The Labour Law (2005) deals with employee benefits in Saudi Arabia, with specific requirements set and administered by the Ministry of Human Resources and Social Development, previously the Ministry of Labour and Social Development. International companies operating in Saudi Arabia must comply with every aspect of employment legislation after first establishing a legal entity in the country to hire staff and operate payroll. Minimum safeguards and guarantees for their workforce include paid vacations, working hours, termination, severance and notice periods, sick leave, and maternity allowances and benefits.
However, the responsibilities of foreign companies reach further than simply complying with social security and payroll regulations – although these still add to a demanding workload. Failure to comply with specific rules applying to benefits and entitlements runs the risk of fines and sanctions. Employers must have a firm grasp of what is guaranteed for their employees, as failure will compromise the employer-employee relationship.
This is where Bradford Jacobs points you in the right direction, drawing on over 20 years of experience as a Professional Employment Organisation (PEO) and Employer of Record (EOR). We deal with the complexities while your staff focus on work and building the business.
The basis for employment legislation and employee benefits in Saudi Arabia (KSA) is the Labour Law (2005), plus additional regulations applied in some cases by the Ministry of Human Resources and Social Development (HRSD), formerly the Ministry of Labour and Social Development. Labour Courts interpret legislation. They do not set precedents or publish findings, which makes it difficult to assess how ‘grey areas’ of the law may be interpreted.
The government is promoting ‘Saudization’ to increase the number of Saudi Arabian nationals employed in the private sector, where expats dominate the workforce. Positive discrimination applies to Saudi Arabian nationals; for example, only locals can be employed on initial indefinite contracts or are entitled to a ‘de facto’ minimum wage. Most entitlements and benefits also apply to nationals from the other five Gulf Cooperation Council (GCC) nations – Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.
National Minimum Wage (NMW): The monthly national minimum set in 2022 is SAR 4,000 (€1,046, US$1,065), which was changed for the first time since 2013 but applied only to Saudi Arabian nationals working in the public sector. There is no statutory minimum in the private sector. The average monthly wage in both private and public sectors in 2022 was SAR 10,238 (€2,677, US$10,727), according to the Saudi General Directorate of Statistics.
Sick Leave and Benefit: Under the Labour Law and administered by the HRSD, in one year, the employee is entitled to 30 days leave on full pay, 75% of salary for the following 60 days, then without payment for subsequent days. Employees suffering an injury at work receive 60 days of leave at full pay and 75% of their salary for the length of their treatment.
Working Hours and Breaks: The working day is generally eight to a maximum of 48 hours a week. During the holy month of Ramadan, hours are cut to six a day and 36 a week for Muslim staff members. Employees are entitled to 30 minutes unpaid break after working five hours, and total work time cannot exceed ten a day, including overtime. Office hours may typically be 7.30-8 am till noon, then 3.30-4 pm until 7-8 pm. Friday is the Muslim day of rest, with either Thursday or, more usually, Saturday as the other rest day.
Overtime: Extra hours are paid at 50% above the employee’s standard hourly pay, regardless of whether the extra hours are for day work, night work, rest days or public and religious holidays. The HRSD restricts total annual overtime to 720 hours per Article 98 of the Labour Law. Employers face fines of SAR 10,000 (€2,615, US$2,663) for each employee if they exceed working hours’ regulations.
Paid Vacations: The Labour Law provides a minimum of 21 calendar days of paid leave a year for employees with up to five years of service and 30 days for more than five years. Employees are paid for unused vacation if they leave the company. Employees can only carry over unused days to the following year – or take pay in lieu – with the employer’s agreement.
Public Holidays: Islamic holidays are determined by moon sightings. The dates of two official holidays celebrated within Islam, Eid-al-Fitr and Eid-al-Adha, vary between years. Eid-al-Fitr marks the end of the month-long Ramadan, while Eid-al-Adha marks the end of the Hajj. The national holidays are:
Maternity / Paternity / Parental Leave and Benefits: Pregnant employees receive ten weeks’ leave on full pay with a maximum of four weeks before the predicted birth date, which a medical certificate and the appropriate health authority must confirm. Fathers receive three days of paid paternity leave. Employees can take an extra one month’s unpaid leave. If the child is disabled, the mother gets one month of additional leave on full pay and can take another month unpaid.
Discrimination: Employers must not discriminate against Saudi Arabian employees because of gender, age or disability, or other reasons. Companies employing more than 25 must have 4% of workers with recognised disabilities. Female employees cannot be discriminated against in terms of pay if they perform the same work as men. Since 2018, amendments to the law have required employers to have procedures to deal with harassment and ensure employees are aware of the process.
Health and Social Insurance: The General Organisation for Social Insurance (GOSI) implements the Social Insurance Law, which mandates collecting compulsory contributions from employers and employees. The scheme covers workers in the private sector and some in the public sector, delivering on retirement, disability and death benefits, medical care and compensation for work-related illness or injury.
GOSI administers a modern healthcare network that provides modern healthcare to Saudi Arabia citizens with a network of hospitals and . At the same time, the government has encouraged private sector involvement by offering long-term, interest-free loans to establish hospitals, clinics and pharmacies.
Saudi Arabian employees contribute 10% of their basic monthly salary (9% to social insurance and pensions and 1% to unemployment insurance); employers contribute the equivalent of 12% of payroll (9% to social insurance and pensions, 2% towards occupational hazard insurance and 1% to unemployment insurance). Non-Saudi Arabian employees contribute 2% to occupational hazard insurance. Contributions are capped at an upper salary limit of SAR 45,000 (€11,776, US$11,990).
13th Month Salary: There is no statutory requirement for employers to pay a 13th-monthth month salary, although performance-related bonuses are not uncommon. Generally, only self-employed individuals file returns.
Minimum entitlements and benefits in Saudi Arabia are underpinned by the 2005 Labour Law and by other decisions from the Ministry of Human Resources and Social Development, formerly the Ministry of Labour and Social Development. Guaranteed benefits include:
Saudi Arabia’s social security program was brought in by the Social Insurance Law and is implemented by the General Organisation for Social Insurance (GOSI), which collects compulsory contributions from employers and employees.
The system supports Saudi Arabian workers in the private and public sectors, delivering retirement and pensions, disability and death benefits, medical care and compensation for work-related illness or injury.
Saudi Arabian employees contribute 10% of their basic monthly salary (9% to social insurance and pensions and 1% to unemployment insurance); employers contribute the equivalent of 12% of payroll (9% to social insurance and pensions, 2% towards occupational hazard insurance and 1% to unemployment insurance). Non-Saudi employees contribute 2% to occupational hazard insurance. Contributions are capped at an upper salary limit of SAR 45,000 (€11,776, US$11,990).
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