Saudi Arabia Country Facts

We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.

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Expanding into Saudi Arabia generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.

Visas and work permits for Saudi Arabia can differ depending on the employee’s nationality. In the last few decades, Saudi Arabia has become a significant 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. As well as introducing a fee on expatriate dependents causing a cost of living increase, there have also been restrictions on which professions and sectors foreigners can be employed in.

Foreigners require a Saudi Arabian employer to sponsor them and the Ministry of Human Resources and Social Development (MHRSD) to approve them. Workers also need an ‘Iqama’, the official Saudi Arabian ID that proves employees are legally in the country and includes details of the work and residence permits. In September 2019, Saudi opened to tourists by introducing the e-Visa, either issued online or on arrival to eligible visitors. Nationals of five Gulf Cooperation Council (GCC) countries – the United Arab Emirates, Kuwait, Qatar, Bahrain, and Oman – do not need visas to enter Saudi Arabia.

Around 50 countries’ citizens can apply for the e-Visa online, or some people can apply for a ‘visa on arrival’ (VoA) at an immigration office, but the e-Visa is the quickest and easiest route. Other nationalities have to visit an embassy or consulate in their home country. Since restricting employment for foreigners, the system has become more complicated and convoluted. This is where Bradford Jacobs can help with our comprehensive knowledge of work documentation procedures and experience in supporting business expansion into the Middle East!

The different types of Visas and Work Permits for Saudi Arabia

Holiday visitors must apply:

  • online for an e-Visa, or,
  • on arrival at an immigration centre, or,
  • at a local embassy or consulate in their home country before they leave.

Travellers must check to see which procedure applies to them. These are not employment Visas.

The e-Visa has 360 days validity; people can stay for 90 days at any time up to 180 days in the year. There are four travel Visas:

  • Tourism
  • Event Visa
  • Family Visit Visa
  • Pilgrimage for Umrah

Note: For the five other countries of the Gulf Cooperation Council (GCC), their nationals can enter without a Visa and on their country’s national ID.

Other Main Visa types include:

  • Employment Visa / Work Visa for those who have a job with a sponsoring employer and employment contract
  • Temporary Work Visa for short-term employment, usually connected to a particular project, acquired before entering Saudi Arabia in a similar process as the Employment Visa. It allows employees to work on behalf of a foreign company if there is no representative in Saudi Arabia. Duration 30 or 90 days
  • Business Visit Visa with a letter of invitation regarding business meetings, conferences, or for the employed, self-employed, or sole traders. Also, business owners, officers of companies or directors without a letter of invitation may want to investigate business in Saudi. This is, however, at the discretion of the Foreign Affairs Department at the local embassy where the visa is applied for.
  • Residence Visa gives people the right to reside in Saudi Arabia, own property and a car and have the legal right to work in private companies. In 2019, Saudi Arabia implemented a ‘Premium Residence Permit’ as part of a reform plan to allow new employee rights, a.k.a. Green Card. This allows permanent residency without the need for a sponsor at the cost of SAR 800,000 (EUR 209,000; USD 213,000) or SAR 100,000 (EUR 26,000; USD 27,000) for an annual residence permit
  • Family Visas issued for dependents which incur a monthly fee of SAR 400 (EUR 104; USD 107)
  • Transit Visa for no longer than 48 hours available to stopover travellers

The Employer must apply for The Work Permit and the Residence Permit before the Employment Visa expires, and obtaining those permits is part of the process for acquiring the Iqama ID Card with a 10-digit number, required by ALL residents living and working in Saudi Arabia.

Note: Changes and updates can complicate the procedures for obtaining the required work documentation as the country goes through accelerated Saudization, officially called the Saudi Nationalisation Scheme or ‘Nitaqat’ and is implemented through the Ministry of Human Resources and Social Development (HRSD). Companies are expected to consider local workers before applying to onboard foreigners.

Documentation needed to work in Saudi Arabia.

  1. The Work Visa allowing workers to travel to Saudi Arabia and work:
  • This is the primary work visa for foreigners working for legally-registered companies who act as their sponsors. They should have an employment contract to be able to apply for this visa
  • When receiving the visa, the employee can enter the country to work. It is issued through the Ministry of Foreign Affairs at a local embassy or consulate in their home country and can take from three weeks to eight weeks
  • This visa is valid for one year for the worker to use. Then the holders can travel to and enter the country to work for 90 days. During this time, the employer must apply for a residence permit and work permit for long-term employment and residence
  • There are fines if the company fails to comply with the work documentation to SAR 100,000 (€26,000; US$27,000), and they can also have their license rescinded. Employees also can be fined up to SAR 10,000 (€2,600; US$2,700) and may even be arrested
  • The employer starts the visa application process with the Ministry of Human Resources and Social Development (HRSD). However, to act as sponsors, they require a visa allocation to be able to employ foreigners for which they receive a block number for the visas, also from the HRSD
  • After the employee receives his contract and the visa block number, they finalise the process at the local embassy by presenting documentation and completing the application form
  1. The Work Permit is part of the Residence Permit process, which allows long-term employment and residency:
  • Before foreign companies can begin operating or employing workers, foreigners or locals, they require a commercial license which is the final part of setting up a company in Saudi Arabia
  • The employment contract is registered with the Ministry of Interior (MOI) before a Residence Permit can be issued; the MOI keeps an immigration file on all the employers’ foreign workers
  • The employer, as the sponsor, applies for Residence Permit and Work Permit when the employee receives the employment visa and travels to Saudi. They are the legal permits to live and work in the country.
  1. The Iqama is the National ID Card:
  • This is also the Residence Permit. The Work Permit must be finalised before applying for the Iqama. Initially, this is done through the HRSD and, once approved, is forwarded to the Ministry of Interior, where it is issued via the ‘Directorate General for Passports.’
  • The Work Permit (and employment contract) determines how long the Residence Permit or Iqama is valid (up to two years).
  • The ID details include name, DOB, nationality, expiry date and employer details. The Iqama serves as the Residence and Work Permit. It can be used to deal with government agencies, open a bank account etc.
  • Employees who want to travel out of the country during employment must apply through the Ministry of Interior for an Exit/Re-Entry Permit, which takes about one week.

