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Saudi Arabia PEO Employment Services by Velocity Global

Saudi Arabia Employer of Record

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Saudi Arabia at a Glance

  • Currency: Saudi Arabian Riyal, SAR (ر.س, ﷼‎)
  • Population: 35.35 million (41st largest)
  • Economy/GDP: $1.54 trillion (17th largest)
  • Top Sectors: Crude oil, petroleum, agriculture and fertilizer, automotive repair, and construction.
  • Ease of Doing Business: Ranks 63 in the world, according to the World Bank’s latest Doing Business report from 2019
  • Languages: The official and most widely spoken language in Saudi Arabia is Arabic. However, English is also widely spoken as it’s the primary business language and it’s a compulsory second language taught in schools.

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Grow Your Team in Saudi Arabia

Velocity Global’s Employer of Record simplifies the complexities of expanding into Saudi Arabia. Through our Employer of Record, you don’t need to undertake the costly and time-extensive entity establishment process to grow your business internationally. Instead, we efficiently manage the employee onboarding process, payroll, compliance, risk mitigation, and benefits.

Our streamlined global expansion method accelerates your company’s readiness and ease of doing business, compared to entity setup. Velocity Global hires employees on your behalf in compliance with Saudi Arabia’s labor laws to ensure a simplified global growth experience. We can hire as many or as few employees as you need for your expansion into Saudi Arabia.

Ready to take advantage of expanding your business abroad? Learn how our Saudi Arabia Employer of Record makes it happen.

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Benefits of hiring in Saudi Arabia

  • Saudi Arabia remains in the world’s top twenty economies and accounts for 25% of the Arab GDP. The country’s economy is oil-based, possessing about a quarter of the world’s oil reserves. It holds a significant responsibility in the Organization of the Petroleum Exporting Countries (OPEC).
  • Saudi Arabia has the largest population in the Persian Gulf region. Half of the Saudi population is under 25 years of age. The country’s populace is one of the fastest growing in the world.
  • Saudi Arabia introduced its 2030 program, which has strongly intensified the country’s economic diversification efforts, by investing in Saudi public health, education, infrastructure, and tourism.
  • Saudi Arabia’s education system molds its youth to be prepared and well-developed for international business by requiring English as a second language in schools. The Saudi business world primarily speaks English.

Challenges of hiring in Saudi Arabia

  • The Saudi Ministry of Labor’s Saudization policy, officially known as the Saudi Nationalization Scheme or Nitaqat, enforces Saudi companies to prioritize hiring Saudi nationals instead of expatriates. The policy was implemented in 1985 and it has caused challenges for foreign companies to obtain visas for their non-Saudi citizen employees.
  • The Saudi economy is heavily dependent on its oil sector, as it accounts for 60% of public revenues. As the world’s climate increasingly changes, countries with economies dependent on natural resources are left vulnerable to instability.
  • Saudi Arabia is a Mulsim country, where Islamic Law, known as Sharia, is strictly enforced. For example, the LGBT community can be subject to severe penalties. Foreign companies allocate substantial legal resources to ensure their professional activities remain compliant.

Cultural nuances and must-knows of doing business in Saudi Arabia

  • Local laws require dressing modestly, covering shoulders and knees in public. It is best to dress formally for meetings and avoid a casual demeanor. Greet and communicate with colleagues by using full titles. Saudi business culture highly values respect and formality.
  • Business is based on a hierarchy of seniority position and age. Decision power is in the hands of the highest ranked colleague. However, elders are always given heightened respect, even when they are in lower positions of power in a company.
  • Unlike in the Western world, the Saudi working week is from Sunday to Thursday, with the weekend on Friday and Saturday for days of rest.
  • Personal relationships drive Saudi Arabia’s business world. Saudis prefer to do business with colleagues they know and trust. They often want to know a great deal about their business partners so be prepared for a series of meetings before concluding deals.
  • Meetings are scheduled around daily prayers. Don’t be surprised by meetings being paused if they interrupt prayer time.
  • There is generally not much urgency in meetings or business deals. Decisions are made slowly, as Saudi colleagues are focused on building confidence and loyalty to ensure business in the future.

