employee representation comes in the shape of a labour committee. A Governmental Decree and Resolution allow the formation of such a committee on a voluntary basis in workplaces with over 100 Saudi nationals as employees.

The establishment of a committee must receive approval from the Ministry of Human Resource and Social Development. The committee consists of three to nine members, depending on the size of the workforce, elected by the Saudi national employees. Meetings are attended by representatives from both the employer and the Ministry. The primary responsibilities of the committee encompass making recommendations to company management on various aspects, including the enhancement of working conditions, productivity, health and safety standards, management and technical training programs, and social and cultural facilities. The committee is also entrusted with deciding how disciplinary fines imposed on employees are utilised.

The employer is obliged to provide the necessary resources, time off, and information to the labour committee. The Ministry holds the authority to dissolve committees if they infringe regulations or pose a threat to public security. Furthermore, labour committees are represented on the National Committee of Labour Committees, established to express workers' viewpoints on certain issues and represent them in international forums such as the International Labour Organisation.

Health and safety

The labour law mandates employers to prioritise employee safety and well-being. This involves taking necessary precautions to protect against hazards, occupational diseases, and machinery risks. Employers must adhere to government-issued safety rules, measures, and standards.

Specific obligations include maintaining a clean and hygienic workplace, displaying instructions on work safety in Arabic or other languages understood by employees, informing employees about job hazards, providing and training employees in the use of personal protective equipment, ensuring adequate lighting and water supply, taking fire safety precautions, providing first-aid facilities, arranging regular medical examinations for employees exposed to occupational diseases, offering preventive and therapeutic healthcare, and reporting occupational injuries and diseases.

Employers are prohibited from charging employees for occupational health and safety measures. They are also accountable for emergencies and accidents occurring to authorised individuals on the premises due to their negligence, with a duty to compensate for any resulting damage or harm.

Various additional requirements apply to high-risk workplaces. These workplaces involve the production, preparation, disposal, handling, use, or storage of certain quantities of hazardous substances. Hazardous substances refer to materials or mixtures that present a hazard due to their chemical, physical, or toxic properties. These rules focus on protection against major hazards, the duties of employers, arrangements for safeguarding the public and the environment, the rights and responsibilities of employees, and measures to prevent major accidents, minimize the risks, and mitigate their impacts.

To ensure employee safety, employers must inform workers of the hazards associated with their work before they begin their tasks. They must also provide the necessary personal protective equipment, train employees on its use, and enforce its use. Adequate lighting, potable and washing water, fire protection precautions, and functional safety exits are crucial. Employers must display detailed fire prevention instructions prominently in the workplace. First-aid cabinets with essential medications and supplies should be readily available. Employees exposed to occupational diseases require comprehensive medical examinations at least once a year, following official standards. Employers should also provide employees with preventive and therapeutic healthcare. Any occupational injuries and diseases must be reported promptly.

It's important to note that employers cannot charge employees or deduct any amount from their wages for providing protective occupational health and safety measures. Employers bear responsibility for emergencies and accidents that may affect individuals who enter the workplace due to official duties, with the employer's approval or that of its agents. If such emergencies and accidents result from the employer's negligence in taking the necessary technical precautions, compensation for the damage and harm suffered should be provided. 

An employee has the right to resign without giving notice in the presence of a serious workplace hazard that jeopardises their safety or health and when the employer is aware of it but fails to address the issue.

Moreover, employees are not obliged to comply with any instructions from the employer that might expose them to undue hazards.

In workplaces where a labour committee is established, the committee has the authority to provide suggestions to the employer regarding the enhancement of health and safety standards.

Employee benefits

Mandatory benefits

Statutory benefits in Saudi Arabia include a shortened workday of six hours for Muslim employees during the period of Ramadan, 21 paid leave days and leave for public holidays.

Supplementary benefits

To attract top talent to your business, it’s important to have a strong benefit management plan. It’s customary for employers in Saudi Arabia to offer the following supplementary benefits:

• Additional health insurance
• Transportation allowances
• Plane tickets to go home during annual leave
• Housing allowances
• Remuneration for educational training costs
• Work mobile phones
• Retirement plans

Types of leave available

Annual leave

Employers are required by law to provide 21 days of paid annual leave per year. Once an employee has worked for the company for five consecutive years, the leave must increase to 30 days.

