As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies.

1. Payroll Outsourcing Saudi Arabia :- A
brief overview
For a layman, payroll is all about getting your wages paid on a specific date of
every month. But it is much more than that. It is a huge responsibility that
involves a lot of dedication, knowledge, and resources. Ensuring that all the
employees within an organization get paid the correct salary on time with
deductions/ allowances if any while complying with all the payroll rules and
regulations, is mandatory.
The payroll process will not be the same for all countries; each country has its
own tax laws, minimum salary requirements, pension plans, gratuity schemes,
leave policies, and many more. Earlier, we covered through a detailed blog,
on the payroll process in UAE. Here, our experts in KSA payroll will
enlighten you on the payroll process in KSA, through a set of FAQs.
1. What is the frequency of making salary payments to employees in
KSA?
The law stipulates in Article 90 that the intervals for making salary
payments to employees should be monthly or weekly depending on the
type of contract.Workers paid on a daily basis shall be paid at least
once a week. Workers paid on a monthly basis shall be paid once a
month. If the work is done by the piece and requires a period of more
than two weeks, the worker shall receive a payment each week
commensurate with the completed portion of the work. The balance of
the wage shall be paid in full during the week following the delivery of
the work. In cases other than the above, the worker’s wages shall be
paid at least once a week.
2. Which are the statutory pay components included in employee
salary?

2. The KSA labor law does not define the components that should make
up an employee’s salary; there are no defined statutory components.
3. Which are the common pay components that are normally payable
to employees?
Fixed components may include Basic salary, House rent allowance,
transport allowance, and other allowances. The variable components
may include Overtime, Sales commission, Bonus, Incentives,
Relocation allowances, Mobile allowances, etc.
4. What is the minimum salary payable in KSA?
There is no minimum salary payable in KSA.
5. How is overtime calculated?
Overtime is any extra hours worked by an employee beyond the normal
working hours. Article 107 states that the employee shall be entitled to a
remuneration equal to his normal working hours plus an extra of at least
50% of such remuneration. All working hours performed during holidays
and Eid’s shall be considered as overtime hours
6. How is gratuity accrued?
As per article 84 of Saudi Labor Law, the Gratuity calculation is accrued
on the following basis.
o If the service period is below five years at half a month salary per year.
o If the service period is more than five years at a full month salary per
year.
7. When is gratuity paid to an employee?
Gratuity is paid at the end of employment. The end-of-service award
shall be calculated on the basis of the last wage and the worker shall be
entitled to an end-of-service award for the portions of the year in

3. proportion to the time spent on the job. The gratuity paid is not affected
by the type of contract, but by the type of separation. There is no EoSB
entitlement if an employee is terminated under Article 80 of Saudi Labor
Law
For a comprehensive understanding of KSA gratuity accrual and
settlement, please refer to our article on KSA gratuity policy and
settlement.
8. What are the statutory deductions that are made to employees in
the KSA?
In the KSA, payroll is not subject to income tax, and hence there are no
mandated tax deductions. However, KSA nationals are subject to
mandatory national pensions plans contributions.
9. How is KSA pension (Social Insurance) calculated? Which
employees qualify for KSA pension contribution?
GOSI, or the General Organization for Social Insurance, is a major
government entity in the Kingdom of Saudi Arabia (KSA) that
implements the country’s Social Insurance Law.
GOSI percentage for Saudi nationals is 21.50%. Please find the below
break up;
Employer’s Contribution
 Unemployment Contribution = 0.75%
 Retirement Contribution = 9%
 Compensation and Disability Plan = 2%
 Total Employer’s Contribution = 11.75%
Employee’s Contribution
 Unemployment Contribution = 0.75%
 Retirement Contribution = 9%

4.  Total Employee’s Contribution = 9.75%
The employer is responsible for paying a 2% GOSI contribution for
Expat staff. However, there is no GOSI contribution to be paid by an
expatriate employee in Saudi Arabia SAR 45,000/- is the maximum
basic sum utilized in GOSI calculations.
The amount paid effectively adds towards the retirement benefits of the
National employees, and for expatriates, it adds towards work-related
injuries fund which is limited to a certain amount. They are split into 3
categories:
8. Saudi Nationals (private & public sector) – 22% of the
maximum monthly applicable earnings (9% each for the employee
and employer for pension, 1% each for unemployment
contribution and 2% for occupational hazard which the employer
pays)
9. GCC Nationals (excluding Saudis) – between 17-22% in total
depending on the nationality
10. Expatriates – 2% unemployment contribution paid by the
employer
10. What is WPS in Saudi Arabia?
The Wage Protection System (WPS) in Saudi Arabia became
mandatory for all Saudi companies operating in the private sector. The
objective of the WPS is to minimize any delay and issues in the
payment of salaries.Under the WPS, companies are required to submit
wage information to the Ministry of Labor via the e-service program. The
WPS ensures that employee rights are protected and that salaries are
paid according to agreed terms of employment contracts.
11. Are Employees eligible for Air Ticket Benefits in KSA?
Employers are required to provide return air tickets to the worker’s
home country at the end of the relation between the two parties. The

