Employment laws in Saudi Arabia

The primary legislation overseeing the employment laws in Saudi Arabia is the Saudi Labor Law, issued under the Royal Decree No. M/51 of 2005. The law outlines the rights and obligations of both employees and employers in the workplace. 

Administered by the Ministry of Human Resources and Social Development, the labor laws in Saudi Arabia cover key aspects such as working hours, employment contracts, leave entitlements, wages, occupational safety, termination, and more. Labor law compliance in Saudi Arabia is mandatory to avoid fines and penalties. 

Payoneer Workforce Management offers a trusted EOR service and helps navigate the employment laws in Saudi Arabia seamlessly. 

The EOR service also offers active assistance with payroll management, employment contracts, onboarding, termination, leave entitlements, and more. 

Key employment laws in Saudi Arabia

Saudi Arabia’s employment landscape has a comprehensive legal framework designed to regulate the relationship between employers and employees within the Kingdom. 

Employees and employers have to adhere to labor law compliance in Saudi Arabia to avert penalties. Here are some of the employment laws in Saudi Arabia.

• Saudi Labor Law: This primary employment law in the country governs employment contracts in Saudi Arabia, working hours, leave, worker protections, wages, and more. 
• The Social Insurance Law: Administered by the General Organization for Social Insurance (GOSI), this law primarily governs workplace injury compensations, pensions, retirement, and unemployment.
• The Saudization (Nitaquat) Regulations: This regulation is under the Ministry of Human Resources and Social Development (MHRSD). It helps determine quota and compliance in private companies in the country. 
• The Civil Transactions Law: Issued by the Royal Decree No M/191, this law is a civil code covering general contract principles.

Contract employment laws in Saudi Arabia

The Ministry of Human Resources and Social Development (MHRSD) governs employment contracts in Saudi Arabia. The employment contract, in Arabic and English, must be written and signed by the employee and the employer. There will be 2 copies of the contract, each party retaining one copy. 

Types of contract

There are mainly three types of employment contracts in Saudi Arabia. They are as follows:

• Fixed-term contract: This contract is for a fixed time period and expires at the end of the term. However, if the parties continue to implement the contract, it gets renewed for an indefinite period. 
• Indefinite-term contract: Fixed-term contracts in Saudi Arabia often get renewed multiple times.
• Short-term contract: Short-term contracts are for short projects or specific tasks. The contract ends on the completion of the given work. 

Essential contract terms

As mentioned, employment contracts in Saudi Arabia have to be in writing and duly signed by the employee and the employer. 

Here are the essential terms that every contract must contain:

• Details of the employee, name and nationality
• Details of the employer, name and place of business
• Identity verification information
• Residential address
• Date of commencement of employment
• Type of employment contract
• Type and location of work
• Probation period
• Agreed upon wage
• Benefits and allowances
• Rights and obligations of each party
• Termination with notice period 

Minimum wage in Saudi Arabia

One of the most important employee rights in Saudi Arabia is the wage that an employee gets from the employer in exchange for the service. The minimum wage in Saudi Arabia is 4,000 SAR. 

Working hours in Saudi Arabia

According to the Labor Laws in Saudi Arabia, the working hours are 8 hours daily in the country. The work week is from Sunday to Thursday, while Friday and Saturday are weekends. 

There are also overtime laws in Saudi Arabia. As per the law, the daily working hours should not exceed 11 hours. The rate of overtime payment is:

• 50% extra for each overtime hour with the hourly wage worked during regular working days.
• 150% extra for all hours worked on public holidays or Eid holidays. 

Mandatory benefits 

Employees in Saudi Arabia are entitled to various benefits from their employers. Some of them are:

Public health insurance

Cooperative Health Insurance (CHI) provides mandatory health insurance coverage for all citizens and residents of Saudi Arabia. 

