Employment in Saudi Arabia is changing at a rapid pace brought about from demographic changes as a result of government reforms, an increase in global business, a younger entrepreneurial generation and the implementation of robotics and automation of job roles. However, for now at least, people still remain the most essential part of any business. Sourcing the right employees is essential to the early success of entering a new market and the Saudi Arabia employment processes can be daunting in comparison to a company’s originating country. There are many new employment regulations to implement and corporate immigration needs to follow an often-unknown process in order to be successful and compliant. Efficient and transparent employee management has a positive effect on the engagement and productivity of teams and companies gaining local knowledge enables this.

1. EMPLOYMENT IN
SAUDI ARABIA

2. Contents
1. Introduction
2. Governance
3. The Current Labour Force
4. Contracts
5. Saudization
6. Immigration Best Practices
7. Leave Entitlement
8. Other Benefits
9. Social Insurance
10. Payroll Processing
11. Termination of Employment
12. Essential Takeaways
13. Contact

3. Introduction
Employment in Saudi Arabia is changing at a rapid pace
brought about from demographic changes as a result of
government reforms, an increase in global business, a
younger entrepreneurial generation and the implementation
of robotics and automation of job roles. However, for now at
least, people still remain the most essential part of any
business.
Sourcing the right employees is essential to the early success
of entering a new market and the Saudi Arabia employment
processes can be daunting in comparison to a company’s
originating country. There are many new employment
regulations to implement and corporate immigration needs
to follow an often-unknown process in order to be successful
and compliant.
Efficient and transparent employee management has a
positive effect on the engagement and productivity of teams
and companies gaining local knowledge enables this.
In this white paper we look to provide the information that all
companies need for successful team employment in Saudi
Arabia, from regulatory requirements to best practices, we
are sharing our expertise so that you can make better and
more informed business decisions.

4. Governance
Employment in the private sector is governed by the Ministry
of Labor and Social Development (MLSD). The department
makes many efforts to improve the labor market conditions
for both companies and to protect employees. In April 2019,
the Qiwa portal was introduced to consolidate the services
provided by the in one online platform with simplified
processes.
The Ministry is constantly working to protect the labour
market in the Kingdom as the actions of some companies
damages the both balance and the reputation of the market.
Actions include trafficking visas that help the flow of migrant
labor without a real or specific need, Saudization fraud or
assigning expat workers in professions reserved for Saudi
nationals.
In November 2019, actions were taken to ensure that a
company’s activities are aligned with their registered
activities by preventing the access to the Ministry’s e-
services. Business owners are able to update their commercial
records with the Ministry of Commerce and Investment if
their actions are not matching what was originally registered.
In December 2019, the Ministry removed the yellow Nitaqat
rating for Saudization, pushing all companies that were
previously in this category down to red. The aim is that the
companies now sitting in the red category are better
incentivised to make improvements to their Saudization.

5. The Current Labour Force
The Growing Number of Youth
Over half of the Saudi national population is of working age, with the
percentage continuing to increase as high numbers of graduates join
the workforce and small numbers of nationals come to retirement age.
In the second quarter 2019 labor report, there were 316, 147 nationals
in the 20-24 age bracket but only 35,567 nationals making up the two
retirement age brackets of 60-64 and 65+.
More than 1.9 million Saudis are set to enter the workplace over the
next decade and companies need to develop training programs and
best practices in order to not only invest in the workforce of the future
but remain competitive and attract the best talent.
Women in the Workplace
In the last six years, there has been a 72% increase of the number of
women joining the workforce. Reforms made by the Ministry of Labor
has opened up the job market to an educated and driven
demographic group, around 50% of graduates in 2017 were women
and the visible appointment of women in senior roles has inspired
many others to go after roles previously only held by men.
The introduction of the Wusool and Qurrah schemes (both established
to make it easier for women to join the labor force) along with the
removal of the driving ban and a new willingness to employ women
has supported the desire of women to have access to jobs. Out of all
the recent labor reforms, it is with women in the workforce that the
government has achieved the most success.

6. Workplace environment trends in Saudi Arabia
One of the most notable trends is the need to have visible Saudis
present in a company. It is now the business culture from Saudis to
have another Saudi sitting across from them at meetings and those
companies who do not have Saudis present this way are not seen as
being as trustworthy as those that do.
Studying abroad is an increasingly popular option with the number of
those choosing international degrees doubling in the last six years.
The most common locations for international study are the US, UK
and Canada with the US leading with 57% of the total international
students. This focus on western education will have an effect on the
way these graduates view the workplace, bringing their experience
and ideas from internships, placements or graduate employment back
to Saudi with them.
Future skills
There is an increase in the number of graduates taking university
courses, the number has almost doubled over the last six years, this is
an almost equal split between male and female with the female
demographic taking the lead slightly.
The most popular courses are:
• Business and Management
• Huminites
• Engineering
• Healthcare
• Teaching

7. Tamheer
The Tamheer program was introduced to provide workplace training
for new graduates so they are able to develop skills and experience
that will further their careers. The graduates are required to have a
bachelor’s degree, master’s degree or PhD and not have held
employment during the last six months. The salaries for each
individual in the program is provided by HRDF although the company
providing the placement is able to supplement the standard amount, .
The placement lasts three to six months and the company is able to
offer employment to the graduate if they are suitable for the role.

