Saudi Arabia

Contract Types                

Contracts in Saudi Arabia can be fixed term or indefinite for the local population. For Saudis, once a fixed contract is renewed 3 times, or the employee has served 4 years, the contract automatically becomes indefinite.

For expatriates all contracts are deemed to be fixed term, even if this is not stated in the contract and can be terminated on expiry of the work permit. In order to allow renewal of a fixed term contract the original contract should state that the contract may be renewed. A template must be followed for the contract to be lodged with the authorities, but it is normal to have a second more detailed contract as well.

The Arabic version of the contract will prevail.

Salaries are always quoted on a monthly basis in Saudi Arabia.

Probation                         

Probation cannot be more than 6 months, and is agreed in writing in the contract. Typically the probation period is 3 months and can be extended with the employee’s consent but cannot exceed 180 days.

Working Hours                

The Saudi working week is currently Sunday to Thursday. Normal hours are 40 to 48 hours per week, 8 hours per day. During Ramadan it is usual to work 6 hours per day.

Overtime                           

The working day is limited to 11 hours per day. Hours worked over contracted hours should be paid at overtime rates specified in the contract and timesheets are required. There are exemptions to overtime for those in senior positions.

Other Financial               

There is no requirement for a 13th month salary though some companies may offer this, especially companies operating on the Hijri (Muslim) calendar. Bonuses are common.

Other                                 

The employee’s workplace cannot be changed without consent. Employers in Saudi Arabia must abide by Saudization quotas, a policy designed to bring more Saudis into the workforce.

Tax rates valid for 2024                             

Corporation Tax: 20%

Consumption Tax: 15%

Employers’ Social Security:

2% for Expats (Occupational Hazard)

11.75% for Saudis

Based on minimum monthly salary of SAR1,500 and maximum of SAR 45,000

Employees’ Contributions           

0% for Expatriates

9.75% for Saudis

Income Tax Rates

No income tax

Please note, GCC Nationals pay Social Security rates in accordance with their home country.

Notice                                

The notice period for Fixed Term contracts is 30 days, with 60 days’ notice required for indefinite contracts.

Payment in lieu of notice is allowed.

During Probation            

1 days’ notice should be given during probation by the employer and no gratuity payment is due.

Process                              

There are several grounds for summary dismissal, or dismissal with just cause, including, for example, gross misconduct. Termination of a Fixed Term contract occurs when it is not renewed. Expiration of a work permit for expatriates is also a justified means of dismissal.

If the dismissal is due to disciplinary reasons then a specific process must be followed including notification in writing and giving the employee the opportunity to provide a defence followed by an investigation.

Indefinite contracts can also be terminated for “valid reasons”. These are not defined in law but are generally understood to include redundancy and incompetence. If a dismissal is found not to be justified, then additional compensation should be paid.

Employees cannot be dismissed whilst on maternity, annual or sick leave.

Severance Pay                 

This is known as End of Service Benefits or a Gratuity in Saudi Arabia and is payable in all circumstances, including for those on fixed term contracts and is dependent on length of service. It is not due when an employee is dismissed for reasons such as gross misconduct and other reasons defined in Article 80 of the Labour Law. The amount payable varies with the type of termination.

If the employer terminates the relationship and the employee has more than 1 year’s of service, the calculation is 50% of a month’s pay for the first 5 years of service and 1 month per year thereafter. Part years are prorated.

If the employee resigns, then after 2 year’s of service and less than 5 years’  the entitlement is one third of that described above for termination. Between 5 and 10 years’ of service, it is two thirds of the gratuity due in case of termination and after 10 years the employee is entitled to the full amount due.  Exceptionally full gratuity should be given in the following cases of resignation:

• A female employee who resigns within 3 months of giving birth or within 6 months of marriage;
• An employee who resigns without notice in cases permitted under the law, for example, where the employer has failed to meet his contractual obligations or has committed fraud;
• An employee is forced to resign for reasons beyond their control.

