Saudi Arabia is the largest of all economies in the Arab World, and there is more to the desert kingdom’s economy than extraction and export of oil. Even though petroleum remains the mainstay of the economy, foreign investment has played a key role in the diversification and development plans since the 1980s. The value of exports and imports taken together equal 73% of Saudi Arabia’s total GDP of $1.7 trillion. No minimum capital is required to start a new business, and direct purchase of shares listed on Saudi stock exchange is now possible. The current foreign direct investment inflow into the county is $8.1 billion.
Currency: Saudi Riyal
Principal language: Arabic
Government: Absolute Monarchy
Capital City: Riyadh
Major Cities: Jeddah, Mecca, Medina, Dammam
Employment contracts in Saudi Arabia need not be in writing unless employers or employees ask for it. Probationary periods can be up to 90 days and get extended for 90 days more with employees’ consent in writing.
Workers cannot be put on probation more than once by employers. Fixed-term contracts can be renewed only thrice as after this they automatically change into indefinite term contracts.
Employees should not work longer than 40 hours during a week and the daily work hours shall not be more than 8 hours. Maximum permissible working hours which include overtime, are 12 in a day. In some hazardous occupations, daily work schedule may get reduced to 7 hours. In the month of Ramadan, the work schedule for Muslims is reduced up to 6 hours per day or 36 per week.
Friday is the usual weekly rest day for all workers. After proper notification to the government, employers may replace this rest day with any other day of the week for some employees. Additional wages or payments cannot be exchanged for a weekly rest day. However, weekly rest periods may be accrued for up to 8 weeks under some special circumstances but only when the employer and workers agree.
Employees can be eligible for overtime pay if they work more than 40 hours per week or on mandatory paid holidays, and such work entitles them to 50% premium over the base pay.
Employees in Saudi Arabia get 9 holidays annually; the dates of some of which change every year:
- Eid Al-Fitr: (date varies), lasts 10 days, but employers usually allow only 3
- Sept. 23: Saudi National Day
- Eid Al-Adha: (date varies), lasts 10 days, but employers usually allow only 5
If the National Day falls on a weekend, a day off can be taken either a day before or after the weekend. If the National Day falls on a Friday, it is observed on the subsequent Saturday. If it falls on a Thursday, it is observed on the preceding Wednesday.
Employees are initially entitled to 21 days’ annual leave, which goes up to 30 days after completing 5 successive years with an employer. Employers may specify the dates of employees' leave by work requirements, and they need to notify the employees of the date of leave at least 30 days in advance.
Annual leave may be carried forward to the next year, but it cannot be encashed. An employer can postpone a worker's leave, but for not more than 90 days prior to the year in which it is due. If work conditions require a further extension, the concerned worker must approve in writing.
Women employees can take paid maternity leave for 4 weeks immediately before the expected delivery date and for 6 weeks prior to delivery. A female employee whose newborn is sick or a child with special needs is granted an additional month of paid maternity leave which may get extended up to 18 weeks’ paid and unpaid leave.
An employer cannot terminate a mother of a newborn baby during the period of an ailment caused by pregnancy or delivery if a certified medical report establishes it. The period of absence should not be more than 180 days.
A father gets 3 days of paid leave to attend to his child's birth.
Workers in Saudi Arabia are entitled to sick leave for 30 days at full pay every year, an additional 60 days at 75% pay, and another 30 days of unpaid leave. Count of a year for this purpose begins from the date an employee takes the first sick leave.
Employees can also request to club their sick leave with the annual leave. An employer is not allowed to terminate workers due to illness without first allowing them their sick leave.
- Five days’ bereavement leave on the death of parents or children
- Paid education leave to sit for an examination
- 10 to 15 days’ leave to perform Hajj pilgrimage to Mecca
- 5 days of paid leave for marriage.
Pension and Social Security
The General Organization for Social Insurance (GOSI) manages the social insurance programs in Saudi Arabia. Men aged 60 (62 according to the Hijri calendar) and women aged 55 qualify to receive a pension provided they have made contributions to the social insurance fund for at least 120 months. The employer needs to contribute 9% of payroll while the employee makes a contribution of 9% of gross earnings to the social security programs.
An employee younger than 60 who has made minimum 12 months of social insurance contributions qualifies for unemployment insurance benefits. The unemployed person gets 60% of the average monthly wage capped at 9,000 Saudi Riyals for 3 months; 50% of the average monthly wage up to 7,500 Riyals thereafter. The benefit is paid only for 12 months.
Workers’ Compensation Insurance
If employees sustain injuries at work, employers need to cover all direct and indirect treatment expenses. In case of a temporary disability resulting from a work injury, an employee is entitled to full wages for 30 days, then 75% of the wage for the duration of the treatment. If a year elapses or it is medically determined that the employee's chances of recovery are unlikely or that he or she is not physically fit to work, the injury is deemed to be a total disability.
If an injury results in a permanent total disability or death, the concerned employees, or their eligible beneficiaries, are entitled to a compensation equal to 3 years, with a minimum of 54,000 riyals.
Being a part of the Occupational Hazards Branch is mandatory for almost all the workers while getting enrolled in the annuities branch is mandatory for those Saudi individuals who are under a work contract with a particular employer. Both employers and employees need to make contributions to an unemployment insurance fund that comes under GOSI.
Employees who are not in formal employment relationships such as engineers, doctors, artisans, lawyers, and consultants may voluntarily take part in the annuities branch of the social insurance system but are considered solely responsible for filing registration applications, forms, and returns.
All employers need to buy health insurance for their employees from a provider which the Council of Cooperative Health Insurance approves. Employers need to purchase health insurance for their employees on the day they hire them. Employers must get their insurance cards within 10 days of their health insurance registration.
How GPS can Help
With our Global PEO/Employer of Record services, companies can expand into Saudi Arabia and hire their employees without having to establish a branch office or subsidiary in Saudi Arabia.
- Your candidate is hired via our Saudi Arabia PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
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Spin Off/M&A Support
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When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Learn more about our end-to-end international expansion services.