Important: This Iqama ID Card should be carried continuously to prove legality in the country.

Note: The employer is responsible for providing health care and insurance (Article 144 of the Labour Law). Employer-provided insurance payments for private sector employees are divided between the company and expatriate workers and are relatively basic. However, extra cover can be purchased separately.  Saudis and public sector employees pay into the social security scheme (GOSI), and healthcare is free.

How to Obtain Visas and Work Permits for Saudi Arabia

The procedures for obtaining the required work documentation can be complex as there have been changes and updates, especially as the country goes through Saudization, which is officially called the Saudi Nationalisation Scheme or ‘Nitaqat’, executed by the Ministry of Human Resources and Social Development (HRSD).

This is not a new policy, but it has accelerated since 2018 and is a way of continually protecting the local workforce by investing in education, upskilling, and reserving certain professions for Saudi Arabian nationals. So, it is worth checking how this can affect business and potential staff.  For instance, companies are colour-coded according to their compliance with Saudization from red up to platinum, the highest rated platinum, which gives them preferential treatment for processing immigration documentation and the ability to apply for ‘block’ visas for all workers at the same time.

Process for working in Saudi Arabia

  • Receive a job offer from a Saudi-registered company.
  • The employer acts as the sponsor and must have approval from the Ministry of Human Resources and Social Development (HRSD) to sponsor foreigners and receive a block visa number allocation to employ expatriates.
  • Employer starts applying for the Employment Visa with the HRSD by registering with the Enjazit portal. They use this portal to pay for the visa and to directly contact an embassy abroad for the employee to finalise the Employment Visa.
  • The employer supplies HRSD with the business registration certificate.
  • The employment contract, which should be in Arabic but can also be in English, is registered with the Ministry of Interior (MOI) before a Residence Permit is issued. The MOI keeps an immigration file on all the employer’s foreign workers.
  • Employee receives the employment contract and visa block number to finalise the Employment Visa.
  • When the Employment Visa has been approved, the HRSD informs the Ministry of Foreign Affairs (MOFA) in the local embassy or consulate in the employee’s home country. Within two weeks, the MOFA issues a Visa Authorisation Number.
  • The employee finalises the Employment Visa by submitting a completed and signed application form alongside the required documentation.
  • It takes around seven to 21 days to issue the visa. At this point, the employee can travel to Saudi Arabia and begin work.
  • The employer applies for the Residence Permit and the Work Permit within 90 days of the employee arriving in the country. This is called the Iqama Card, which is the ID detailing the employee’s name, nationality, expiry date, and employer’s details as the sponsor of the ID Card. This is carried out constantly to show they are in the country legally. It allows them to open a bank account and deal with government authorities. It is valid for up to two years, depending on the length of the employment contract and subsequent work permit.
  • The Iqama Card, with a 10-digit ID number, is applied for at the HRSD and, when approved, sent to the MOI to be issued through the Directorate General for Passports. The employer is responsible for applying, renewing, and paying for the Iqama Card (Article 40 (1) of the Labour Law).

Employees who also want to travel out of the country during employment have to apply through the Ministry of Interior for an Exit/Re-Entry Permit, which takes about one week. Employees and employers must supply the relevant paperwork, some of which must be legalised and attested. The employer pays for the visa and permits during the application procedure.

Note: The employer is responsible for providing health care and insurance (Article 144 of the Labor Law). Employer-provided insurance payments for private sector employees are divided between the company and the expatriate workers. However, extra cover can be purchased separately.  Saudis and public sector employees pay into the social security scheme (GOSI), and healthcare is free.

How to Apply for Visas and Work Permits for Saudi Arabia

It is essential to understand which authorities are responsible for which documentation and what paperwork is required by the employer and employee. You also need to figure out what documents need attesting to, translating and legalising. We cover the requirements for foreign employees to work for registered companies who already have a job with a sponsoring employer. The documentation is generally applied for and paid for by the employer.

Required to work in Saudi Arabia

  • Employment Visa (Work Visa)
  • Work Permit and Residence Permit
  • Iqama National ID Card

Documentation required

  • Passport valid for the duration of employment and a minimum of six months from the date of entry with two facing pages for the visa (note: For some nationals, it may be advisable to apply for a second passport as Saudi Arabia, e.g., Israel may not approve some visa stamps).
  • Coloured photographs along passport guidelines – some embassies need more than others.
  • Proof of fees paid by the employer through the Enjazit website portal.
  • Downloaded, completed and signed application form.
  • Copy of the employment contract signed by employer and employee and approved by the Ministry of Foreign Affairs (MOFA) and Chamber of Commerce (by employer).
  • University degree, educational certificates or similar as required for the job. These must be authenticated and legalised by the Saudi Arabian Embassy and attested by a cultural bureau in the home country. Most countries with an embassy also have a cultural bureau.
  • A certificate of good conduct by police in the home country, issued no more than six months before the application for the visa.
  • Medical Report re: Hepatitis, HIV, Chest X-ray and more recommended and legalised by the embassy or consulate in the home country. This must be done no more than three months before the start of the application for the Employment Visa. Three copies are required.
  • Letter of support from employer verified by the Saudi Chamber of Commerce and MOFA, which the employer must organise.
  • Biometrics taken
  • Copy of Letter of Invitation from MOFA giving details of the employer and allocated Visa number.
  • Block number from employer regarding visa allocation for foreigners and Company ID number.
  • Visa Authorisation Number issued by the Ministry of Foreign Affairs.
  • If applicable, any other previous visas for Saudi Arabia.
  • A pre-paid envelope.

Employers’ documentation for the Ministry of Interior

The Ministry keeps an immigration file on employers’ foreign workers. The employers register the employment contracts with the MOI, which are kept on file instead of the Iqama, including the Residence Permit being issued:

  • Company’s Certificate of Registration proving they can apply for Work Visas.
  • Company Seal.
  • Zakat Certificate as proof they are registered with the Zakat, Tax and Customs Authority.
  • GOSI Certificate to show they are registered for social insurance contributions.
  • Chamber of Commerce Certificate.
  • Nitaqat statement, which shows the level of Saudization of the company from Red (low) to Platinum (high), may affect their visa allocation and documentation processing time. The employer must demonstrate that no Saudi could do the job offered to the foreign worker.