Wages and Salaries in Saudi Arabia

Minimum wage

  • As of 2022, Saudi Arabia’s minimum wage is SAR4,000 (USD1,065) per month for public sector employees. There is no minimum wage for the private sector. The last time that Saudi Arabia increased their minimum wage was in 2013.

Probation periods

  • If provided in the employment contract, a probation period doesn’t exceed 90 days. However, it can extend to 180 days with a written agreement between the employer and employee.

Bonuses

  • Bonuses are not legally mandated in Saudi Arabia, but they are permissible. An employer can include bonuses in an employment contract through negotiation.

Onboarding

  • In Saudi Arabia, a written employment agreement, signed by both employer and employee, is mandatory by law. Employment agreements must include the following information:
    • Job title
    • Contract duration and renewal, if applicable
    • Probation period, if applicable
    • Regular work days and hours
    • Wages and bonuses, if included
    • Annual leave and medical insurance
    • Social security contributions
    • Recruitment and residency permit cost coverage for non-Saudi employees
    • Employer policies and guidelines
    • Termination clause
    • End of service benefits

Termination and notice periods

  • According to Saudi Arabia’s Labor Law, employers are required to have just cause in order to dismiss an employee.
  • When an employee has an indefinite employment contract, employers must observe a minimum notice period of 60 days. For all other employees, employers must inform their employees at least 30 days prior to termination.
  • When an employee has a fixed-term employment contract, the employer cannot end the employment relationship before the contract’s expiration date without just cause, as described in the Labor Law.
  • Employers may pay compensation in lieu of notice.
  • Severance pay is defined as end-of-service benefits. Employees are entitled to end-of-service benefits in half month’s wage for each of the first five years and an entire month’s salary for each subsequent year. The benefit is determined by the employee’s final wage during employment.

Leave Entitlements in Saudi Arabia

Annual leave

  • Saudi Arabia’s Labor Law guarantees employees annual paid leave of 21 days once they have completed a full year of employment. After five years of continuous employment with an employer, employees receive a minimum of 30 days.

Parental leave

  • Article 164 of Saudi Arabia’s Labor Law provides working mothers the right to a paid maternity leave of four weeks before and six weeks after childbirth. If the mother has worked for the employer for one year, she receives half of her regular wages while on maternity leave. If the mother has worked for the employer for three years or more, she receives her full regular wages while on maternity leave.
  • Paternity leave is granted in Article 159 of the Saudi Arabian Labor Law, which entitles employees to a minimum one day of leave with full pay. However, companies usually provide fathers additional time to the statutory minimum.

Sick

  • Article 158 of the Saudi Arabian Labor Law designates that, provided employees have a medical report, they receive the first 30 days of sick leave with their full wage. Employees receive three-quarters of their wage for the following 60 days afterwards.

Other Leave Entitlements

  • Article 159 of the Saudi Arabian Labor Law requires employers to give employees paid leave during the following:
    • Marriage
    • Death of a spouse, parent, or child

National and regional holidays

  • Saudi Arabia has four public holidays in a calendar year. Employees take public holidays in addition to annual leave. The following are national holidays recognized by Saudi Arabia:
    • Founding Day (February 22)
    • Eid al-Fitr Holiday (March, April, or May, the specific days fluctuate each year)
    • Eid al-Adha Holiday (May, June, or July, the specific days fluctuate each year)
    • National Day (September 23)

Benefits in Saudi Arabia

  • Saudi Arabia’s government benefits programs are administered by the Ministry of Human Resources and Social Development and the General Organization for Social Insurance (GOSI). The Ministry was established in 2019 after the merging of the Ministry of Civil Service with the Ministry of Labor and Social Development. The Ministry administers the country’s social protection system which includes survivor benefits, short-term disability, long-term disability, unemployment benefits, and paid leave entitlements. GOSIA collects contributions from employers and employees to maintain the Saudi Arabian Social Security scheme, which maintains old-age pensions.