8. Contracts
For all employees, Saudi national or expatriate, a written
employment contract is mandatory, which should detail
the terms of the agreed compensation, benefits and
termination requirements, vacations, contract type (limited or
unlimited), job title, work location. Both the offer letter and
employment contract should include the wage and
compensation amounts in Saudi Arabian Riyal (SAR).
Compensation in Saudi Arabia can be split into base salary
plus remuneration for housing and transportation.
Saudi nationals who complete three consecutive fixed term
contracts or work continuously for four years, whichever is
less, automatically have their contract converted to an
unlimited contract. There is no similar ruling for expatriates.
Working hours are between 40-48 hours per week with
the exception of Ramadan where working hours are reduced
to 6 per day. Although all employees working hours are
usually reduced, it is only required for Muslim employees. If
employees work over 40 hours in a week, they are entitled to
overtime, which is time and a half. There is no cap on the
number of overtime hours that can be worked.
Probation periods can be up to 90 days and if required the
probation period can be extended by a further 90 days
provided that the employer and employee both agree.
Probation periods are not a regulatory requirement and can
not be used if the employers wishes.

9. Saudization
The Nitaqat program was first introduced in 2011 in order to
increase the employment of Saudi nationals in the private
sector, however Saudization has seen the most advancement
since 2016 when Vision 2030 was announced.
Currently, companies in Saudi Arabia are assigned their
Nitaqat status based on three factors;
• Classification - the primary activities registered with
MLSD
• Size of the organization - total workforce
• Saudization percentage - total number of Saudi nationals
employed
The Nitaqat level determines the level of compliance that the
organization is in with compliant companies receiving a
number of immigration benefits, such as shorter processing
times for on-boarding non-Saudi employees.
Saudization has strengthened in importance and is now an
essential part of business both for compliance and cultural
values. The reforms have seen success with Saudi
unemployment now sitting at 12.3% down from 12.5% in the
previous quarter.
If companies are not able to find a Saudi National to take the
role, they are able to pay a fee to the government as an
alternative. The scheme, called Parallel Nitaqat enables
companies to move to a higher level of Saudization.

10. Immigration Best
Practices
Government relations officers (GRO) need to be Saudi
nationals and they are the representative that will attend
ministry departments for any updates.
There are other roles that are exclusive to Saudi nationals, for
example, receptionist positions must be held by Saudis.
Before hiring expats, organizations must check the
requirements for the role as well as the Saudization
requirements for the size of the company and industry.
Its essential to be aware and take action following the
announcement of any new regulations or policies. Appointing
a person whose role is to oversee new announcements and
implement any changes to policies and regulations within the
time frame will support a company in remaining compliant.

11. Leave Entitlement
Annual leave
Employees are given a minimum vacation leave of 21 days
per year but upon completion of 5 years onward, the
minimum is 30 days per year. It is permitted that unused
leave can be carried over to the next year and it is also
permitted that companies can cap the amount of leave
carried over.
Muslim employees are entitled to Hajj leave after 2 years of
continuous employment. This leave can be up to 15 days
including the Eid holidays and can only be taken once in 5
years with the same employer.
The most notable religious festivals are Eid Al Fitr and Eid al
Adha. Another notable public holiday is Unification of the
Kingdom Day which falls on September 23rd each year. Saudi
Arabia has 4 days for each Eid and 23rd September.
Sick leave
Employees are allowed up to four months of sick leave, this is
the standard from Ministry of Labour although individual
employers may grant more leave at their discretion, as long
as the employee provides a relevant medical certificate. Sick
leave is paid as follows;
• The first 30 days - 100% of the employees wage
• 31 to 90 days - 75% of the employees wage
• 91 days to 120 days: unpaid + any accrued annual leave
can be clubbed together

12. Maternity leave
Female employees are entitled to 10 weeks of paid maternity
leave, up to four weeks can be taken before the birth and a
minimum of six weeks must be taken after the birth. During
maternity leave, female employees that have been employed
for at least three years are entitled to full pay and female
employees that have been paid for at least one year but less
than three are entitled to half pay. Female employees that
have been employed for less than one year are not entitled
to paid maternity leave.
It is important to note that if a female employee takes her
annual vacation during the same calendar year as her
maternity leave, she will only be entitled to half pay or no pay
during that vacation depending on if she received full pay or
half pay during her maternity leave.
Fathers are eligible for three days of paid paternity leave.

13. Other Benefits
Health insurance is given by the employer to all employees
and their dependents as a mandatory requirement. The level
of cover provided is agreed at the time of contract
negotiations.
Other benefits can include travel expenses back to an
employees home country, cover of education costs,
retirement plans, additional housing allowances and
transport allowances.