The absence of personal income tax in Saudi Arabia is one of the compelling reasons for international companies to expand there. The country’s economy is built around oil – Saudi Arabia has 15% of the world’s known reserves and is the largest global exporter of crude oil. Aside from the oil fields, the Saudi Arabian government encourages diversification and is licensing major multinationals to rival the United Arab Emirates as the region’s leading business hub. These advantages must be balanced against the challenges of dealing with payroll and employment regulations for your staff.

Handling these issues from overseas always poses complications that demand top-rated guidance. Bradford Jacobs has over two decades of experience among front-line payroll providers worldwide, and we ensure our clients comply with every aspect of legislation wherever they operate. Our local ‘know-how’ plus international expertise is essential for international companies expanding into Saudi Arabia and spreading throughout the Middle East and Asia. From locating the brightest talent to running your payroll, our Professional Employer Organisation (PEO) and Employer of Record (EOR) specialists will guide you every step of the way!

Overview of Tax in Saudi Arabia

Personal Income Tax (PIT):

There is no personal income tax in Saudi Arabia on Saudi-sourced income, removing the need for registration, reporting, residence qualifications or filing, except for the self-employed.

Employee Social Insurance Taxes:

The General Organisation for Social Insurance (GOSI) collects 10% from Saudi Arabian employees on the payroll, 9% going to social insurance and pension, with 1% to unemployment insurance. Expats do not contribute, except for 2%, to occupational hazard insurance.

Corporate Income Tax:

Corporate income tax is 20% on net profits, plus 2.5% on the company’s Zakat base, assessed on the entity’s net worth. Zakat is an assessment under Islamic law to go for religious and charitable purposes. Tax rates on income from oil and hydrocarbon production range from 50% to 85%. The company’s tax year generally begins when it receives its business license, although exceptions can apply.

Value Added Tax (VAT):

The standard rate on goods and services is 15%, which increased from 5% in July 2020. The registration threshold is SAR 375,000 (€99,200, US$99,900). Voluntary registration is allowed if turnover exceeds SAR 187,500 (€49,550, US$49,950). Returns can be filed monthly or quarterly, depending on turnover, with filing and payment made by the end of the following month.

Withholding Tax (WHT):

The domestic rates are 5% on dividends and interest and 15% on royalties. Non-residents earning Saudi-sourced income have tax withheld at rates of 5%, 15% or 20%, depending on the type of service.

Customs and Excise Duties:

Excise duties are tobacco (100%), soft drinks (50%) and energy drinks (100%). Customs duty is applied according to the regulations of Saudi Arabian Customs.

Capital Gains Tax (CGT):

A levy of 20% applies when a non-resident shareholder disposes of shares in a resident company.

White Land Tax (WLT): Since 2015, owners of vacant, undeveloped land have been subject to an annual 2.5% tax based on the market value of the land.

Corporate Deductions and Allowances:

Expenses relating to the business are generally deductible. Depreciation is permissible at rates between 5% and 25% on fixed and movable buildings, machinery and equipment, various vehicles, software, geological surveys, drilling exploration, aircraft, ships and trains, and goodwill.

There are no consumption taxes or net wealth, inheritance, estate, gift or property taxes.

Individual Tax Rules in Saudi Arabia

There is no personal income tax in Saudi Arabia. Therefore no rules apply to individuals for registration, reporting or filing, except for the self-employed who must file returns.

In this case, taxpayers must:

  • Register with the Zakat Tax and Customs Authority (ZATCA).
  • File returns within 120 days of the end of their financial year.
  • Be prepared to supply audited returns to ZATCA.
  • Maintain accounting records in Arabic.

Employer’s Social Contributions in Saudi Arabia

Employers contribute to the compulsory health and social insurance program for Saudi Arabian citizens. Employers contribute 12% of payroll, 9% to social insurance, 2% to occupational hazard insurance, and 1% to unemployment insurance.

Citizens from the other five Gulf Cooperation Council (GCC) nations, Bahrain, Kuwait, Oman, United Arab Emirates and Qatar, are treated as Saudi Arabians.

One of the options for international companies undertaking an expansion into the Middle East would be to consider a subsidiary entity set up in Saudi Arabia to widen their global horizons. There are risks, of course, and establishing a presence in a foreign territory can be costly both in time and money; plus, the effort and financial outlay have no guarantee of bringing success. Therefore, expert guidance is essential for expansion into Saudi Arabia.

Saudi Arabia offers a powerhouse economy built on holding 15% of the world’s oil reserves and being the largest exporter of crude oil. This strength underpins Saudi’s move towards a more diverse economy, encouraging private enterprise and entrepreneurs and striving to rival the United Arab Emirates as the prime business hub for the Middle East and West Asia.

The most common choice for a subsidiary in Saudi Arabia is a limited liability company (LLC), with branch offices being another option, but making such a move is a significant commitment. The sensible alternative is to use a Professional Employer Organisation (PEO) and Employer of Record (EOR), such as Bradford Jacobs, to locate the finest local talent and administer your payroll in Saudi Arabia. Your company will be up and running in days rather than weeks or months without any risks.

How to Set Up a Saudi Arabian Subsidiary?

Step one for companies establishing their profile in the Kingdom of Saudi Arabia (KSA) is to decide the business structure that best fits their expansion plans. The most popular choice is to open a limited liability company (LLC), which operates under the Companies Law, as amended in 2016. In 2020 the Ministry of Commerce and the Capital Markets Authority published a ‘Draft Law’, which proposed lifting the restriction on a single shareholder LLC being owned by another single shareholder LLC.