All annual leave should be granted in full at the start of the year. However, employees will need to ask for permission before taking time off. All leave has to be taken in the year it was granted and employees are not allowed to forgo time off or receive any compensation in its place.

Sick leave

Employers are obligated to provide 90 paid sick days to all employees. This leave is paid at full wages for the first 30 days, reducing to three-quarters of the employee’s normal wage for the remaining 60 days.

If an employee has used all of their sick days, they can receive an additional 30 days of unpaid sick leave.

Maternity and paternity leave

Employees are entitled to ten weeks of paid maternity leave - four weeks prior to the due date and six weeks after the birth of a child. If the employee has worked at the company for less than 12 months, maternity leave is unpaid. Employees who have worked at a company for 1-3 years receive 50% of their wage during maternity leave, and those who have worked for more than three years receive their full wages.

Employees who take maternity leave at full wage can take their annual leave, but this must be unpaid. Those taking maternity leave at 50% of their wage are also entitled to annual leave, but this will be at half of their normal wage.

Employees who have returned from maternity leave are also entitled to periods of rest of up to one hour a day for the purpose of feeding their newborn child according to Article (153) of the Labor Law. This is in addition to rest periods granted to all employees and is calculated based on their actual working hours and will not be be subject to any reduction in wages.

Employers must legally provide employees on maternity leave with medical care during pregnancy and delivery.

New fathers are entitled to three days of paid parental leave.

Hajj leave

Saudi workers who have never performed the ritual pilgrimage to Mecca and Medina are entitled to between 10 and 15 days of paid leave at one point during their tenure in order to perform the pilgrimage.

Student leave

Employers must allow paid leave to all student workers on examination days on the condition that the employees are not repeating a school year. If a staff member does need to repeat a schooling year, they are entitled to unpaid leave on examination days.

Marriage leave

The Saudi government grants newly married employees three days of paid leave.

Bereavement leave

In the event of the death of a spouse or child, employees are allowed 5 days of leave.

If a female employee’s husband passes away, she is entitled to 15-130 days of paid leave, depending on the conditions of her religion.

Public holidays

Saudi Arabia observes the following public holidays:

• Eid al-Fitr (4 consecutive days)
• Arafat Day
• Eid al-Adha (3 consecutive days)
• National Day

Attracting talent

According to global economic reports, in 2022, Saudi Arabia ranks within the world’s top 20 economies and is set to be the fastest-growing major economy in the world in 2022. This makes it an attractive location for business expansion.

To differentiate your company from others in Saudi Arabia, consider building an employee benefit program that enables your employees to grow within their careers as well as achieve a good work-life balance.

Career development opportunities

Employees who are high performers often seek ways to learn new skills and will be attracted to companies that offer opportunities for career development. You could offer training, professional development plans or one-to-one mentoring programs.

No matter how you choose to build these opportunities into your benefits package, it’s important to focus on offering prospective employees a clear vision of their professional pathway and how they might grow within your organisation.

Introduce policies that promote a strong work-life balance

Work-life balance is an essential construct of the quality of work-life for employees. When work begins to interfere with home life, it can have a detrimental effect on both morale and productivity.

Where possible, companies should provide flexible working conditions that enable their employees to stabilise their work-life balance, whether that’s through flexible working hours or remote and hybrid work environments.

Hiring best practices

Hiring staff in Saudi Arabia is similar to hiring a new employee in your home country. However, there are a few differences to consider and adjust your practices accordingly:

Use the local language and currency

When hiring locally, it's important to provide communications in Arabic, especially contracts and offer letters. Additionally, express monetary amounts in Saudi riyals instead of your home country’s currency.

Leverage word-of-mouth

Many Saudi Arabian companies rely on personal recommendations to fill open positions. If you work with an employer of record, utilise your connections to recruit talented individuals and even passive candidates who might not be actively searching for a job. Online advertisements and social media job postings can also be effective if you have limited in-country personal connections.

Research your location

Saudi Arabia is a kingdom comprising four distinct regions — Hejaz; Najd; parts of Eastern Arabia, or Al-Ahsa; and Southern Arabia, or Asir. Each region has its own customs and regulations, so it is advisable to seek expert advice regarding your chosen region before finalising your employment practices.

