Employing in
Saudi Arabia

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Expanding into
Saudi Arabia

Expanding into Saudi Arabia can bring excitement to the possibilities and significant stress to ensure the entity with the country’s rigid legal structures and laws. The Kingdom of Saudi Arabia (KSA) has modernised in leaps and bounds but, in some areas, has stayed with its traditions and Islamic teachings.

Saudi Arabia has one of the world’s largest oil deposits, the largest sand desert on the planet and boasts a world-class airport covering more than 300 square miles – all this and more accomplished since the kingdom’s formation in 1932. In the last few decades, Saudi Arabia has become a major economic power and encourages economic growth and much-needed skills for development. Expats were welcomed in their millions. However, the focus since the launch of ‘Saudization’ in 2011 has been on developing the local workforce and diversifying beyond petroleum.

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Global Expansion is a step to make for any business, regardless of your goal. But the opportunities that can come with an expansion can be stimulating as well as intimidating and confusing, especially when you consider all of the registration procedures that need to be done and the documentation required.

Going at it without the proper support can increase the costs, time and risks involved.

The legwork and potential red tape can be worked through more efficiently and cost-effectively with the support of a Professional Employer Organisation (PEO) such as Bradford Jacobs, primarily through our Employer of Record (EOR) framework.

It can be best utilised when businesses are just beginning their expansion process and require more information before incorporating an entity and fully establishing themselves in that market.

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Country EOR Guide - Bradford Jacobs

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Download our Guide to Saudi Arabia

Learn all about expanding into Saudi Arabia and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs
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Hiring Staff
in Saudi Arabia

The economy of Saudi Arabia is the largest in the Arab States and the 18th in the world. A permanent and founding member of the Organisation of the Petroleum Exporting Countries (OPEC), Saudi Arabia is also a member of the Gulf Cooperation Council (GCC), the Arab League, the G20, The United Nations (UN), The World Trade Organisation (WTO), and co-chair the Organisation of Islamic Cooperation (OIC).

The economy of Saudi Arabia functions as a petrostate. In 2016, the Saudi government launched its ‘Saudi Vision 2030’ program to reduce its dependency on oil and diversify its economic resources. In the first quarter of 2019, Saudi Arabia’s budget had its first surplus since 2016. This surplus of USD 10.10 billion (EUR 9.5 billion) was achieved due to increased oil and non-oil revenues.

With an estimated value of USD 34.40 trillion (EUR 32.67 trillion), Saudi oil reserves are the second-largest in the world, and the country is the world’s leading oil exporter and second-largest oil producer. According to figures provided by the Saudi government, reserves are estimated to be 260 billion barrels (41 km3), about one-quarter of the world’s oil reserves. Petroleum in Saudi Arabia is plentiful and located under pressure close to the earth’s surface, making it less expensive and more profitable to extract than in other places. The petroleum sector accounts for roughly 87% of Saudi budget revenues, 90% of export earnings, and 42% of GDP.

As stated above, the government has sought to allocate its petroleum income to transform its relatively undeveloped, oil-based economy into a modern industrial state while maintaining the Kingdom’s traditional Islamic values and customs. Although economic planners have not achieved all their goals, the economy has progressed rapidly. Oil wealth has increased the standard of living of most Saudi Arabians. During the 2000s, high oil prices allowed the government to post budget surpluses and boost spending on job training and education, infrastructure development, and government salaries.

Since 2017, Mohammed bin Salman has brought multiple changes to boost the economy, including raising the prices of gasoline and electricity, introducing new taxes, and policies of hiring Saudi Arabians workers over foreign workers. However, significant population growth has strained the government’s ability to finance further improvements in the country’s standard of living. Heavy dependence on petroleum revenue continues, but industry and agriculture now account for a larger share of economic activity. The mismatch between the job skills of Saudi Arabians graduates and the needs of the private job market at all levels remains the principal obstacle to economic diversification and development.

According to many reports, the Saudi government is intensely interested in giving more liberty to the foreign investment system and giving a 100% allowance to foreign investors working in the wholesale and retail sector in particular cases.