There is a daunting list of requirements to form a limited liability company, including:

  • Submitting a comprehensive business and financial plan to the Ministry of Investment Saudi Arabia (MISA), formerly Saudi Arabia General Investment Authority (SAGIA) pre-2020, to obtain their pre-approval to apply for an international investment license.
  • Verifying unique company name with the Ministry of Commerce (MOC), submitting Articles of Association and making a formal application to receive a Registration Certificate.
  • Registering for taxation with the Zakat, Tax and Customs Authority (ZATCA).
  • Employers and employees must register with the General Organization for Social insurance (GOSI).
  • Securing lease agreement for business premises and registering with the appropriate municipality, a process that can take up to three months to complete.
  • Opening a business bank account.
  • There is no statutory minimum for share capital, but MISA requires foreign LLCs to have a minimum capital of at least SAR 500,000 (€130,750, US$133,180).
  • Submitting to MISA the license from the municipality, tax number, Registration Certificate, and bank’s confirmation of deposited share capital. MISA then issues the foreign business investment license. At this point, the business can start operating.
  • Publishing a résumé of the Articles of Association in the Official Gazette, registering with the relevant chamber of commerce and producing a company seal.
  • A minimum of one shareholder is required under the new Companies Law (2016), before which the requirement was for two. The shareholder can be a person or entity. There is no requirement on the number of directors.

Requirements to Set Up a Saudi Arabian Subsidiary

  • Business and financial plan submitted to the Ministry of Investment Saudi Arabia (MISA), formerly Saudi Arabia General Investment Authority (SAGIA) pre-2020, to obtain pre-approval for the application to set up the subsidiary.
  • A unique company name verified and reserved with the Ministry of Commerce (MOC).
  • Articles of Association submitted to the MOC with a formal application to be issued a Registration Certificate.
  • Registration with the Zakat, Tax and Customs Authority (ZATCA).
  • Registration with the General Organization for Social Insurance (GOSI).
  • Lease for business premises registered with the appropriate municipality.
  • Business bank account.
  • Deposited capital. Although there is no statutory minimum, MISA requires foreign LLCs to have a minimum capital of at least SAR 500,000 (€130,750, US$133,180).
  • Collated documents, including a license from the municipality, tax number, Registration Certificate, and bank’s confirmation of deposited share capital, are supplied to MISA, who then issues the foreign business investment license. At this point, the business can start operating.
  • Résumé of Articles of Association published in the Official Gazette.
  • Registration with the relevant chamber of commerce and creating a company seal.
  • A minimum of one shareholder is required under the new Companies Law (2016).

Benefits of Setting Up a Saudi Arabian Subsidiary

International companies expanding into Saudi Arabia by establishing a limited liability company (LLC) as a subsidiary will operate under the Companies Law, as amended in 2016. In 2020, the Ministry of Commerce and Capital Markets Authority issued a ‘Draft Law’. Among various proposals, it removed the restriction on a single-shareholder LLC being owned by another single-shareholder LLC.

Subsidiaries in Saudi Arabia have an independent legal identity from the parent company. The incorporation process is prolonged and differs from the procedures for Saudi companies. Those form the other Gulf Cooperation Council nations, Oman, Bahrain, the United Arab Emirates, Qatar and Kuwait.

The liability of the parent company and its shareholders is generally limited to their invested capital. The subsidiary provides the parent company with the potential for further expansion throughout the Middle East and West Asia as a stepping stone into other regional economies. Additionally, the subsidiary can ‘test the market’ by following its own business ideas and entering into different areas of operation for the owning company. The subsidiary is also free to draw up its own contracts and agreements with clients.

Other benefits for a subsidiary:

  • Easier to obtain potential benefits and incentives and enter into contracts with other Saudi and GCC companies
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches
  • Employees feel there is more stability and job security than from being with a branch

Subsidiary Laws in Saudi Arabia

The Companies Law is the governing legislation for companies operating in Saudi Arabia. It was updated in 2016, and then in 2020, the Ministry of Commerce and Capital Markets Authority issued a ‘Draft Law’. Various amendments included removing the restriction on a single-shareholder limited liability company (LLC) being owned by another single-shareholder LLC.

Registration and Documentation:

  • Obtain pre-approval for application from the Ministry of Investment Saudi Arabia (MISA), formerly Saudi Arabia General Investment Authority (SAGIA) pre-2020.
  • Confirm unique company name with the Ministry of Commerce (MOC), which must include ‘limited liability’, submit Articles of Association and make a formal application to receive a Registration Certificate.
  • Register for taxation with the Zakat, Tax and Customs Authority (ZATCA).
  • Register with the General Organization for Social Insurance (GOSI).
  • Sign the lease agreement and register with the relevant municipality.
  • Submit the lease from the municipality, tax number, Registration Certificate (which must be renewed annually), bank’s confirmation of deposited share capital to MISA, who then issue the foreign business investment license. At this point the business can start operating.
  • There is no statutory minimum for share capital, but MISA requires foreign LLCs to have a minimum capital of at least SAR 500,000 (€130,750, US$133,180). A bank account must be opened as part of the incorporation process.

Accounts and Taxation:

  • Annual returns must be filed to ZATCA.
  • Company manager(s) must prepare a report on distribution of profits to the MOC within three months of the end of the financial year.
  • Corporate Income Tax rate is 20% on net profits and generally non-Saudi investors are liable for tax on profits gained in Saudi Arabia.

Management:

  • A minimum of one shareholder is required under the new Companies Law (2016), prior to which two were required. The shareholder can be a person or entity.
  • Shareholders are generally not liable for the company’s debts beyond their own financial contribution, although certain circumstances can remove this protection.
  • Shareholders must hold at least one annual meeting within four months of the end of the fiscal year.
  • There is no legal requirement for a board of directors or regarding their nationality if there are directors.
  • The general manager must be a Saudi resident.

Entering the Saudi Arabian market opens the door to a unique economy among global businesses and commerce. The Kingdom has a powerful economy. Its strength is built on holding 15% of the planet’s known oil reserves and being the largest global exporter of crude oil. As Saudi Arabia increases its international profile, the government is striking a balance between attracting foreign investment into an increasingly entrepreneurial environment and seeking to protect the Saudi Arabian workforce.

Most private sector workers are expats, which the government is countering with its Saudization program known as Nitaqat. This sets quotas for the balance between expats and locals in the private sector. Launched in 2011, the program has accelerated since 2018. Only Saudi Arabians can be employed in specific sectors, and by September 2023, employees such as branch managers, supervisors, customer services, and sales agents will all have to be locals.