Private health insurance

This insurance is mandatory in Saudi Arabia. Employees can choose from individual-level plans, with coverage for the employee, spouse, and children. With this health insurance, employees will get coverage for inpatient, outpatient, and dental treatments. 

Social Security

The General Organization for Social Insurance (GOSI) provides social security in Saudi Arabia. All Saudi and non-Saudi employees working in the private sector are covered in this. Social security contributions come from both the employers and employees. 

Sick leave

Sick leave is among the prominent employee rights in Saudi Arabia. Employees in the country are entitled to 30 days of sick leave per year. 

Maternity leave

Female employees in Saudi Arabia are entitled to 12 weeks of maternity leave in the country. 

Paternity leave

Male employees are granted 5 days of paternity leave right after the birth of the child in the country. 

Annual leave and public holidays

The service tenure of an employee is the deciding factor for the duration of annual leave in Saudi Arabia. 

There are 13-16 public holidays in Saudi Arabia. They are:

• Eid Al-Fitr holiday – 4 days of holiday starting from the day following the 29th of Ramadan. 
• Eid Al-Adha holiday – 4 days of holiday starting from ARAFAT day.
• Founding Day 
• National Day – 2 days
• Saudi Flag Day
• Muharram

Termination

The Saudi Labor Law includes the termination laws in Saudi Arabia. There should be a valid and legal reason for the employee termination. If it is proved otherwise, the employer might be subjected to penalties for non-compliance. The termination process is complicated and requires expert handling. 

Types of termination scenarios

Here are some common termination scenarios in Saudi Arabia.

• Mutual agreement between the employee and the employer
• Employee resignation
• Termination during the probationary period
• Employers may terminate employees for reasons such as misconduct, poor performance, or unauthorized absence, among others.

Notice period in Saudi Arabia

Notice period in Saudi Arabia varies from 1 week to 3 months. 

• During the probation period, the employee and the employer can terminate the employment without any notice. 5 days’ advanced intimation often helps with arranging the paperwork. 
• However, the notice period after probation is different. A Saudi national terminating a non-fixed term contract has to serve a notice period of 30 days. If the employer terminates the contract, the notice period is 60 days. 

Severance payable

Employees are entitled to severance pay in Saudi Arabia. For an indefinite-term contract, the details are:

For a definite-term contract, the wages for the remainder of the contract term should be paid out. 

Navigate employment laws in Saudi Arabia with trusted support

A thorough knowledge of the labor laws in Saudi Arabia is mandatory to maintain compliance. An EOR service like Payoneer Workforce Management helps maintain labor law compliance in Saudi Arabia. By adhering to the necessary regulations, businesses can reduce fines and penalties in the country. 

Along with navigating the employment laws in Saudi Arabia, our unified platform offers assistance with employment contracts, payroll management, leave entitlements, termination, etc. 

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FAQs

1. What are the work laws in Saudi Arabia?

According to the Labor Laws in Saudi Arabia, the working hours are 8 hours daily in the country. The work week is from Sunday to Thursday, while Friday and Saturday are weekends. 

2. When is the pay date and payout currency in Saudi Arabia?

Employees in Saudi Arabia get paid on the last day of the month. The payout currency in the country is the Saudi Riyal (SAR). 

3. What is the probation period in Saudi Arabia?

The initial probation period in Saudi Arabia cannot exceed 90 days. However, it can be extended to not more than 180 days by a written agreement between the employer and the employee. 

4. Are employees in Saudi Arabia entitled to Hajj leaves?

Yes, employees in Saudi Arabia are entitled to Hajj leaves of 10 to 15 days. However, this leave can be availed only once in a lifetime. The employee has to complete 2 years of service with the employer to be eligible for the leave. 

5. How does Payoneer Workforce Management support businesses in complying with local employment laws?

Payoneer Workforce Management helps you navigate compliance by supporting locally aligned employment contracts, handling payroll and benefits as per regulations. It helps simplify complex legal requirements and reduces the risk of non-compliance.