With its absolute monarchy, large state sector, and supply of welfare benefits, the Saudi economy has been described as a bewildering (at least to outsiders) combination of a feudal fealty system and more modern political patronage. The government bureaucracy is a maze of overlapping or conflicting power centres under the patronage of various royal princes with their priorities and agendas to pursue and dependents to satisfy.

The Small and Medium Enterprises General Authority (Monsha’at) announced in August 2022 that the number of SMEs reached 752,500 during Q1 of 2022, a 14.6% y-o-y increase in light of the incentives provided by Vision 2030 (which plans to increase SMEs’ contribution to GDP from 20% to 35% by 2030).

A recent report by the Digital Transformation Program showed that SMEs constitute 99.5% of the total companies in the Kingdom. According to the report, the Riyadh region has the highest share of SMEs, with a percentage of 31.8% (239,000 SMEs, employing over 1.8 million people), while the Makkah region recorded 21% and Al-Shraqiyah 12.7%.

The percentage of women-owned enterprises is recorded at 45% of the total start-up companies’ owners in Saudi Arabia, representing double the percentage achieved in 2017. As for the investment finance obtained by the Saudi start-up companies, it has grown by 244%, reaching SAR 2.19 billion in Q1 of 2022. With that growth, Saudi Arabia has been designated as the second most active venture capital market in the Middle East and North Africa regions during the same period.

The food and beverages sector has received the most significant percentage of investment finance in the first half of 2022 compared to companies in other sectors. MAGNiTT reported for Q1 and Q2 of 2022 that the food and beverages sector received an investment of SAR 700 million during the year’s first half. The Monsha’at report also stated that Saudi coffee manufacturing is witnessing considerable activity during the current period. With more than 400,000 coffee bean trees, Saudi Arabia enjoys an increase of 70% in the Khawlani coffee beans’ production.

The Authority aims to regulate, support, develop and sponsor the SME sector in the Kingdom, following global best practices to increase their contribution to the national GDP. It launched the Support Centre, which includes integrated unified units that provide programs to develop enterprises and entrepreneurs, including consultations, presentations to investors, training, development services, and guidance. It also links SMEs with large enterprises in the same economic zone.

The National Transformation Program (NTP) report stated that one of the most prominent efforts to support the SME sector is the launch of the SMEs Bank, as one of the funds and development banks to increase financial loans, enhance the contributions of financial institutions in providing innovative financing solutions, and achieve financial stability.

Country:
Saudi Arabia (the Kingdom of Saudi Arabia – KSA)
Local Currency:
Saudi Riyal (SAR)
Time Zone:
Arabia Standard Time – AST (UTC+3)
Country Dial Code:
+966
Tax Year:
1 January – 31 December (calendar year)
VAT:
15%
National Minimum Wage:
SAR 4,000 in the private sector (EUR 1,022 – USD 1,066)
Taxpayer Identification Number (TIN):
TIN is automatically issued by the GAZT (Saudi tax administration) only to individuals or entities subject to tax.
Non-Saudi individuals do not receive a TIN as they are not subject to tax.
The TIN consists of 10/15 digits.
Main trading partners (2021):

Main Suppliers: China (17.8%), the UAE (12.1%), the United States (9%), Germany (4.77%), Japan (4.41%), India (4.28%), the UK (2.8%), South Korea (2.65%), the Netherlands (2.62%), and Italy (2.6%).

Main Customers: China (20.1%), India (11%), Japan (10.8%), South Korea (8.58%), the USA (5.37%), Singapore (3.44%), France (3%), the UAE (2.9%), and Egypt (2.22%).

Hiring Staff
in Saudi Arabia

The economy of Saudi Arabia is the largest in the Arab States and the 18th in the world. A permanent and founding member of the Organisation of the Petroleum Exporting Countries (OPEC), Saudi Arabia is also a member of the Gulf Cooperation Council (GCC), the Arab League, the G20, The United Nations (UN), The World Trade Organisation (WTO), and co-chair the Organisation of Islamic Cooperation (OIC).

The economy of Saudi Arabia functions as a petrostate. In 2016, the Saudi government launched its ‘Saudi Vision 2030’ program to reduce its dependency on oil and diversify its economic resources. In the first quarter of 2019, Saudi Arabia’s budget had its first surplus since 2016. This surplus of USD 10.10 billion (EUR 9.5 billion) was achieved due to increased oil and non-oil revenues.