Even so, Saudi Arabia has issued over 40 licenses to multinationals such as PepsiCo, Deloitte and Unilever as it seeks to rival the United Arab Emirates as the No. 1 business hub for the Middle East and West Asia. By 2023 only companies with a regional headquarters in KSA will be allowed a license.

Starting a business in Saudi Arabia

International companies entering the Saudi Arabian market must set up subsidiaries to hire staff in the country and operate their payroll. The most popular route is to open a limited liability company (LLC), which operates under the Companies Law, as updated in 2016.

In a further move, the Ministry of Commerce and the Capital Markets Authority published a ‘Draft Law’ which removed the restriction on a single shareholder LLC being owned by another single shareholder LLC. Even so, there is a long list of requirements, regulations and responsibilities that go with establishing a legal entity in Saudi Arabia and dealing with several Saudi Arabian authorities. They include:

  • The Ministry of Investment Saudi Arabia (MISA), formerly the Saudi Arabia General Investment Authority (SAGIA) – to obtain pre-approval for an international investment license application by submitting a comprehensive business and financial plan.
  • The Ministry of Commerce (MOC) – reserve a unique company name and submit Articles of Association.
  • Zakat, Tax and Customs Authority (ZATCA) – company registration is required.
  • General Organisation for Social Insurance (GOSI) – employers and employees must be registered for making health, social security, pension and unemployment insurance contributions.
  • Submit municipality lease, tax number, registration certificate, and bank’s confirmation of deposited share capital to MISA, who then issue the foreign investment license. At this point, the business can start operating.
  • A minimum of one shareholder is required under the new Companies Law (2016), before which the requirement was for two. The shareholder can be a person or entity. There is no requirement for the number of directors.

Additionally:

  • Sign a lease agreement for the business premises and register with the appropriate municipality. This process can take up to three months.
  • Open a business bank account. There is no statutory minimum for share capital, but MISA requires foreign LLCs to have a minimum capital of at least SAR 500,000 (€130,750, US$133,180).
  • The subsidiary must publish a résumé of the Articles of Association in the Official Gazette, register with the relevant chamber of commerce and produce a company seal.

However, there are speedier alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Saudi Arabia. Work alongside our Professional Employer Organisation (PEO) recruitment specialists, then utilise our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of Saudi Arabia and how to navigate its legislative issues around Business Law.

Expanding your business into Saudi Arabia

Saudi Arabia is a magnet for foreign investment and workers, but there are inevitably issues in complying with the relevant employment legislation. This revolves around the Labour Law and the Saudization program in Saudi Arabia, which sets quotas to protect the number of local workers in the expat-dominated private sector.

Opening a business in any overseas territory can be challenging. Moving staff worldwide means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance? Drawing up an expansion blueprint is not enough; your business plan must answer all these questions. By partnering with a PEO and EOR such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Saudi Arabia. But for those who want to ‘go it alone’, here are some of the necessary steps.

Finding an office in Saudi Arabia

A booming economy is only one of the attractions of the Kingdom, which is opening its doors to international trade and investment. The government’s Vision 2030 initiative stimulates the environment for private enterprises, from start-ups to multinationals, widening its financial, digital, and economic perspectives. It encourages a more talented expatriate workforce while promoting and investing in its citizens through Saudization (Nitaqat).

What opportunities are available in Saudi Arabian cities?

Jeddah is a modern and lively city blending the old and new, famous for its shopping malls, providing a diverse cultural experience to live and work, and being the country’s commercial hub. It is also the home to many famous names such as Nestlé, Siemens, Proctor & Gamble and Unilever – to name but a few and in line with Vision 2030 to attract top companies to establish their headquarters in the country.

Riyadh is the largest city and administrative capital. A great city for business with all the facilities of a world-class destination but with little to offer in the way of nightlife. However, there is quad biking and hiking with plenty of green space even though the city is located in the desert with no coastline. It is a high-salary area and offers top-quality health care, education, and many shopping places and sites to see.

Dhahran, the top area for oil production, and maybe because of it, provides excellent facilities in a contemporary setting. It offers a well-developed IT industry with high-paying jobs. Although not offering much in music and entertainment, it is more of a traditionalist city and a place to chill with the locals; however, there are shopping malls, restaurants and things to keep the children entertained.

Some of the considerations when locating your office are:

  • What government funding, grants and subsidies or tax benefits are there for start-ups and new businesses?
  • Are the premises near to wholesalers, manufacturers and distributors offering ‘just-in-time’ inventory management?
  • What business hubs or clusters offer networking opportunities, improved supply chains, and research and development opportunities with appropriate office space?
  • How active and vibrant is the locale with a healthy business environment and proximity to commercial services?
  • Does it provide good facilities for staff, impress clients, and provide good transport links, air conditioning and safe car parking?
  • Is it fit for purpose but within budget … and yet still has room for expansion?
  • Does it have good infrastructure with appropriate services such as WIFI, internet, maintenance and cleaning, air-conditioning, and availability of a prayer room?
  • How does the nature of your business affect your choices? For instance, administrative or commercial?

Taking advantage of all this country has to offer to optimise profits, but staying compliant, means research and a good understanding of the region and the Muslim culture.

Finding a manufacturer in Saudi Arabia

The Vision 2030 initiative aspires to huge social and economic reforms to integrate local Saudi Arabians into the workforce and employment. The main aim is diversification from oil dependency towards a sustainable manufacturing ecosystem creating specialised clusters, investment and productivity to ensure a prosperous future.

Areas targeted to encourage efficiency and competitiveness and promote integration and expansion are the automotive and pharmaceutical industries. Also, the Research Products Development Company (RPDC) melds expertise from educational institutions and facilities for research in biotechnology through an R&D Cluster started in 2018 aimed at supporting clinical trials for emerging vaccines and medication.

In July 2022, KSA issued over 400 permits for projects in the metal, rubber and chemical sectors for new factories and facilities to encourage expansion in the manufacturing sector. Up to 2022, there were over 10,000 projects, with small enterprises accounting for over 90% of the industrial licenses. Investment has been more than SAR 1.3 billion (US$347 million).

