Table of Contents

Saudi Arabia

Table of Contents

Currency

Saudi Riyal (SAR)

Payroll Frequency

Monthly or Weekly

Employer Taxes

22% - 24%

About Saudi Arabia

The Kingdom of Saudi Arabia is an Arab country, reputed to be where Islam originated. It also has the two most holy mosques (Mecca and Medina) in the Islamic faith which are the primary destinations for Muslims all over the world to visit as part of their pilgrimage, also known as the ‘Haj’. Their economic wealth comes from their vast natural reserves of crude oil, and they remain the world’s main source for imports. The political temperatures in the country were recently set ablaze due to global condemnation of the Kingdom’s alleged involvement in the killing of a dissident journalist. Their government remains a monarchy with a strict, authoritarian style of government that is considered very harsh towards people who are considered to be non-compliant with its dictates. Saudi Arabia is also rich in cultural traditions as defined by its Islamic heritage. People are very religious and practice ancient traditions from centuries ago. The population speaks primarily Arabic and practices Islam.

Employment Relationship

• Permanent Employment

Indefinite contracts are contracts made for more than 3 years. Fixed-term contracts convert into indefinite term contracts upon their third renewal or if the contract is continued even after its expiry, without explicit renewal. Foreign employees can only be employed under fixed-term contracts. Indefinite-term contracts are terminated by the mutual consent of both the employee and employer or at the initiative of either party based on a legitimate reason, which must be stated by a notice addressed to the other party in writing.

• Fixed-Term or Specific-Purpose Contracts

A fixed-term contract terminates upon the expiry of its term. It can be renewed in writing a maximum of 2 times. The maximum duration of a fixed-term contract is 4 years, including renewals. If the contract is not renewed upon expiry, but the employment relation continues, it becomes an indefinite term contract. A contract for a specific project terminates upon the completion of the work. An employment contract must clearly define the type of contract.  Non-Saudi employees can only be employed in fixed-term contracts, the duration of which depends on the work permit issued to them. 

• Temporary Employment Contratcs

Temporary work is defined as work considered by its nature to be part of the employer’s activities, requiring a specific period or relating to a specific job, and ending with its completion. It must not exceed 90 days in either case. Temporary employment contracts that continue beyond 90 days will become indefinite term employment contracts. Temporary employees are not entitled to end of service benefits. According to the Labor Law, these employees are subject to provisions on duties and disciplinary rules, maximum working hours, daily and weekly rest intervals, overtime work, official holidays, safety rules, occupational health, work injuries, compensation, as well as whatever is decided by the Minister of Labor. 

Probationary Period

The Labor Law of the Kingdom of Saudi Arabia provides that an employment contract can designate the first 90 days of employment as a probationary period. Probationary period can be extended by an additional 90 days with the written agreement of both parties. Probationary period must be explicitly stated in the employment contract. An employee cannot be subject to more than one probationary period with the same employer in the same position or role. Both the employee and employer have the right to terminate the employment contract without any notice period during probation. Such termination does not entitle the employee to payment of severance or damages.

Working Hours

The maximum number of working hours is generally eight hours per day or 48 hours per week, except for the holy month of Ramadan. During Ramadan, working hours for Muslim employees may not exceed six hours per day or 36 hours per week. Under exceptional circumstances, employees may be asked to work beyond normal hours, limited to ten hours per day or 60 hours per week. Employees cannot be allowed to work for more than five hours continuously. *According to a new regulation, in view of COVID-19, employers are allowed to reduce employees' salaries with a corresponding reduction in working hours. This reduction cannot exceed 40% of the normal salary. After these regulations cease to be in effect, employees must increase the salary to normal levels. If employers are not able to pay even the reduced salary, they can dismiss employees. These regulations do not apply to companies that benefit from government subsidies. 

Holidays / PTO

• Statutory Holidays

National Public Holidays in Saudi Arabia are the following: Eid Al Fitr (The Feast of the end of Ramadan) Observed officially for 10 days, by private institutions from 3 to 7 days. Eid Al Adha (The Feast of the end of Hajj, date varies on Lunar cycle): Observed officially for 10 days, by private institutions from 3 to 7 days) Saudi National Day (The day of the Unification of the Kingdom) Officially for one day

• Paid Annual Leave

The minimum entitlement to paid annual leave is 21 days a year, increasing to 30 days a year after five years of service. The annual leave cannot be forfeited by the employer nor can it be paid in lieu of leave. Employers decide the dates of the leave according to work requirements. They must inform their employees of the leave at least 30 days in advance.  The employee has the right to request that their employer defer their entire annual leave or part thereof to the next year. An employer may postpone an employee's leave for up to 90 days after the end of the year during which it is due if required by work conditions with the employee's written approval. *According to a new measure for mitigating the impact of COVID-19, the government has allowed employers to place employees on paid annual leave or unpaid leave (with the employee's agreement) to cope with a decrease in work.

• Sick Leave

According to the Kingdom of Saudi Arabia's Labor Law, the minimum entitlement to sick leave is 120 calendar days a year, implemented as follows: First 30 Days – fully paid Next 60 Days – 75% of the total wages Next 30 Days – unpaid Sick leave can be continuous or intermittent. An employer cannot terminate the worker's services on account of illness prior to allowing them sick leave. Sick leave may be combined with annual leave. If the sick leave days coincide with the annual leave days, the annual leave days are suspended until the end of the sick leave days. If weekly days off coincide with sick leave days, the worker may not be compensated for those days. *According to a Ministerial Decision by the Ministry of Health, in view of COVID-19, the following employees are entitled to a compulsory paid sick leave of two weeks: Pregnant women Employees suffering from respiratory diseases Employees with immunodeficiency and users of immunosuppressive drugs Employees suffering from tumors or chronic diseases

• Maternity Leave

A female worker is entitled to a minimum of ten weeks' paid maternity leave, divided into four weeks before the expected date of delivery and then six weeks following the child's birth. Employees who have worked for at least one year with the employer are entitled to 50% of wages during maternity leave, and those who have worked for at least three years with the same employer are entitled to 100% of wages. Employees are not eligible for annual leave in the year they avail themselves of maternity leave. Employers are prohibited from dismissing or suspending an employee while she's on maternity leave or in the period of 180 days before her maternity leave begins. *In view of COVID-19, the government has granted compulsory paid leave of two weeks to all pregnant employees.

• Paternity Leave

In the Kingdom of Saudi Arabia, male employees are entitled to paid paternity leave of three days for their child's birth. Employers have the right to request supporting documents.

Termination of Employment

• Notice Period

According to the Kingdom of Saudi Arabia's Labor Law, indefinite term contracts may be terminated by either party by providing at least 60 days' written notice to the other party if the employee is paid monthly. If the employee is paid at a different frequency, at least 30 days' notice must be provided. Payment in lieu of notice is permitted if both parties agree to it. 

• Severance Benefits

Saudi Arabia's Labor Law provides for an end-of-service award due at the end of employment, regardless of the reason for termination (retirement, end of the fixed-term contract, force majeure, resignation, or redundancy). Such an award amounts to 15 days' wages for each of the first five years of service and one month's wages each year for the following years. This benefit is calculated based on the last drawn wage. Where employment is terminated due to an employee’s resignation, the amount of severance benefits decreases depending on the number of years of experience. In case of a female employee's resignation within six months from the date of her marriage or three months from her delivery date, full severance is paid irrespective of the years of work experience.