Expand your business into Saudi Arabia - without an entity
New Horizons provides global employment solutions for businesses wanting to hire employees and distribute payroll in Saudi Arabia. Through our Saudi Arabia PEO and Employer of Record, we manage your company’s payroll, benefits, and expenses in Saudi Arabia. Additionally, we oversee HR duties, as well as employment and tax compliance.
New Horizons will act as your employees’ Employer of Record, which means you can begin doing business in Saudi Arabia without a local entity. This not only allows your business to go to market faster, but also has the potential to save your business thousands in expansion costs.
As the only Saudi Arabia Employer of Record & PEO with an in-house recruitment team, New Horizons will source, hire, and onboard your Saudi Arabian workforce. We hire employees in accordance with Saudi Arabian labor regulations and coordinate all expense claims and benefits payments. Although we act as your employees’ Employer of Record, you still maintain full autonomy and control over all employees.
Our Saudi Arabia PEO simplifies your expansion
New Horizons enables your business to expand its operations into Saudi Arabia – without setting up a legal subsidiary.
Employment & Labor Laws in Saudi Arabia
📝 Employment contracts in Saudi Arabia
Employers seeking to hire employees in Saudi Arabia are encouraged to draft strongly-worded, written employment contracts. In addition to describing the job and the employee’s responsibilities, the employment contract should also state the rate of compensation, any benefits, and protocols surrounding resignation and termination. Contracts should be drafted in Arabic and all references to salary should be made in Saudi riyal (SAR).
Saudi Arabian law allows probation periods of up to 30 days. If the employer and employee agree on lengthening this term, a probationary period can be extended another 90 days.
Employees who complete three consecutive fixed-term contracts or work continuously for their employer for four years, automatically have their contract converted to a non-term length contract.
New Horizons’ Saudi Arabia PEO offers compliant employment contracts that meet Saudi Arabia’s complex workplace regulations.
⏰ Working hours in Saudi Arabia
The typical work week in Saudi Arabia is between 40 and 48 hours. Work is generally performed eight hours per day, six days per week. If an employee works more than 40 hours in a week, they are entitled to overtime pay, which is 1.5x the normal hourly rate. There is no cap on the amount of overtime hours that may be worked.
During Ramadan, the work day in Saudi Arabia is reduced to six hours. While this policy normally applies to all employees, it is only required by law to grant this adjustment to Muslim employees.
📆 Work week in Saudi Arabia
The typical work week in Saudi Arabia is between 40 to 48 hours each week. Typically, this means work-related tasks and responsibilities will be performed 8 hours per day, 6 days per week. If an employee works more than 40 hours in a week, he or she is entitled to overtime pay, which is 1.5 times the normal rate. There is no cap on the amount of overtime hours that may be worked.
During Ramadan, the workday in Saudi Arabia is reduced to six hours per day. While this policy typically applies to all employees, it is only required by law to grant this adjustment to Muslim employees.
📅 Holidays in Saudi Arabia
Saudi Arabia celebrates Eid Al Fitr and Eid al Adha, which are religious festivals. These festivals last three and four days respectively. Additionally, Saudi Arabia observes Unification of the Kingdom Day on September 23.
Eid Al Fitr Holiday
Eid Al Fitr Holiday
Eid Al Fitr Holiday
Eid Al Fitr Holiday
Eid Al Adha Holiday
Eid Al Adha Holiday
Arafat (Haj) Day
Eid Al Adha
Eid Al Adha Holiday
🏦 Employment taxes in Saudi Arabia
Employers in Saudi Arabia must pay GOSI for their employees, which are social insurance taxes. These payments are based on employees’ base salary, housing allowances, and other designated allowances. Employers also need to pay contributions for occupational hazards insurance (similar to workers’ comp) of 2% for their employees.
🏥 Health insurance
Saudi Arabia’s national healthcare system provides medical care and hospital care for citizens of the country. Expatriate employees often receive supplementary health insurance as an added benefit.