Companies expanding into Saudi Arabia who have located their office and who have a product that requires manufacturing should not find this a problem, with the right advice and expertise from Bradford Jacobs. Partnering with the best company to launch your project and achieve production goals is a boon for any business.

A first-class manufacturer can help with the culture and local customers, the language and making the right contacts while hitting targets for quality and quantities. However, practice ‘Due Diligence’ with new contacts – start small before financially committing to large orders and seek out reviews and recommendations. Check out local embassies, most have country guidelines offering good information. Here are some of the questions you could ask:

  • Are they licensed and quality assessed?
  • Can they produce goods in the quantities needed?
  • Can they deliver directly to your customer or distributor?
  • Have they produced similar products, and can they provide recommendations?
  • Can they keep pace with your expansion plans?
  • Are they financially sound, and can they provide a previous audit?
  • Do they have payment terms and require a deposit?
  • Will there be a language problem?
  • Will you have a single point of contact, e.g., an account manager?
  • How are their supply chains for sourcing or outsourcing their raw materials?
  • What are their potential lead times to deliver?
  • Processes for dealing with poor quality or missed deadlines?
  • Do they provide sampling or a prototype?
  • Is their manufacturing equipment up to date?

Other considerations:

  • Run market research to avoid saturating the market.
  • Finding a company to both manufacture and distribute.
  • Legalities in the country to protect your intellectual property rights.
  • Regularly monitor your manufacturer’s performance.

Finding a distributor in Saudi Arabia

Since May 2016, foreign companies can wholly own retail and distributor trading businesses without partnering with Saudi Arabian companies to distribute goods. The Dow Chemical Company became the first in June 2016 to receive a trading license.

However, it is recommended for companies new to the KSA markets to initially partner with a local company. The three main areas of commercial trade are around Jeddah, Riyadh in the central province, and the Eastern area where the oil industry is located. Luxury goods are in high demand, as are food and beverages. Retail goods in the domestic market, especially food, are becoming more competitive with the heavy presence of hypermarkets such as Carrefour, Al Raya, Panda Retail Co., and Lulu Group.

After setting up your company, locating an office and partnering with a local manufacturer, you now have a product to sell. You need a distributor capable of starting small and locally who, in the future, can also expand to cover the whole country into the rest of the Middle East and farther afield. The KSA, as of 2022, does not have ‘Free Zones’, but as part of the Vision 2030 initiative, they are creating Economic Cities, and the NEOM Mega City is part of the expansion and diversification, with Free Zone areas part of the plans.

Situated alongside the north of the Red Sea but south of Jordan and Israel, the NEOM Mega City is estimated to cover 26,500 km2 with a 460km coastline along the Red Sea and is designed to host ‘smart-city’ tech companies as well as a holiday destination.

Apart from the main areas of distribution resting with wholesalers, major retailers such as supermarkets, department stores and huge shopping malls, e-commerce is booming; during January 2022, sales were around SAR266 million (€69.7 million, US$70.8 million) per day.

A top-rated distributor should be experienced with the larger markets, distribution channels and supply chains at home, in the rest of the Middle East, West Asia, Africa, and South Asia. They should have a handle on changes in the marketplace or emerging trends such as online shopping.

Some pointers when vetting a distributor:

  • Do they provide good storage facilities and have up-to-date machinery for handling goods before they distribute?
  • How do they track changes to market trends?
  • How does your product match or fit in with their existing product line?
  • Do they have well-trained and enthusiastic marketing and sales teams with excellent customer service that can also assist with customs, cultural differences, and the language?
  • See their plans for your product distribution, and have they worked before with foreign companies?
  • Look at their processes and logistics for distribution.
  • You may want to check out their customers’ history, satisfaction, and financial stability.

Getting the right distributor can mean product success for both of you. It is not just about moving merchandise, it’s also about growing and developing markets together, expanding both of your horizons and increasing your market share.

How to find a distributor

  • Check out Trade missions, which are usually organised to encourage mutual trade. They can target relevant companies more easily, arrange face-to-face meetings, and be aware of the best trade fairs or conferences. They may offer financial incentives if this is a new market for you or your country.
  • Networking: Joining B2B groups, Chambers of Commerce, exploring social media, e.g., LinkedIn and Facebook – all good vehicles to become familiar with your new country or to elicit experiences or recommendations
  • Check out the local expatriate community, some may attend embassy functions, and many expatriates occupy top positions with international companies
  • Accessing local directories and magazines, and online websites. Many in-country embassies produce country guidelines
  • Why not ask your manufacturer, maybe they should be your first port of call.

Some Saudi Arabian Facts

  • Capital – Riyadh
  • Population – 34 million
  • Regions/Provinces – Geographically, there are six regions: Eastern, Central, Northern, Northwest, Midwest and Southwest. The provinces are Riyadh, Makkah, Eastern, Madinah, Al Baha, Al Jawf, Northern Borders, Qassim, Ha’il, Tabuk, Aseer, Jizan, and Najran.
  • Official language – Arabic
  • Economy and world ranking – GDP USD 842 billion (2021) – 19th
  • Main exports – Mineral fuels and oil, plastics, organic and inorganic chemicals, fertilisers, aluminium, iron and steel, gems and precious metals, honey and dairy products, and copper.
  • Main imports – Machinery, mechanical appliances, electrical equipment, transportation equipment, chemical products, and vegetables.
  • Main trading partners – China, UAE, Turkey, France, Germany, Italy, Singapore, Belgium, Egypt, US, Kuwait, South Korea, and Malaysia.
  • Government – Absolute monarchy based on Islam.
  • Currency – Riyal.

Advantages and Challenges when entering the Saudi Arabian Market

Some advantages of entering the Saudi Arabian market include the following:

  • Economy: Diversification away from oil sees growth in hydrocarbons and natural gas, as well as an increase in tourism and consumer spending.
  • Manufacturing: Output is expected to increase alongside investment in domestic industries.
  • Finance: Insurance and business services are expected to grow based on increased private sector credit.
  • Vision 2030: The initiative aims to increase the role of private sector companies, SMEs, entrepreneurs and innovators.