With an estimated value of USD 34.40 trillion (EUR 32.67 trillion), Saudi oil reserves are the second-largest in the world, and the country is the world’s leading oil exporter and second-largest oil producer. According to figures provided by the Saudi government, reserves are estimated to be 260 billion barrels (41 km3), about one-quarter of the world’s oil reserves. Petroleum in Saudi Arabia is plentiful and located under pressure close to the earth’s surface, making it less expensive and more profitable to extract than in other places. The petroleum sector accounts for roughly 87% of Saudi budget revenues, 90% of export earnings, and 42% of GDP.

As stated above, the government has sought to allocate its petroleum income to transform its relatively undeveloped, oil-based economy into a modern industrial state while maintaining the Kingdom’s traditional Islamic values and customs. Although economic planners have not achieved all their goals, the economy has progressed rapidly. Oil wealth has increased the standard of living of most Saudi Arabians. During the 2000s, high oil prices allowed the government to post budget surpluses and boost spending on job training and education, infrastructure development, and government salaries.

Since 2017, Mohammed bin Salman has brought multiple changes to boost the economy, including raising the prices of gasoline and electricity, introducing new taxes, and policies of hiring Saudi Arabians workers over foreign workers. However, significant population growth has strained the government’s ability to finance further improvements in the country’s standard of living. Heavy dependence on petroleum revenue continues, but industry and agriculture now account for a larger share of economic activity. The mismatch between the job skills of Saudi Arabians graduates and the needs of the private job market at all levels remains the principal obstacle to economic diversification and development.

According to many reports, the Saudi government is intensely interested in giving more liberty to the foreign investment system and giving a 100% allowance to foreign investors working in the wholesale and retail sector in particular cases.

With its absolute monarchy, large state sector, and supply of welfare benefits, the Saudi economy has been described as a bewildering (at least to outsiders) combination of a feudal fealty system and more modern political patronage. The government bureaucracy is a maze of overlapping or conflicting power centres under the patronage of various royal princes with their priorities and agendas to pursue and dependents to satisfy.

The Small and Medium Enterprises General Authority (Monsha’at) announced in August 2022 that the number of SMEs reached 752,500 during Q1 of 2022, a 14.6% y-o-y increase in light of the incentives provided by Vision 2030 (which plans to increase SMEs’ contribution to GDP from 20% to 35% by 2030).

A recent report by the Digital Transformation Program showed that SMEs constitute 99.5% of the total companies in the Kingdom. According to the report, the Riyadh region has the highest share of SMEs, with a percentage of 31.8% (239,000 SMEs, employing over 1.8 million people), while the Makkah region recorded 21% and Al-Shraqiyah 12.7%.

The percentage of women-owned enterprises is recorded at 45% of the total start-up companies’ owners in Saudi Arabia, representing double the percentage achieved in 2017. As for the investment finance obtained by the Saudi start-up companies, it has grown by 244%, reaching SAR 2.19 billion in Q1 of 2022. With that growth, Saudi Arabia has been designated as the second most active venture capital market in the Middle East and North Africa regions during the same period.

The food and beverages sector has received the most significant percentage of investment finance in the first half of 2022 compared to companies in other sectors. MAGNiTT reported for Q1 and Q2 of 2022 that the food and beverages sector received an investment of SAR 700 million during the year’s first half. The Monsha’at report also stated that Saudi coffee manufacturing is witnessing considerable activity during the current period. With more than 400,000 coffee bean trees, Saudi Arabia enjoys an increase of 70% in the Khawlani coffee beans’ production.

The Authority aims to regulate, support, develop and sponsor the SME sector in the Kingdom, following global best practices to increase their contribution to the national GDP. It launched the Support Centre, which includes integrated unified units that provide programs to develop enterprises and entrepreneurs, including consultations, presentations to investors, training, development services, and guidance. It also links SMEs with large enterprises in the same economic zone.

The National Transformation Program (NTP) report stated that one of the most prominent efforts to support the SME sector is the launch of the SMEs Bank, as one of the funds and development banks to increase financial loans, enhance the contributions of financial institutions in providing innovative financing solutions, and achieve financial stability.