14. Social Insurance
The General Organization for Social Insurance (GOSI) is a
semi-governmental body that retains administrative and
financial independence. The scheme is a part of social
cooperation provided for its citizens covering private sector
workers and a select group from the public sector.
GOSI supports contributors and their families with financial
aid if the individual has ceased employment due to
retirement, disability or death; it provides medical care for
contributors with work injuries or occupational diseases and
the necessary compensation in the event of occupational
disability or death.
Organizations must notify GOSI once new workers enter their
employment, provided that the notification is effective within
the first fifteen days of the month immediately following the
month in which the worker has entered the employment. The
notification should be made by completing the required form
in addition to paying contributions and can be made through
the portal.

15. An employer must also notify GOSI of any worker who leaves
their employment, provided that the notification is effective
within the first fifteen days of the month immediately
following the month in which the worker has left
employment, this can also be done through the GOSI office,
GOSI online portal or the data exchange.
Calculations for GOSI are based on the earnings of the
employee and are divided into three categories:
• GOSI for Saudi nationals
• GOSI for GCC nationals
• GOSI for non Saudi nationals
The contributions are paid monthly based on the monthly
basic wage plus housing (paid or in kind) with a minimum
limit of SAR 1,500 per month and a maximum limit of SAR
45,000 per month for Saudi employees and a minimum limit
of SAR 400 per month and a maximum limit of SAR 45,000
per month for non-Saudi employees which calculated at 2%
for non-Saudi employees and are paid by the employer. For
Saudi employees, the rate is 22% and is paid by both the
employee (at 10%, a combination of 9% social insurance plus
1% unemployment insurance and the employer (at 12% a
combination of 9% social insurance plus 2% occupational
hazard plus 1% unemployment insurance.

16. Payroll Processing
Today payroll compliance is paramount in every employers
mind with many employers outsourcing payroll as a method
to reduce the business’ exposure to risk. Businesses in Saudi
Arabia have required contributions that impact employee
payroll processing.
The Wage Protection System (WPS) is a mandatory scheme
to ensure that employee compensation is paid out as per the
terms of the employment contract and is applicable across all
private sector organizations. The system is based on the
information that has been registered in the General
Organization for Social Insurance (GOSI) portal.
WPS became mandatory for all private sector companies with
over 3,000 employees on 1 September 2013 with staggered
implementation for companies with fewer employees. Today
it is only companies with fewer than 10 employees that are
still not part of the scheme.

17. There are a number of regulatory compliance processes
which companies should be aware of in order to remain WPS
compliant. The submission file should be compliant with the
structure outline. The data regarding deductions, increments
and salaries should be accurate and match all other sources
linked with the Ministry of Labour. There are significant fines
and repercussions associated with non-compliance such as
suspension of MoL file.
The process for completing online WPS is not very
complicated, this is currently the only way to submit the
information. However, companies should be mindful of the
various nuances within the data required and compliant
explanations for any exceptions. HR professionals with
significant WPS experience will be aware of issues that result
from a company’s payroll structure and activities. This
becomes especially crucial with more stringent WPS
exception rules now applicable.

18. Termination of
Employment
If the employer wishes to terminate the employee, then the
notice period depends on the type of contract that is
between the employer and employee. For employees with
unlimited contracts, they are entitled to receive 60 days
notice.
During the notice period, employees can use up to 8 hours of
work time per week to find alternate employment or 1 full
day.
At the end of an employment contract, the employee is
entitled to an end of service benefit. There are separate
calculations dependent on the method of termination.
Termination by employer: For employees that have been with
the organization for five years or less, they will receive one
half of a month’s wage for each of the five years. For over five
years of service, the employee will receive one half of a
month's wage for each of the five years plus a full month's
wage for each year of employment thereafter and pro rated
for any partial year.
Termination by employee: If the work relation ends due to
the worker’s resignation, he shall, in this case, be entitled to
one third of the award after a service of not less than two
consecutive years and not more than five years, to two thirds
if his service is in excess of five successive years but less than
ten years and to the full award if his service amounts to ten
or more years.

19. Essential Takeaways
Businesses need to be prepared for additional costs
surrounding deploying a team including; recurring visa costs
for non Saudi workers, and for all employees for health
insurance, end of service benefits and GOSI contributions.
The Wage Protection System may be made more
complicated by the organizations existing set up and
companies are advised to take professional advice if they
cannot manage the set up themselves.
Saudization is essential for both compliance and business
culture.
A Government Relations Officer is also vital for business
operations, however, companies can outsource this task to a
local provider.

20. Contact
For more information, contact us on
marketing@proven-sa.com.
Saudi Arabia
Moon Tower 3rd Floor, 7586
King Fahd Branch Road - Ar Rahmaniyah
Riyadh, Kingdom of Saudi Arabia
Phone: +966 11 411 1127
United Arab Emirates
Office 3601,
Jumeirah Business Centre 1
Cluster G
Jumeirah Lake Towers
Dubai, United Arab Emirates
Phone : +971 4 450 8208