Some challenges of entering the Saudi Arabian market include the following:

  • Oil: Dependency on international prices and an economy heavily dependent on the industry.
  • Labour force: Relatively high unemployment among the local population, which the government seeks to redress with the Saudization program enforcing quotas for numbers of expats in the private sector.
  • Stability: Potential tensions due to land borders with Yemen and Iraq, while neighbour Iran is seen as a potential regional rival.
  • Business operation: Late payment is common, not legally regulated, and late payment interest is not allowed.
  • Bureaucracy: Lacks transparency; the legal process can stretch over months, and precedents do not bind courts.

Saudi Arabian employment contracts are 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). The Law protects all workers in Saudi Arabia, but to different degrees depending on the type of worker.

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 Saudis or citizens from the other five Gulf Cooperation Council (GCC) nations, the United Arab Emirates, Bahrain, Qatar, Oman and Kuwait.

Thanks to our Professional Employer Organisation (PEO) and Employer Of Record (EOR) solutions, we can provide compliant labour contracts for your employees in Saudi Arabia, including local benefits. Our team keeps track of Saudi Arabian laws and regulations daily to be duly aware of updates that can be implemented in working contracts and to ensure a smooth entry for your business into the Saudi economy.

The different types of Saudi Arabian Employment Contracts

Open-ended, indefinite employment contracts: Only Saudis and Gulf Cooperation Council (GCC) citizens can be placed on these contracts at the start of their employment. Either party can terminate the agreement by following the correct procedures under the Labour Law.

Fixed-term employment contracts: They can apply to Saudi, GCC or foreign nationals. When the contracts for Saudi and GCC employees have been renewed three times or four years, they become open-ended. Fixed-term contracts for foreigners can be renewed if they contain a clause to that effect, with employees’ rights and benefits extended throughout the entire service period. However, they cannot be converted to an open-ended contract. If the fixed-term period is not specified, it equals the visa or work permit length.

Probation periods: These must be included in the contract, usually for 90 days, although the employee can give a written agreement for an extension to a maximum of 180 days. Either party can terminate without reason.

Saudi Arabian Employment Contracts Requirements

General considerations include:

  • 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 of 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.

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.

What are the Compensation Laws in Saudi Arabia?

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:

  • Foundation Day, February
  • National Day, September

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.

Guarantees and Restrictions on Employee Benefits in Saudi Arabia

Guaranteed Benefits:

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:

  • Maternity Leave and Benefit: Pregnant employees receive ten weeks on full salary with a maximum of four weeks before the due date, which is verified by a medical certificate or health authority. Women are allowed an extra four weeks of unpaid leave. If the child is born disabled or unwell, mothers are entitled to a further month’s paid leave and an additional four weeks unpaid.
  • Sick Leave and Benefit: Leave entitlement is 30 days on full pay, 75% for the next 60 days and without compensation for subsequent days within the course of one year. Work-related illness or injury permits 60 days of leave on full payment and 75% of salary for the duration of medical treatment.
  • Paid Vacations: Employees receive 21 calendar days of annual paid leave for the first five years of service, then 30 days per year for further years of service.

Restrictions:

  • Maternity Leave: To be entitled to maternity leave benefits, the employee must have been working for at least one year.
  • Unemployment Benefit: Applicants must have resided in Saudi Arabia for at least ten months over the previous 12, be fit and available for work, and actively seek employment with a CV. Support is from the Saudi Arabia Unemployment Assistance Scheme.

Social Security in Saudi Arabia

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).

Recruiting in Saudi Arabia can bring potential tripwires for companies taking steps to build their international profile. International companies recruiting top talent in Saudi Arabia for their expansion plans face restrictions on how they build their workforce. The majority of employees in the private sector are expats, which led the Saudi government to institute a program of ‘Saudization’ to increase the number of locals working for leading companies.

Saudization, known as Nitaqat and launched in 2011, must comply with quotas based on the company’s size, activities and the expat/Saudi balance in their workforce. The scheme is color coded. Platinum-rated entities receive preferential treatment regarding immigration processing times, while the lowest-rated ‘red’ companies are restricted from hiring foreigners until they improve their quota. Non-compliance results in fines, a ban on new work permits or being able to transfer employees. The Ministry of Human Resources and Social Development (HRSD) – formerly the Ministry of Labor and Social Development – announced extensions to the program to come into effect by September 2023, affecting such as branch managers, supervisors, customer services and sales agents, all of which will have to be Saudis.

Other restrictions were already in place as the government seeks to protect its own nationals in the employment market while maintaining Saudi Arabia’s attractions for foreign investment and high-level talent. This is evidenced by the KSA issuing 44 licenses for multinationals to move their headquarters to Riyadh, including PepsiCo, Deloitte, Unilever and Baker Hughes. From 2023, foreign companies will need a regional headquarters in Saudi Arabia to qualify for a license.

Bradford Jacobs’ global experience is vital for taking the smartest recruitment route into Saudi Arabia. Our benchmark platforms as a Professional Employer Organisation (PEO) have worldwide reach and include a total understanding of the complexities of the Saudi employment market. You need staff to be ‘up and running’ quickly.

Recruiting in Saudi Arabia

Foreign companies recruiting in Saudi Arabia must cope with Saudization, known as Nitaqat. Since starting the program in 2011 as part of ‘Vision 2030’, the Saudi government has been balancing the need to protect the local workforce alongside attracting investment and corporations from overseas. In this complex employment landscape, companies looking to recruit staff need support from partners who comprehensively understand how the system works.

For example, some industries allow only Saudi Arabians to be employed. These are all issues that need to be addressed before you make your first move in finding the right match for your expansion plans. Recruitment is the first stage of making your company operational and competitive in Saudi Arabia.

However, complications surround moving staff into the country, obtaining visas and residence permits and fitting in with the KSA’s quota system. To avoid these issues, knowing where to locate the finest candidates for your company’s international expansion is vital. Don’t wait, contact Bradford Jacobs for the solutions.

Once recruited and onboarded, employers must comply with various procedures to ensure employees can legally work in Saudi Arabia. Responsibilities include.

