Saudi Arabia Employee Benefits

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Employee Benefits

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Saudi Arabia might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Saudi Arabia including local benefits.

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few.

What are the Employee Benefits in Saudi Arabia?

Benefits, compensation, and entitlements in Saudi Arabia are dealt with by the Labor Law (2005), with specific requirements set and administered by the Ministry of Human Resources and Social Development, previously the Ministry of Labor 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
  • 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 up to a demanding workload. Failure to comply with specific rules applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as failure will compromise the employer-employee relationship.

What Compensation Laws exist in Saudi Arabia?

Employment legislation comes under the Labor Law (2005), with any additional minimum statutory entitlements applied by the Ministry of Human Resources and Social Development (HRSD), which was previously the Ministry of Labor and Social Development. Legal issues arising from employment law go before Labor Courts, although they do not establish case law or publish their procedures.

  • Maternity Leave and Benefit: Leave on full pay is 10 weeks with a maximum of four before the due date. Employees can take an extra four unpaid weeks. Additionally, the mother receives one month’s extra leave on full pay and can take a further month unpaid if their child is born unwell or disabled
  • Sick Leave and Benefit:  Over 12 months, permitted leave is 30 days on full pay, 60 days on 75% pay and any subsequent days without pay. Work-related illness or injury entitles to 60 days leave on full pay and 75% pay for the duration of treatment after this
  • Minimum Wages: In 2022 the minimum monthly wage for Saudi employees in the public sector was increased to SAR 4,000 (€1,046, US$1,065), the first increase since 2013. There is no statutory minimum in the private sector
  • Probation Periods: Trial periods are generally for 90 days and must be referred to in the employment contract. The employee can give written permission for the probation up to a maximum of 180 days
  • Working Hours: The normal working day totals eight hours with a limit of 48 a week, and a maximum of six per day and 36 a week for Muslim employees during the holy month of Ramadan. Unpaid breaks are a minimum of 30 minutes after five hours and total daily hours cannot exceed 10 including overtime
  • Overtime: Extra work is paid at 50% above the normal hourly rate regardless of whether overtime is for day or night work, on public or national holidays
  • Notice Periods: The Labor Law’s Article 75 sets 60 days’ notice from employers or employees, for terminating a contract or resigning
  • Termination / Severance / Redundancies: Termination must follow procedures dictated by the Labor Law or the HRSD, or employers risk compensation claims or fines and sanctions. If the employer terminates, the employee is entitled to End of Service Gratuity (ESOG) payments as severance, which also apply if the employee resigns. Collective redundancies are possible for bankruptcy or permanent closure of a business and the HRSD must be informed 60 days beforehand
  • Paid Vacations: A minimum 21 calendar days’ paid leave is permitted under the Labor Law for employees with up to five years’ service, and 30 days for more than five years