Country:
Saudi Arabia (the Kingdom of Saudi Arabia – KSA)
Local Currency:
Saudi Riyal (SAR)
Time Zone:
Arabia Standard Time – AST (UTC+3)
Country Dial Code:
+966
Tax Year:
1 January – 31 December (calendar year)
VAT:
15%
National Minimum Wage:
SAR 4,000 in the private sector (EUR 1,022 – USD 1,066)
Taxpayer Identification Number (TIN):
TIN is automatically issued by the GAZT (Saudi tax administration) only to individuals or entities subject to tax.
Non-Saudi individuals do not receive a TIN as they are not subject to tax.
The TIN consists of 10/15 digits.
Main trading partners (2021):

Main Suppliers: China (17.8%), the UAE (12.1%), the United States (9%), Germany (4.77%), Japan (4.41%), India (4.28%), the UK (2.8%), South Korea (2.65%), the Netherlands (2.62%), and Italy (2.6%).

Main Customers: China (20.1%), India (11%), Japan (10.8%), South Korea (8.58%), the USA (5.37%), Singapore (3.44%), France (3%), the UAE (2.9%), and Egypt (2.22%).

The Main Sectors of the Saudi Arabian Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Petroleum and Natural Gas

With an estimated USD 34.4 trillion (EUR 32.67 trillion), Saudi Arabia has the world’s third most valuable natural resource reserves, mainly petroleum and natural gas. The Kingdom has the second-largest proven petroleum and sixth-largest measured natural gas reserves. Saudi Arabia is currently the largest exporter of petroleum in the world (16.5% of exported crude oil, worth USD 161.7 billion). The economy of Saudi Arabia functions as a petrostate, and the country plays a prominent role in OPEC. Petroleum in Saudi Arabia is plentiful and located under pressure close to the earth’s surface, making it less expensive and more profitable to extract than in other places. The petroleum sector accounts for roughly 87% of Saudi budget revenues, 90% of export earnings, and 42% of GDP. In 2016, the Saudi government launched its “Saudi Vision 2030” program to reduce its dependency on oil and diversify its economic resources.

Other mineral resources are known to exist, and the government has pursued a policy of exploration and production to diversify the economic base. Geologic reconnaissance mapping of the Precambrian shield in the west has revealed deposits of gold, silver, copper, zinc, lead, iron, titanium, pyrite, magnesite, platinum, and cadmium. There are also non-metallic resources such as limestone, silica, gypsum, and phosphorite. The scarcity of water is a perennial problem in the Kingdom. Saudi Arabia has the world’s most significant single desalination program, which meets most domestic and industrial needs. Underwater aquifers provide a limited amount of potable water, and a great deal of energy has been committed to constructing dams for water storage and developing water-recycling plants.

The service sector grew dramatically in the second half of the 20th century with the influx of revenue derived from petroleum sales and because of significant levels of government spending. Nearly three-fifths of workers are engaged in service-related occupations, including civil administration, defence, wholesale and retail sales, hospitality, and tourism. These sectors of the economy account for roughly one-fourth of GDP.

The country has a small agricultural sector, primarily in the Southwest, where annual rainfall averages 400 mm (16 in). Less than 2% of the total land area is used for crops. Of the cultivated land, about half consists of rain-fed dry farming (mainly in Asir), two-fifths is in tree crops, and the remainder is irrigated. Most irrigated areas—in Riyadh and Al-Qaṣīm, for example, and near Al-Hufūf in Al-Sharqiyyah province—utilise underground water. The Kingdom has achieved self-sufficiency in producing wheat, eggs, and milk, among other commodities, though it still imports the bulk of its food needs. Wheat is the primarily cultivated grain, followed by sorghum and barley. Dates, melons, tomatoes, potatoes, cucumbers, pumpkins, and squash are also important crops. Two significant constraints on cultivation are poor water supply and poor soil.

The manufacturing sector has expanded widely to diversify the economy. Since then, Saudi manufacturing examples have included rolled steel, petrochemicals, fertilisers, pipes, copper wire and cable, truck assembly, refrigeration, plastics, aluminium products, metal products, and cement. Small-scale enterprises have included baking, printing, and furniture manufacturing.