  • Registering and obtaining approval for the contract through the Qiwa website.
  • Once the contract is signed, registering the employee online with the General Organisation for Social Insurance (GOSI). All Saudi Arabians must be registered, and expats can elect to register independently or through their employers.
  • Registering employees with the Zakat, Tax and Customs Authority (ZATCA). Although there is no personal income tax on Saudi-sourced income, withholding taxes apply to non-residents.

Note: Foreigners entering Saudi Arabia to work require a sponsor (kafeel), which can be a company or individual. They must have a written employment contract.

Employers must then:

  • Ensure the expat has the 10-digit Sponsor ID from the Ministry of Human Resources and Social Development (HRSD).
  • Use the Sponsor ID to verify the ‘iqama’ residence and work permit issued by the Ministry of the Interior. To obtain a foreigner’s work permit, the subsidiary’s payroll must include at least one Saudi Arabian national.

Employees’ Legal Checks in Saudi Arabia

Criminal Record Checks: Allowed only for specified employment, such as the financial sector, in which case the check is made through the relevant municipality court.

References and Qualifications: Verifying educational qualifications and employment records is common.

Medical Checks: These are required pre-employment as part of the visa application process. Saudi law does not prohibit drug and alcohol screening either pre-hire or during employment when employers can use the Ministry of Human Resources and Social Development (HRSD) accredited system at government-registered clinics.

Required: Compliance with all immigration, work permit and visa regulations for non-Gulf Cooperation Council nationals.

Basic Facts when Recruiting in Saudi Arabia

In the Kingdom of Saudi Arabia (KSA), employment legislation is generally covered by the Labour Law (2005), plus specific provisions that may be introduced by the Ministry of Human Resources and Social Development (HRSD), formerly the Ministry of Labour and Social Development.

The government’s ‘Saudization’ program aims to increase the number of Saudi nationals employed in the private sector, where expats comprise most of the workforce. Only Saudi Arabians nationals, for example, can be employed on indefinite contracts or are entitled to a ‘de facto’ minimum wage. Entitlements and benefits generally also apply to nationals from the other five Gulf Cooperation Council (GCC) nations – Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.

  • Employment contracts must be in writing, generally in Arabic and English or another language, although in the case of disputes, the Arabic version will prevail. Dual language contracts are permitted with both translations in the same document.
  • Employer and employee must each have a copy of the contract drawn up on the HRSD-issued template.
  • All contracts must be registered and approved through the Qiwa website
  • Once the contract is signed, the employee must be registered with the Zakat, Tax and Customs Authority (ZATCA) and the General Organisation for Social Insurance (GOSI).
  • Under the Labour Law and reflecting the Saudization program, only Saudi Arabians nationals are permitted open-ended, indefinite contracts.
  • Probation periods for 90 days can be agreed upon. The employee can give a written agreement to extend the trial period to a maximum of 180 days.
  • The probation period must be included in the contract, and either party can terminate without reason or redress.

The Saudi Arabian work culture can demand adjustments from international companies expanding into the country. Having an economy traditionally based on oil, Saudi Arabia has been opening its doors to international investment, companies and expatriate employees for decades as it builds its global trading profile. The government’s Vision 2030 program encourages private enterprises, start-ups, and SMEs’ growth as it widens its economic horizons. From 2023, foreign companies will need a regional headquarters in Saudi Arabia to qualify for a license.

Saudi Arabia has already issued multiple licenses for multinationals to move their headquarters to the capital, Riyadh, including PepsiCo, Deloitte and Unilever, in a drive to rival the United Arab Emirates as the No. 1 business hub in the Middle East and West Asia. Most staff in the private sector are expatriates, which led to the government introducing in 2011 the ‘Saudization’ plan, or Nitaqat, to increase the number of locals on company payrolls. Companies must comply with quotas based on company size, business activities and the balance of employees between foreigners and Saudi Arabians.

Despite its growing profile in the world economy, Saudi Arabia’s business culture remains traditional and more conservative than most international companies. Adjustments must be made whichever country incomers arrive from. Expats must be prepared for ‘positive discrimination’ towards local employees, such as training, promotion, benefits, and entitlements above the statutory minimums.

Basics of the Saudi Arabian Work Culture

Language: Meetings are generally conducted in English if different nationalities attend, but attendees may discuss delicate or technical points in Arabic.

Timekeeping: Meetings and office environments tend to be flexible. Meetings likely have no agenda. Don’t take it personally if the appointment starts late or is cancelled last minute. Saudi Arabians place little value on punctuality as a whole. Meetings often start late, and prayer times dictate schedules.

Meetings and Negotiations: Introductory small talk can soon be followed by hard bargaining with decision-making from the top, usually from a Saudi Arabian. Being ‘pushy’ will not work, with polite flexibility being the best option. Building trust and relationships are crucial, as in most countries in the region, so be prepared to spend time laying the foundations for the business relationship.

Greetings: A handshake is the standard first-contact greeting in Saudi Arabia for men. If you are greeting a woman, wait for her to extend her hand before offering yours. If she doesn’t, keep your hand by your side. Greet everyone in the room with a handshake, starting with the most senior person in the room and then by seniority if you know the hierarchy. Saudi Arabians and other Arab men may embrace and/or kiss on the cheek, nose, or forehead as a sign of deference and respect. However, expatriate men are not expected to do the same.

Business Cards: Exchange them using the right hand at the start of the meeting, with the Arabic side uppermost. Try to take note of any particular designations on your contact’s card (Shaikh, Doctor, or Engineer) and refer to the person with that title from time to time during the conversation.

Dress Code: Dress to impress! Suit and tie for male expatriates, and national dress (white thobe, red/white checked ghutra) for locals. All women must wear an abaya (black cloak), although foreign women need not cover their heads.

Out of Hours: Lunches and dinners or meetings for coffee in a hotel lounge are part of the “getting to know you” process and a helpful networking introduction for those trying to get ‘ their foot in the door’ for business opportunities.

Gifts: Gift-giving is not part of business etiquette in Saudi Arabia.

Taboos: Acceptable topics for discussion are families, business, art, culture, and sport. Avoid discussing local politics, religion, or the royal family. Never show the soles of your feet, and don’t openly argue with your host, especially in the presence of others. Don’t raise your voice; use only your right hand when eating.

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