5. right of the air ticket with annual leave is determined by the contract
signed by the employee with the employer, Saudi labor law is silent
about this. However, many companies provide air tickets to employees
annually and some of the companies extend this payout to employees’
dependents as well.
12. What is the leave policy defined under the labor law?
A. Annual Leave
According to article 109 of the KSA labor law, a worker shall be entitled
to a prepaid annual leave of not less than twenty-one days, to be
increased to a period of not less than thirty days if the worker spends
five consecutive years in the service of the employer. A worker shall
enjoy his leave in the year it is due. He may not forgo it or receive cash
in lieu during his period of service. The employer may set the dates of
such leave according to work requirements or may grant them in
rotation to ensure the smooth progress of work. The employer shall
notify the worker the date of his leave insufficient time of not less than
thirty days.
B. Sick leave
A worker whose illness has been proven shall be eligible for a paid sick
leave for the first thirty days, three-quarters of the wage for the next
sixty days, and without pay for the following thirty days, during a single
year, whether such leaves are continuous or intermittent. A single year
shall mean the year which begins from the date of the first sick leave.
o First 30 days: 100%
o 31 to 90 days: 75%
o 91 days to 120 days: unpaid
C. Maternity leave
Female workers shall be entitled to fully paid maternity leave for a
period of 10 weeks to be divided at the female worker’s discretion. Such

6. period may start four weeks prior to the expected date of delivery. A
woman may not, under any circumstances, work during the six weeks
immediately following delivery. She shall be entitled to extend the leave
for an additional two months as unpaid leave. In the event of giving birth
to a sick child or a child with special needs whose health condition
requires a constant companion, a female worker shall be entitled to a
one month leave with full pay starting at the end of the maternity leave
and she shall be entitled to extend the leave for an additional month as
unpaid leave.
D. Hajj Leave
A worker shall be entitled to a paid leave of not less than 10 days and
not more than 15 days, including Eid Al-Adha holiday, to perform Hajj
only once during his service if he has not performed it before. To be
eligible for this leave, the worker must have spent at least two
consecutive years of service with the employer.
E. Paternity Leave
Employees are eligible for 3 Days of paid leave up on the the birth of a
child.
F. Marriage leave
As per Article 113, For a marriage, an employee is entitled to 5 days of
paid leave.
G. Compassionate Leave
Compassionate leave is provided and given for five days for the death
of a spouse or one of his ascendants and descendants.
H. Iddah Leave
In the case of a Muslim woman whose spouse has died, the Iddah leave
is provided for the full mourning period of four months and 10 days. In
the case of a non-Muslim woman, the leave is given for fifteen days.
Please read our article on KSA leaves policy here for a comprehensive
understanding.

7. 13. Is employee Medical Insurance mandatory in KSA?
It is mandatory that an employer provide medical insurance to the
employee during the duration of employment
14. Which are the currencies that can be used while making
salary payments in KSA?
The only accepted currency used in making salary payments is the KSA
national currency i.e. SAR and the payments should be made within the
boundaries of the country.
15. Is bonus or incentive payment mandatory in KSA?
Bonus and incentives payments are not mandatory in KSA. Many
companies in the KSA have bonus or incentive schemes implemented
to keep employee motivation and the structures vary from one company
to the other based on their policy.
16. What are the items included in End of Service Benefits
calculation in KSA?
The employee is entitled to the following end of service benefits.
. End of service Gratuity
a. Repatriation ticket if applicable
b. Notice period pay if applicable
c. Any unutilized leave (Vacation) pay
d. Any other outstanding payment or deduction
Employee Benefits in summary:
1. Salary
2. Gratuity
3. Air Ticket
4. Annual Leave
5. Sick leave
6. Maternity Leave

8. 7. Paternity Leave
8. Marriage Leave
9. Compassionate Leave
10. Medical Insurance
11. Overtime pay if applicable.
Laws and policies are ever-changing. We always ensure that we stay up to
date with the payroll legislations, not just in KSA, but the whole of GCC.
Payroll Process
The process of payroll is a little complicated and time-consuming; hence it is
always recommended to outsource your company’s payroll function.
Outsourcing payroll will ensure the assistance of a team of trained payroll
professionals and it frees up the time of the organization, helping them focus
on other projects that add value to their business.
One should be extra vigilant while selecting their payroll provider, as payroll
data is highly sensitive, and one should opt for a provider that can ensure high
levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your
payroll complexities through customized strategies. We take care of our
clients’ entire payroll cycle that includes preparation of payroll reports,
processing salary payment with WPS compliance, accrual management
including Gratuity, pension funds, online portal for accessing payslips, and
many more. Our leadership team spends the necessary hours in every
project, ensuring our clients get refined consulting services to take your
business forward.
To know more about our payroll process,Click here
Disclaimer:

9. Whilst every effort has been made to ensure the accuracy of this information,
HLB HAMT will not accept any liability arising out of errors or omissions.
Please note that this blog is not all-inclusive. Our guidance is designed only to
give general information on the issues/topics covered. It is subjected to
change and not intended to be a comprehensive summary of all laws which
may be applicable to your situation, treat exhaustively the subjects covered,
provide legal advice, or render a legal opinion.
Payroll Outsourcing Saudi Arabia :- A
brief overview
Level 18, City Tower-2,
Sheikh Zayed Road
PO Box 32665
Dubai – United Arab Emirates. Tel: +971 4 327 7775
E-mail: dubai@hlbhamt.com
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