🏖 Vacation leave
The minimum amount of vacation leave in Saudi Arabia is 21 days, which is granted after an employee has worked for a company for at least one year. Starting in the sixth year of employment, the statutory minimum amount of vacation leave is 30 days. Employers may have separate policies regarding carrying over unused time to the next year of service, or capping carry over leave time.
Additionally, Hajj leave may be provided to Muslim employees who have been with the company for at least two years of continuous employment. The leave can be up to 10 days and can only be taken once in five years with the same employer.
😷 Sick leave
Employees are usually entitled to a maximum of four month’s sick leave if they provide a medical certificate to their employer. Sick leave is paid at a rate of 100% for the first 30 days, 75% for 31 to 90 days, and unpaid for 91 days to 120 days.
👶 Maternity and paternity leave
Female employees in Saudi Arabia are usually entitled to 10 week’s paid maternity leave, so long as they have been with their employer for at least one year. Four of these 10 weeks can be taken before the birth of the child, but at least six of the remaining 10 weeks must be taken after the birth.
Maternity leave is paid at half pay if an employee has been with their employer for at least one year. If an employee has been with their employer for at least three years, they are entitled to maternity leave at full pay. Employees can take their annual vacation during the same year that they take their maternity leave. However, if an employee chooses to do this, they are only entitled to half pay or no pay, depending on how much maternity leave has been granted.
Employers in Saudi Arabia are also required to pay for the female employee’s pregnancy and delivery medical expenses.
Fathers may take up to three day’s paid paternity leave.
💰 Termination and severance
Employees are generally entitled to notice before being terminated. For employees with written, limited contracts, they are entitled to 30 day’s notice before termination. Those with unlimited contracts are entitled to 60 day’s notice. Alternatively, both the employer and employee can agree to compensation instead of notice.
There is no notice period for definite contracts.
During the notice period, employees can use up to eight hours each week to find alternative employment.
Once the employment contract ends, the employee is entitled to severance payment that is:
- Equal to half of one month’s average wages for each of the first five years of employment
- Equal to a full month’s wages for each year of work after the fifth year
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. New Horizons’ Saudi Arabia PEO can mitigate risk for foreign companies and provide guidance through this process.
💳 Saudi Arabia compensation and benefits
Saudi Arabia compensation laws
While there are no minimum wages for Saudi Arabia’s private sector, public sector employees must make at least $7,585 a year, equal to approximately 28,444 Saudi Arabian riyal (SAR). Compensation laws also dictate overtime payments that are 100% of an employee’s normal hourly rate, plus a 50% bonus. Any work conducted on a Friday or public holiday is considered overtime.
Severance pay in Saudi Arabia is 15 day’s wages for an employee’s first five years of work, then a full month’s wages for every year thereafter. For Saudi Arabian nationals, they have rights to additional severance pay, as per their employment contract.
Guaranteed benefits in Saudi Arabia
At the very minimum, employers must provide their employees with benefits outlined in the country’s employment regulations. These statutory benefits include:
- Reduced work days (six hours) for Muslim employees during Ramadan
- 21 day’s paid vacation each year
- Time off for public holidays announced by the government each year
While the statutory minimum for paid vacation is 21 days, it increases to 30 days after an employee has been with an employer for six years.
Muslim employees are entitled to leave for the Hajj, after they have been with their employer for two years. This form of leave can only be taken once within five years of employment, and cannot extend to more than 10 days.
Saudi Arabia benefit management
In Saudi Arabia, a benefit management plan should include supplemental benefits. This will enable a business to attract and retain high-level talent. It’s considered the ‘norm’ for employers to offer employees:
- Supplementary health insurance
- Plane tickets to travel home for vacation
- Money for education expenses
- Retirement plans
- Mobile phones
- Housing allowances
- Transportation allowances
Benefits and compensation restrictions
Employers in Saudi Arabia should be mindful of their employee’s sick leave. While employees are generally entitled to four month’s sick leave, they need a medical certificate to take that length of time. If an employee has a medical certificate, they are entitled to full pay for the first 30 days, 75% for 31 to 90 days, and unpaid time off from 91 to 120 days.