Trade

In 2019, the government established the General Authority for Foreign Trade to enhance the Kingdom’s international commercial and investment activities. Saudi Arabia maintains a negative list of sectors in which foreign investment is prohibited. Still, over time, the government plans to open some closed sectors, such as telecommunications, insurance, and power transmission/distribution.

The hospitality industry has traditionally been strong only in and around the holy cities of Mecca and Medina, with the annual influx of pilgrims. Only in the late 20th century did the government actively seek to attract tourists to Saudi Arabia by constructing several coastal resorts and relaxing visa requirements for entering the country. However, tourism not associated with religious observance remains a tiny part of GDP. According to the World Bank, approximately 14.3 million people visited Saudi Arabia in 2012, making it the world’s 19th most-visited country. Tourism is an essential component of the Saudi Vision 2030, and according to a report conducted by BMI Research in 2018, religious and non-religious tourism has significant potential for expansion. Starting in December 2018, the Kingdom offers an electronic visa for foreign visitors to attend sports events and concerts. In September 2019, the Kingdom announced its plans to open visa applications for visitors, where people from about 50 countries could get tourist visas to Saudi Arabia. In January 2020, it was announced that US, UK or Schengen visa holders are eligible for a Saudi electronic visa upon arrival.

It is one of the fastest growing sectors, supported by the introduction of the real estate investment trusts (REITs) market, which has witnessed significant growth in the number of trusts. Real estate plays a fundamental role in the country’s non-oil economy. Ownership of land property in Saudi Arabia is generally restricted to Saudi Arabians, but this is subject to specific qualifications. The introduction of REITs was part of the National Transformation Program (NTP) that aims to increase the real estate sector contribution to GDP from 5 to 10% annually, support the construction of 1.5 million homes by providing the required private capital, establish partnerships with private sector developers to develop government land for housing projects; and establish fast-track licenses and special finance packages to encourage private sector investment in housing projects.

The Saudi Arabian Monetary Agency (SAMA) was established in 1952 as the Kingdom’s central money and banking authority. It regulates commercial and development banks and other financial institutions. Its functions include issuing, regulating, and stabilising the value of the national currency, the riyal; acting as a banker for the government; and managing foreign reserves and investments. As an Islamic institution, it has non-profit status. Under Islamic law, banks cannot charge interest but charge lending fees and pay commissions on deposits. Several commercial banks operate in the country, some of which are joint ventures between Saudi Arabia citizens and foreign banks. (Like all enterprises, banks doing business in the country require a Saudi Arabian partner.) Others, however, are wholly owned by Saudi Arabians.

The Main Sectors of the Saudi Arabian Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Petroleum and Natural Gas

With an estimated USD 34.4 trillion (EUR 32.67 trillion), Saudi Arabia has the world’s third most valuable natural resource reserves, mainly petroleum and natural gas. The Kingdom has the second-largest proven petroleum and sixth-largest measured natural gas reserves. Saudi Arabia is currently the largest exporter of petroleum in the world (16.5% of exported crude oil, worth USD 161.7 billion). The economy of Saudi Arabia functions as a petrostate, and the country plays a prominent role in OPEC. Petroleum in Saudi Arabia is plentiful and located under pressure close to the earth’s surface, making it less expensive and more profitable to extract than in other places. The petroleum sector accounts for roughly 87% of Saudi budget revenues, 90% of export earnings, and 42% of GDP. In 2016, the Saudi government launched its “Saudi Vision 2030” program to reduce its dependency on oil and diversify its economic resources.

Other mineral resources are known to exist, and the government has pursued a policy of exploration and production to diversify the economic base. Geologic reconnaissance mapping of the Precambrian shield in the west has revealed deposits of gold, silver, copper, zinc, lead, iron, titanium, pyrite, magnesite, platinum, and cadmium. There are also non-metallic resources such as limestone, silica, gypsum, and phosphorite. The scarcity of water is a perennial problem in the Kingdom. Saudi Arabia has the world’s most significant single desalination program, which meets most domestic and industrial needs. Underwater aquifers provide a limited amount of potable water, and a great deal of energy has been committed to constructing dams for water storage and developing water-recycling plants.