Prepare for a limited pool of Saudi national applicants

Due to the push for increased Saudisation and the goal of adding 1.2 million private-sector jobs by 2022, you can anticipate a high percentage of Saudi nationals in your candidate pools. However, many Saudi nationals prefer the public sector due to perceived higher salaries and job stability. Consequently, most private-sector employees are international workers, leading to a majority of expatriate applicants.

Expect to hire in-country expats

Businesses have the option to sponsor work visas and work and residence permits, known as iqamas, for new expatriates. However, this process often involves substantial costs.

Alternatively, you may find it more convenient to recruit international employees who already possess valid work permits and visas.

Hiring remote employees

While hiring remote teams for international operations, it's important to consider a few best practices:

Prioritise building an appealing company

Remember that hiring is a two-way process. Just as you evaluate candidates, they are assessing your organisation. Ensure a supportive work culture and attractive benefits to attract talented individuals.

Look for long-term partners

Your new hires will not only be employees but also valuable partners and educators in cross-cultural norms. They can also facilitate new business partnerships. Use targeted questions during the hiring process to identify candidates who will contribute to long-term growth.

Aim for in-person interactions

Although remote interviewing and hiring might be necessary due to time and distance constraints, try to send higher-level executives to meet new employees during onboarding and training. This demonstrates your commitment and appreciation towards new hires.

Remember, keeping these best practices in mind will help you hire and retain the right local talent for your international operations.

The onboarding process for new hires

When onboarding new hires in Saudi Arabia, it is crucial to go beyond the basics. In addition to providing a tour of the office and introducing the team, the orientation should cover essential aspects such as company culture, values, and expectations. Since personal relationships hold great significance in Saudi Arabia, it is imperative that the onboarding process allows for ample interaction between the new employee and their colleagues.

Regarding paperwork, it is mandatory to provide the new employee with an employee contract. This contract must be registered with the Ministry of Human Resource and Social Development using the Qiwa platform.

Termination of employment

Notice periods

Under Saudi Arabia's Labor Law, there are two types of contracts: fixed-term contracts and indefinite (open) contracts. A fixed-term contract typically includes a predetermined notice period stated in the employment contract; if this is not the case, the contract will expire once it reaches the end of its term without notice.

For indefinite employment contracts with an unspecified period, both the employee and employer must provide notice least 60 days in advance if they wish to terminate the employment relationship according to Article (75) of the Labor Law.

Employees are entitled to resign due to misconduct by their employer without providing any notice under Article 81 of the Saudi Labor Law. Employers can also terminate a contract without notice if the termination is due to misconduct.

Probationary periods

If an employee resigns during their probationary period, they must provide one day’s notice.

 According to Saudi law, probationary periods must not exceed 30 days.

Severance pay

Employees in Saudi Arabia are entitled to End-of-Service awards following the below formula:

• 15 days of pay for each of the first five years of employment
• A full month of pay for each year of service after that

The basis for this should be the employee’s last noted wage.

What are my options for hiring?

If you’re looking to expand your business to Saudi Arabia, a company like Airswift can help you get started. We offer employment solutions designed to ensure you stay compliant across all local requirements, including tax, payroll, termination procedures and working hour obligations.

Our in-country teams have the expertise and knowledge necessary to save your organisation from unnecessary risk, freeing up your time to focus on the other prospects of international business growth.

Talent acquisition

Airswift can source and deliver the talent you need across a wide range of industries by leveraging our expertise and employee networks across Saudi Arabia, whether you want to hire contractors or permanent employees. 

Whether you want to hire for an urgent project, have remote hiring requirements or need to cover a staffing shortage, we are committed to finding a contractor to suit your needs. Our contract hire services are catered to organisations that need temporary hires to fulfil a range of requirements.

Finally, if you’re looking to hire employees that can grow with your company, we have professional search services that provide access to highly skilled job seekers who are ready for work. We also take care of all the administrative processes, from shortlisting candidates to screening and onboarding them.

Employer of record

We can help you hire employees without setting up a local entity. Working with an Employer of Record in Saudi Arabia allows you to get up and running in as little as 72 hours. Once your employee has been given the green light, we will take care of everything from onboarding and benefits management to tax filings and annual leave allowance.

*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.