A government portal is available to calculate the gratuity due.

For terminations which are not lawful, an additional payment of 15 days for each year of service for indefinite contracts and payment for the remainder of the term for fixed term contracts is the compensation which will be awarded by a court, subject to a minimum of 2 months’ salary.

Additionally, when a foreign employee’s contract comes to an end, and it was not of their own volition, they are entitled to an economy repatriation ticket from the employer to their country of origin.

National Public Holidays: 11

Founding Day: 22 February

Eid Al Fitr*: 9th – 13th April

Arafat Day*: 15th June

Eid Al Adha*: 16th – 18th June

National Day: 23rd September

*Muslim holidays move forward by 11 days each year and dates are tentative as they are subject to sighting of the moon.

Local governments decide on a case by case basis whether a holiday should be given in lieu when it falls at the weekend.

Paid legal entitlement  

Employees in Saudi Arabia are entitled to 21 calendar days of leave after 1 year’s service. After 5 years of service this rises to 30 days.

Carry over permitted     

With employer approval leave may be carried over. If the employer wants to postpone an employee’s leave he can do so for 90 days after the holiday year end. Beyond this time, if the employer wishes to postpone the leave further then this has to be with the consent of the employee and it can only be carried over the to the end of the holiday year following the year the holiday was accrued.

Payment in lieu allowed

With both parties’ agreement payment in lieu of holiday can be made.

Sick       

Employees are entitled to leave of 120 calendar days per year in the event of a sickness (a doctor’s note is required). The first 30 days are paid 100% by the employer. From the 31st to the 90th day, employees receive 75% of their normal salary from the employer. The remaining sick leave is unpaid. Employees are eligible for sick leave after 3 months of employment. Note that sick leave is not calculated over a calendar year, but rather from the first day of sickness taken. Employees on probation are eligible for sick leave after 90 days.

Maternity          

In Saudi Arabia, new mothers are entitled to 10 weeks of maternity leave fully paid by the employer. They can then take an additional 2 months’ unpaid leave.

A further 1 month of paid leave, following the end of the maternity leave is available in cases where there the child is sick or has special needs. This can be extended by a further month but this month is unpaid.

Maternity leave can start 4 weeks before the due date. It is mandatory to take leave 6 weeks after the birth.

On her return to work the employee is entitled to take 1 hour per day for nursing until the baby reaches its first birthday.

Employees have security of tenure during maternity leave.

Paternity

Fathers are entitled to 3 working days’ paid leave after the child’s birth.

Parental             

There is no parental leave in Saudi Arabia.

Bereavement    

Employees are entitled to 5 days’ paid leave after the death of a spouse or immediate family member. Female Muslim employees are entitled to 4 months and 10 days’ paid leave in the event of the death of their spouse. Non Muslim women who lose their husbands are entitled to 15 days’ paid leave.

Hajj Leave          

Muslim employees with 2 years’ service can take paid leave of 10 to 15 days (including the public holiday) to perform the Hajj pilgrimage over the Eid Al Adha holiday. This is available only once during the employee’s employment with the present company on condition that this is the employee’s first Hajj pilgrimage.

Study Leave

Employees studying in Saudi Arabia whilst working are entitled to paid leave whilst sitting examinations. This is available every other year.

Marriage Leave

Employees are entitled to 5 days’ paid leave on marriage.

Medical              

A basic level of medical insurance is required in order for foreigners to obtain a work visa. Most employers will in addition offer private medical insurance policies which will cover a range of in and outpatient treatments plus dental and optical options. This will commonly be offered as family cover in professional companies.

Pension                                            

It is not normal to offer supplementary pensions in Saudi Arabia.

Allowances        

The following are commonly offered in Saudi Arabia:

• Housing Allowance;
• An annual air ticket to the country of origin for expatriate employees. This will often be offered for family members as well;
• Car or transport allowance;
• Education allowance for school age dependents in Saudi Arabia.