The service sector grew dramatically in the second half of the 20th century with the influx of revenue derived from petroleum sales and because of significant levels of government spending. Nearly three-fifths of workers are engaged in service-related occupations, including civil administration, defence, wholesale and retail sales, hospitality, and tourism. These sectors of the economy account for roughly one-fourth of GDP.

The country has a small agricultural sector, primarily in the Southwest, where annual rainfall averages 400 mm (16 in). Less than 2% of the total land area is used for crops. Of the cultivated land, about half consists of rain-fed dry farming (mainly in Asir), two-fifths is in tree crops, and the remainder is irrigated. Most irrigated areas—in Riyadh and Al-Qaṣīm, for example, and near Al-Hufūf in Al-Sharqiyyah province—utilise underground water. The Kingdom has achieved self-sufficiency in producing wheat, eggs, and milk, among other commodities, though it still imports the bulk of its food needs. Wheat is the primarily cultivated grain, followed by sorghum and barley. Dates, melons, tomatoes, potatoes, cucumbers, pumpkins, and squash are also important crops. Two significant constraints on cultivation are poor water supply and poor soil.

The manufacturing sector has expanded widely to diversify the economy. Since then, Saudi manufacturing examples have included rolled steel, petrochemicals, fertilisers, pipes, copper wire and cable, truck assembly, refrigeration, plastics, aluminium products, metal products, and cement. Small-scale enterprises have included baking, printing, and furniture manufacturing.

Trade

In 2019, the government established the General Authority for Foreign Trade to enhance the Kingdom’s international commercial and investment activities. Saudi Arabia maintains a negative list of sectors in which foreign investment is prohibited. Still, over time, the government plans to open some closed sectors, such as telecommunications, insurance, and power transmission/distribution.

China’s services sector represents more than 54% of the economic output in 2020. To put this in comparison, in 2010, the services industry represented slightly more than 44% of GDP. Consumption of goods is a major factor and driver of growth, representing more than 39% of China’s GDP in 2020. Those goods include jewelry, home appliances, garments, autos, office supplies, and furniture.

However, China’s retail sales jumped by more than 13% from January to November 2021, versus the same period one year earlier. Retail sales represent consumer spending within the economy. In comparison, the United States posted retail sales of 18.2% from November 2020 to November 2021.

It is one of the fastest growing sectors, supported by the introduction of the real estate investment trusts (REITs) market, which has witnessed significant growth in the number of trusts. Real estate plays a fundamental role in the country’s non-oil economy. Ownership of land property in Saudi Arabia is generally restricted to Saudi Arabians, but this is subject to specific qualifications. The introduction of REITs was part of the National Transformation Program (NTP) that aims to increase the real estate sector contribution to GDP from 5 to 10% annually, support the construction of 1.5 million homes by providing the required private capital, establish partnerships with private sector developers to develop government land for housing projects; and establish fast-track licenses and special finance packages to encourage private sector investment in housing projects.

China’s services sector represents more than 54% of the economic output in 2020. To put this in comparison, in 2010, the services industry represented slightly more than 44% of GDP. Consumption of goods is a major factor and driver of growth, representing more than 39% of China’s GDP in 2020. Those goods include jewelry, home appliances, garments, autos, office supplies, and furniture.

However, China’s retail sales jumped by more than 13% from January to November 2021, versus the same period one year earlier. Retail sales represent consumer spending within the economy. In comparison, the United States posted retail sales of 18.2% from November 2020 to November 2021.

Commercial Laws in
Saudi Arabia

Labour Law in Saudi Arabia

The employer-employee relationship is mainly governed by the Labour Law (2005), with additional limits for benefits and entitlements applied by the Ministry of Human Resources and Social Development (MHRSD), formerly the Ministry of Labour and Social Development (MLSD).

Additionally, employers must follow the rules set by the Saudization program – also known as Nitaqat – which enforces quotas on how many foreigners can be hired compared with Saudi Arabians or citizens from the other five Gulf Cooperation Council (GCC) nations, the United Arab Emirates, Bahrain, Qatar, Oman and Kuwait.

