Hire Staff in Saudi Arabia without Establishing a Local Entity.
New Horizons’ PEO services allow you to take advantage of talented labor markets in Saudi Arabia without having to expose yourself to the liabilities associated with the employer/employee relationship. Using a PEO is ideal in many situations, including if you want a cost-effective solution to convert contractors to employees, you need staff but do not have a legal entity or you need an interim solution while you establish a foreign entity.
Below, we discuss some of the most important laws concerning employment in Saudi Arabia. If you decide to hire employees, we can walk you through these laws, or we will assume responsibility for these matters.
Labor Laws in Saudi Arabia
Saudi Arabia has recently made its policy on encouraging employment of nationals of Saudi Arabia stronger. Many expatriate workers contribute to the Saudi economy, but the government is attempting to encourage hiring Saudi national within the private sector. This prioritization has made it more difficult for companies to sponsor new work permits for foreign employees. For this reason, it is typically much easier to hire employees who are already residing in Saudi Arabia than to hire foreign workers.
Expatriates are required to have a work and residency permit before they can legally work in Saudi Arabia. An exit entry visa may also be required to allow the worker to leave and re-enter Saudi Arabia.
Employment Contracts in Saudi Arabia
Many countries across the globe use employment contracts to set out the terms of employment. While this practice is not as common in the western world, it is more common to have employment contracts in place in the Middle East and in Asia. In addition to describing the job and the employee’s responsibilities, the employment contract should also state the rate of compensation and provide information on termination of the employment relationship.
In Saudi Arabia, workers who complete three consecutive fixed term contracts or who work continuously for four years for the employer automatically have their work contract convert to an unlimited contract.
New Horizons offers compliant employment agreements that meet the local and national requirements.
Work Week in Saudi Arabia
The typical work week in Saudi Arabia is 40 to 48 hours each week. Typically, this is performed as 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 not a cap on overtime hours.
The work day is reduced to six hours during Ramadan. Employees who While this policy is usually applied to all employees, it is only required by law to provide 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.
Saudi Arabian Vacation Leave
The minimum vacation leave in Saudi Arabia Is 21 days after an employee has worked for the company for at least one year. Starting in the sixth year of employment, the statutory minimum amount of vacation leave is 30 days. Employers can have policies regarding carrying over unused time to the next year of service or on capping carryover 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. It can only be taken once in five years with the same employer.
Sick Leave in Saudi Arabia
Employees are usually entitled to a maximum of four months of sick leave if they give 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.
Saudi Arabia’s Maternity Leave Policy
Mothers in Saudi Arabia are usually entitled to 10 weeks of paid maternity leave if they have been employed for at least one year. Four of these ten weeks can be taken before the birth of the child, but at least six of the ten weeks must be taken after the birth.
Maternity is paid at half pay if the employee has been employed with the employer for at least a year. If the mother has been employed for at least three years with the same employer before taking any leave, she receives full pay. Mothers can take their annual vacation during the same year that they take their maternity leave, but if they do so, they will only be entitled to half pay or no pay, depending on how much she received in maternity leave pay.
Additionally, employers in Saudi Arabia are required to pay the mother’s pregnancy and delivery medical expenses.
Fathers may take up to three days of paid paternity leave.
Probation Periods in Saudi Arabia
Saudi Arabian law allows probation periods of up to 30 days. If the employer and employee agree, this probationary period can be extended another 90 days.
Termination and Severance Benefits in Saudi Arabia
Employees are generally entitled to notice before being terminated. Employees with written, limited contracts are entitled to 30 days’ notice before termination. Those with unlimited contracts are entitled to 60 days’ notice. Alternatively, the parties 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 a severance award that is equal to half of one month’s average wages for each of the first five years of employment and for a full month’s wages for each year of work after the fifth year.
Employment Taxes in Saudi Arabia
Employers must pay GOSI for their employees, which are social insurance taxes in Saudi Arabia. These payments are based on employees’ base salary, housing allowances and certain allowances. Additionally, employers must pay contributions for occupational hazards insurance (similar to workers’ comp) of 2% for their employees.
Saudi Arabia’s Health Insurance System
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.
Additional Employment Benefits in Saudi Arabia
Employers may offer additional employment benefits to their employees to make themselves a more attractive option. Common employment benefits in Saudi Arabia include:
- Supplementary health insurance
- Housing allowances
- Plane tickets home to visit family on vacation
- Transportation allowances
- Retirement plans
- Education expenses
- Mobile phones
Why Use New Horizons in Saudi Arabia?
Our local experts can walk you through the process of hiring employees in Saudi Arabia. We can explain the nuances of Saudi Arabian labor laws so that you are well-informed about these matters before taking on this responsibility.
We provide comprehensive employment solutions, including:
- Acquisition of business visa and work permits
- Management of local payroll and taxes
- Employment legal support
Our extensive services allow you to expand your operations quickly into new and emerging markets. Our services also allow companies to decrease their time to market without assuming the cost and complexity of establishing a separate branch office or subsidiary in Saudi Arabia. Additionally, Saudi Arabian employee protections are vast and labor laws are complex, so using our services assists you in all compliance matters.
Using an experienced PEO like New Horizons also makes you more competitive as an employer. You can take advantage of our global reach and workforce and offer them the same benefits and security as large corporations. Most of all, our services give you peace of mind so that you can devote your time and attention to running your business while trusting administrative duties to our capable hands.
If you would like to discuss how our PEO services can assist you, contact us.