Planning to hire employees in Saudi Arabia? Here’s a quick guide

Saudi Arabia has become a compelling market for international employers and businesses seeking to expand in the Middle East. One of the largest economies in the region, the country encourages foreign investment through mega-projects and reformed business regulations. 

Hiring the right talent in Saudi Arabia comes with its own set of rules, legal requirements, and cultural nuances that employers cannot overlook. 

It is important to understand the local labor landscape and employment regulations in Saudi Arabia to build a compliant, productive team in the country. 

Explore this guide to know how to hire employees in Saudi Arabia. Along with the hiring process in Saudi Arabia, learn about employment contracts, payroll, benefits, compliance, and more in the country. 

An EOR service like Payoneer Workforce Management helps navigate compliance with various laws and employment regulations in Saudi Arabia, as well as manage payroll. 

How to hire employees in Saudi Arabia

To engage talent in Saudi Arabia, employers can choose from any of the three options mentioned below:

1) Set up a legal entity in Saudi Arabia

Setting up a legal entity to hire in Saudi Arabia requires significant initial investment and administrative resources. However, with this setup, there is complete control over business operations. The process typically includes the following steps:

• You have to establish a company through the Ministry of Investment (MISA).
• You need to reserve a unique company name via the Ministry of Commerce (MOC) online portal.
• Obtain a commercial registration (CR) certificate and register with the Chamber of Commerce. 
• Employers must register their employees with mandatory government platforms such as Qiwa, GOSI, Mudad, Absher, and more. 

2) Hire independent contractors

As per regulations in the Ministry of Human Resources and Social Development (MHRSD), employers can hire independent contractors. 

• The regulations draw a sharp line between employees and independent contractors. 
• Contractors do not get benefits like employees, but misclassification in the country leads to serious legal risk. 
• This path works best for project-based or short-term work. 

Employers can use a contractor management system for support with contractor agreements, payments and more.

3) Partner with an EOR in Saudi Arabia

An Employer of Record (EOR) in Saudi Arabia is a third-party platform that supports legal employment of local talent on the client company’s behalf. They assist with onboarding, payroll, benefits administration, HR, local compliance, offboarding, and more.

• If you want to recruit and manage employees in Saudi Arabia, you can seek help from an EOR service, such as Payoneer Workforce Management. 
• The platform assists in the process of employment in Saudi Arabia, right from onboarding, payroll management, laws and regulations compliance, taxation, benefits, and more. 

Learn more about an Employer of Record in Saudi Arabia.

Where to find employees in Saudi Arabia

Now that you have an idea of how to hire in Saudi Arabia, you must know the right places to find the right talent. 

The best way to identify talent to hire in Saudi Arabia is to browse through the various job platforms or take help from employment agencies. Some popular options in Saudi Arabia are as follows:

Job portals and platforms

Saudi Arabia has many job portals and platforms for finding the right talent in the country. Here are the popular options:

• Bayt.com
• GulfTalent
• Jadarat
• NaukriGulf

Recruitment agencies

Saudi Arabia has recruitment agencies for mid to senior hiring, as well as for blue-collar and general labor hiring. The recruitment agencies have a great understanding of the local job market in the country. Employers find suitable talent for different profiles, which helps them recruit employees in Saudi Arabia. 

EOR support

Employers can take support from an EOR in Saudi Arabia for engaging local talent. You can focus on finding suitable talent for the roles, while the EOR supports with local employment aspects. 

Along with recruitment support, the EOR service assists with regulation and law compliance, payroll management, taxation, onboarding, and more. 

Onboarding employees in Saudi Arabia

In Saudi Arabia, the complete onboarding process takes approximately a few weeks. Here is a step-by-step guide to the onboarding process in the country:

1. All the legal documentation should be in order. 
2. All employment contracts must be documented, approved, and signed digitally through the Qiwa platform to be considered as legally valid. 
3. Nitaqat or Saudization is mandatory, and companies have to adhere to the same. 
4. Employees must be registered with the Mudad system to comply with the Wage Protection System (WPS) and with the General Organization for Social Insurance (GOSI). 
5. Once these registrations are complete, there is an orientation session, where employees are informed about the benefits, payroll setup, holidays, etc. 
6. There is also an official introduction and induction session, where the new member meets the other team members and colleagues. 

Key employment laws in Saudi Arabia

Employment regulations in Saudi Arabia have to be strictly adhered to for compliance. 

Both employers and employees in the country have to follow the legal framework to avoid penalties. Some of the notable employment laws in Saudi Arabia are as follows:

• Saudi Labor Law: This is the primary employment law in the country, which has been amended multiple times. The law governs employment contracts, wages, working hours, termination, leave, worker protections, and more. 
• The Saudization (Nitaqat) 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. 
• The Social Insurance Law: Administered by the General Organization for Social Insurance (GOSI), this law primarily governs workplace injury compensations, pensions, retirement, and unemployment. 