  • The General Authority for Zakat, Tax, and Customs Authority (ZATCA), ​​underwent several developmental phases and changed its name several times. It was established as the “Zakat and Income Bureau“, then became the “Zakat and Income Authority”, and ultimately, the Royal Decree No. (A/133) dated 30/7/1437 AH, specified in Section 11 that the “Zakat and Income Authority” will be converted into the “General Authority of Zakat and Tax” (GAZT) and chaired by the Minister of Finance.
  • The Ministry of Human Resources and Social Development (MHRSC) is the highest Labour Authority in Saudi Arabia. The new labour rule and regulation adopted by the council of ministers aim to organise the labour market in Saudi Arabia and increase its efficiency and productivity to achieve national developmental economic mobility. The new regulation amendments considered both the labourer’s and the employer’s interests simultaneously to realise the public interest for the private sector corporations and ensure the labourer’s rights.

General requirements

  • Under the Labour Law, only Saudi Arabians and GCC nationals can be employed on indefinite, open-ended contracts at the start of employment. They can also be on fixed-term contracts.
  • If a Saudi Arabian has a fixed-term contract that is renewed three times, or the total period reaches four years, their contract becomes indefinite.
  • Employer or employee can terminate an open-ended contract by giving a valid reason, in writing, 60 days’ notice before the termination date if employees are paid monthly, with 30 days’ notice for others.
  • If a non-Saudi contract does not specify the fixed term, it will equal the length of their work visa or permit.
  • Under Article 55 of the Labour Law, the fixed term can be renewed for the same or similar period if specified in the original contract. Under Article 56, it is added to the service period in terms of the employee’s rights.
  • Non-Saudi Arabians can work only in a profession/company specified in their permit.
  • Any probation periods must be included in the contract, usually to a maximum of 90 days. However, in writing, the employee can permit a maximum extension of 180 days. Either party can terminate without providing a reason.

Commercial Laws in
Saudi Arabia

Labour Law in Saudi Arabia

The employer-employee relationship is mainly governed by the Labour Law (2005), with additional limits for benefits and entitlements applied by the Ministry of Human Resources and Social Development (MHRSD), formerly the Ministry of Labour and Social Development (MLSD).

Additionally, employers must follow the rules set by the Saudization program – also known as Nitaqat – which enforces quotas on how many foreigners can be hired compared with Saudi Arabians or citizens from the other five Gulf Cooperation Council (GCC) nations, the United Arab Emirates, Bahrain, Qatar, Oman and Kuwait.

  • The General Authority for Zakat, Tax, and Customs Authority (ZATCA), ​​underwent several developmental phases and changed its name several times. It was established as the “Zakat and Income Bureau“, then became the “Zakat and Income Authority”, and ultimately, the Royal Decree No. (A/133) dated 30/7/1437 AH, specified in Section 11 that the “Zakat and Income Authority” will be converted into the “General Authority of Zakat and Tax” (GAZT) and chaired by the Minister of Finance.
  • The Ministry of Human Resources and Social Development (MHRSC) is the highest Labour Authority in Saudi Arabia. The new labour rule and regulation adopted by the council of ministers aim to organise the labour market in Saudi Arabia and increase its efficiency and productivity to achieve national developmental economic mobility. The new regulation amendments considered both the labourer’s and the employer’s interests simultaneously to realise the public interest for the private sector corporations and ensure the labourer’s rights.

General requirements

  • Under the Labour Law, only Saudi Arabians and GCC nationals can be employed on indefinite, open-ended contracts at the start of employment. They can also be on fixed-term contracts.
  • If a Saudi Arabian has a fixed-term contract that is renewed three times, or the total period reaches four years, their contract becomes indefinite.
  • Employer or employee can terminate an open-ended contract by giving a valid reason, in writing, 60 days’ notice before the termination date if employees are paid monthly, with 30 days’ notice for others.
  • If a non-Saudi contract does not specify the fixed term, it will equal the length of their work visa or permit.
  • Under Article 55 of the Labour Law, the fixed term can be renewed for the same or similar period if specified in the original contract. Under Article 56, it is added to the service period in terms of the employee’s rights.
  • Non-Saudi Arabians can work only in a profession/company specified in their permit.
  • Any probation periods must be included in the contract, usually to a maximum of 90 days. However, in writing, the employee can permit a maximum extension of 180 days. Either party can terminate without providing a reason.

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