Saudi Arabia Labour Law
Saudi Arabia, officially named The Kingdom of Saudi Arabia, is one of the six countries that form the GCC (Gulf Cooperation Council). It is located between the Red Sea and The Arabian Gulf and grew its financial influence after discovering substantial petroleum deposits in 1938.
Since then, it has become an attractive place for companies to expand their businesses, and as a result a popular place for expats to move and work there.
As with all other GCC countries, employment is governed by the local Labour Law, and in Saudi Arabia, the Labour Law is governed by the Ministry of Human Resources and Social Development.
Before you can hire an employee, you must first make sure you have the right to hire employees and the legal documentation (such as a valid trade license from the appropriate authority). All employers in Saudi Arabia must provide a valid employment contract in Arabic (and English depending on their native tongue) to any new employee they wish to hire.
When operating in the Private sector of KSA, you must also be aware of the Saudization programme: Nitaqat, which aims to increase the employment of Saudi Nationals in the private sector. Nitaqat requires employers with over nine employees to a hire a percentage of Saudi Nationals. The percentages are dependant on the company’s industry and number of employees.
In November 2020, the General Organisation for Social Security (GOSI) announced a minimum wage for Saudi Nationals who are 50 years of age or older of SR 3,000 per month. This was updated in July 2021 to reflect the minimum wage for Saudi nationals who are 50 years of age or older to SR 4,000 per month. If employees are paid less than the minimum wage, they will only be classed as half a worker in accordance with Nitaqat, the Kingdoms Saudization programme.
Working week and hours
Much like the rest of the GCC, In Saudi Arabia, the workweek is from Saturday to Thursday, with Friday considered as the weekend, as Friday is the holy day of Islam. In some instances, the working week is from Sunday to Thursday, with Saturday included in the weekend.
Employment of foreigners
All Foreign workers in Saudi Arabia need to have the correct visa and work permits, sponsored by an employer. This can be a Saudi Company, a Saudi citizen or a foreign entity, appropriately licensed to do business in Saudi Arabia.
As per the Saudi Labour Law, employers cannot put their employees under probation from longer than 30 days under the same employer.
Paid Time Off Entitlements
According to the Saudi Labour Law, employees are entitled to 21 days paid annual leave entitlement each year, and 30 days after 5 years of continuous service with one employer. If the employee does not take the leave entitlement each year, it is at the employers discretion whether it can be encashed or an allowance can be carried over.
As with most other GCC countries, there are a few religious holidays each year which grant paid time off to employees, these include:
- Eid al Fitr
- 4 days paid vacation
- Eid al Adha
- 4 days paid vacation
- KSA National Day (23rd September)
- 1 day paid vacation
A total annual allowance of 4 months can be permitted as sick leave to employee if they’re medical condition can be proven with an official sickness certificate. During this time, an employer is not allowed to terminate an employee’s employment.
Paid entitlement of sick leave is as follows:
- First 30 days- full pay
- The next 60 days- ¾ of net salary
- 90+ days- unpaid
According to the Saudi Labour Law, sick leave can be combined with annual leave
Other types of Paid time off
Hajj is the annual Islamic pilgrimage in the Islamic faith to the holy city of Mecca. an employee is entitled to take 10 days ‘Hajj Leave’ after they have been in continuous service with one employer for 2 years and are allowed to take it every 5 years.
Employees are entitled to 3 days of paid marriage leave in addition to annual leave. For example, is an employee takes two weeks of paid time off to get married, 3 of those days will be deducted from their marriage leave allowance, the remainder will come from their annual leave allowance.
Female employees are entitled to 10 weeks of paid maternity leave. This can be taken up to 4 weeks before the birth, and at least 6 weeks must be taken after the birth. If the employee has been in service with her employer for at least one year, she will get half-pay, and over three years from the start of her leave, will receive full pay.
New fathers are entitled to three days of paid paternity leave, following the birth of their child.
If an employee wishes to take time off from work outside of the permitted paid allowances, it is at the employers discretion.
It is important to track any unpaid absences, as it can impact other aspects of statutory requirements and benefits to the employee.
Statutory regulations for Saudi Arabia is governed by General Organisation for Social Security (GOSI). For more information on GOSI, read our article here.
Contributions must be made each month by both the employee and employer, and are capped at SAR 45,000 per month)
For GCC Nationals:
- Employer contribution- 12%
- Employee contribution-10%
- Employer Contribution- 2%
- Employee Contribution- Foreign employees do not make contributions.
End of Service and Termination
Employers who have been in continuous employment with the same employer for more than 2 years are entitled to an end of service settlement.
Employees who are terminated must be given a minimum of 1 month’s notice from the employer, as per the Labour Law. Terminated employees are entitled to the following end of service payment:
- 0-2 years- 50% of basic salary for each year of service
- 2-5 years-50% of basic salary for each year of service
- 5-10 years- 100% of basic salary for each year of service
- 10+ years-100% of basic salary for each year of service
Employees who resign from their job must give a minimum of 1 months notice, as per the Labour Law, are entitled to the following, based on their length of service:
- 0-2 Years- no entitlement
- 2-5 Years- 1/3rd of Termination EOS gratuity
- 5-10 years- 2/3rds of Termination EOS Gratuity
- 10+ years- Same as Termination EOS Gratuity
Disclosure: This article does not detail all aspects of the Saudi Arabia Labour Law
If you’d like advice on the Saudi Arabia Labour Law, get in touch with one of our payroll specialists of labour law experts.