Along with the laws, you need to know other important things when you plan to hire in Saudi Arabia. 

Employment contracts

Employment contracts in Saudi Arabia are governed by the Ministry of Human Resources and Social Development (MHRSD). They must typically be in Arabic and English.

There are different kinds of employment contracts in the country:

• Fixed-term contract– As the name indicates, this employment contract is for a fixed time period, and it expires at the end of the term. However, if the parties continue to implement the contract, it is renewed for an indefinite period. 
• Indefinite-term contract – When the renewal of a fixed-term contract is multiple, three times in a row, or the duration of the original contract with the renewal period is 4 years, whichever is less, and the employer and the employee implement it, the contract is transformed into an indefinite contract. 
• Short-term contract – Such short-term contracts are for specific works or projects. Once the agreed work is complete, the contract ends. 

The employment contract in Saudi Arabia must be written and signed by the employee and the employer. There will be 2 copies of the contract, each party retaining one copy. 

Here are the details that an employment contract in Saudi Arabia must contain:

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

Employee benefits

Employees in Saudi Arabia enjoy various kinds of benefits. Here are some of the most important ones:

Working hours in Saudi Arabia

According to the Labor Laws in Saudi Arabia, the working hours in the country are 8 hours daily, but not more than 48 hours per week. 

• The work week is from Sunday to Thursday.
• Friday and Saturday are weekends. 

Overtime in Saudi Arabia

• Daily working hours should not exceed 11 hours. 
• Overtime is paid at the following rate:
  • 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. 

Employer’s tax obligations

According to the employment regulations in Saudi Arabia, employers in the country have certain taxation and social security obligations. 

• There is no individual income tax in the country. 
• There is only a social insurance tax applied to the payroll. 
• The social insurance tax is paid monthly based on the basic wage. 
• For non-Saudi employees, the rate is 2%, paid by the employer. For Saudi employees, the rate is 22% and is paid by both the employee (at 9%)  and the employer (at 12%)

Termination and severance pay in Saudi Arabia

Employment termination in Saudi Arabia must be on valid grounds. Unfair dismissals in the country can lead to serious consequences, legal hassles, and even penalties for the employer. 

Here are the situations in which termination is possible in Saudi Arabia:

• When the employee resigns
• When there is mutual agreement between the employee and the employer
• When there is a termination in the probationary period
• When the employer terminates the employee due to misconduct, absence without leave, or performance issues

Notice period

Notice period for employees varies from 1 week to 3 months. 

Notice period during probation

• During the probation period, both the employer and the employee can terminate the contract without any notice. 

Notice period after probation

• When a Saudi national terminates a non-fixed term contract, the notice period shall be 30 days. 
• If the employer terminates this contract, a 60-day notice period is required. 
• When an employee of any nationality terminates a fixed-term contract, the notice period spans from 30 to 60 days, depending on the employment contract terms. 

Severance pay

• Employees in Saudi Arabia are entitled to severance pay. Here are the details for an indefinite-term contract:

• For a definite-term contract, the wages for the remainder of the contract term should be paid out. 
• In both scenarios, the compensation should not be less than the worker’s wage for a period of 2 months. 

Explore Payoneer Workforce Management in Saudi Arabia

If you are looking to hire employees in Saudi Arabia, an EOR service such as Payoneer Workforce Management can help you. It will not only integrate and streamline the hiring process but also assist with workforce management in Saudi Arabia. 

With services in more than 160+ countries, it offers assistance for onboarding, payroll, local compliance, benefits, and more. 

Book a demo today!

FAQs

1. What is the minimum onboarding time for employees in Saudi Arabia?

The complete onboarding process for employees in Saudi Arabia takes approximately 2 weeks. There are many processes that employees have to complete before onboarding.

2. What is the payout currency and the minimum wage in Saudi Arabia?

The Saudi Riyal (SAR ﷼) is the payout currency in the country. The minimum wage in the country is 4,000 SAR.

3. Are employment contracts mandatory in Saudi Arabia?

Yes, written employment contracts, duly signed by the employee and the employer, are mandatory in Saudi Arabia. The contract should be drafted in Arabic & English and authenticated on the Qiwa platform.

4. Can I hire independent contractors instead of employees in Saudi Arabia?

Yes, employers can hire independent contractors instead of employees in the country. However, the country strictly distinguishes between independent contractors and employees. Missclassification can include serious legal risks.

5. What are the daily working hours in Saudi Arabia?

According to the Labor Laws in Saudi Arabia, the working hours in the country are 8 hours daily, but not more than 48 hours per week.