Tax and Social Security

  • There is no income tax for employees in Saudi Arabia.
  • Saudi employees pay 10% of their salary towards social security for the General Organization for Social Insurance (GOSI). Non-Saudi employees do not pay social security contributions.
  • Non-employment income is taxed as a permanent establishment. A non-resident without a permanent establishment, who receives income from within Saudi Arabia, is taxed based upon withholding tax regulations. Depending on the service and if the beneficiary is a related party, the tax rates range from 5%, 15%, and 20%. The withholding tax must be paid within the first ten days of the month, after the month where the payment was received.
  • The Saudi Arabian General Authority of Zakat and Tax (GAZT) collects Zakat and taxes. The GAZT issues companies a certificate as proof of payment since it’s a prerequisite for operating in Saudi Arabia. Zakat base calculation varies by income and the income year is based on the lunar calendar. Zakat requires special consideration from professional assistance.

Thresholds

  • The domestic withholding tax rate is 5% on dividends, 5% on interest, and 15% on royalties.
  • The corporate income tax rate in Saudi Arabia is 25%.

Health

  • Healthcare in Saudi Arabia is seen as a universal right. Saudi Arabia provides free healthcare to all Saudis and non-Saudis employed by the country’s public sector, through the Ministry of Health. The Saudi government calls for non-Saudis working in the private sector to have medical insurance paid for by their employers. A unique feature of Saudi medical care is that it’s supplied annually to more than 5 million visitors to the Holy Mosque in Makkah. The Saudi government provides medical care free of charge to Holy Mosque visitors through the Ministry of Health.

Pension

  • Employees in Saudi Arabia are subject to eligibility requirements for the state’s old-age retirement pension. Qualifying conditions for the state’s old-age pension include being at least 58 years of age and submitting at least 120 months of contributions to the General Organization for Social Insurance (GOSI). With 300 months of social security contributions, retirement at any age is possible. The minimum old-age state pension is SAR1,984 per month.

Payroll in Saudi Arabia

Tax dates

  • There is no income tax in Saudi Arabia. However, there is withholding tax. The withholding tax must be paid within the first ten days of the month, after the month the payment was received.

Cycle

  • The payroll cycle in Saudi Arabia is weekly or monthly. Weekly employees receive payment once a week and monthly employees receive payment once a month.

Average hours

  • The usual working schedule, according to Saudi Labor Code Article 147, is eight hours a day and 48 hours a week. During Ramadan, usual working hours cannot exceed six hours a day and 36 hours a week. The Saudi work week is from Sunday to Thursday, with the weekend on Friday and Saturday.

Overtime

  • Overtime is considered time worked beyond the standard working hours a week. Saudi Labor Law Article 148 designates that employees cannot work more than 11 hours per day. Saudi Labor Law Article 151 stipulates that employees receive 150% of their regular wage as overtime pay. Additionally, employees receive overtime pay on weekly days of rest, feast days, and official holidays.

Why Work in Saudi Arabia?

Saudi Arabia is located in southwestern Asia. The Persian Gulf borders the country to the east and the Red Sea borders the west. Saudi Arabia is the only country in the world with a coastline along the Persian Gulf and Red Sea. It has the largest economy in the Middle East and the largest population in the Persian Gulf region.

It’s a clever calculation to incorporate Saudi Arabia as an international business partner, since the country contains roughly a quarter of the world’s oil reserves, half of the population is under 25 years of age, and English is commonly spoken. The Saudi workforce is developed to prosper in international business.

Those searching for reasons to work and live in Saudi Arabia can look forward to an income tax-free salary, a lower cost of living compared to other Middle Eastern countries, one of the lowest global crime rates, warm weather year round, and a spiritually rich culture. Saudis share cultural values influenced by Islam including strong family relationships, tradition, generosity, and hospitality.

The climate in Saudi Arabia is characterized by its desert. The country experiences warm, dry, high temperatures during the day and low temperatures at night. The province of Asir on the western coast is the exception, as it’s affected by the Indian Ocean monsoons between October and March. Contrary to popular belief, Saudi Arabia has four distinct seasons and the temperatures are not always dry and hot. The country’s terrain includes mountains, coral reefs, and beaches, all unimpaired by restrained tourism.

Saudi Arabia offers its residents and visitors a rich culture, composed of Islamic traditions. The country is world-famous for being Islam’s birthplace and heartland. The Hajj is an annual Islamic pilgrimage to the city of Mecca in Saudi Arabia, which is known as the holiest city by Muslims. Millions of Muslims make the pilgrimage to Saudi Arabia every year. Additionally, the country is internationally recognized for its beautiful Arabian horses, traditional sword-wielding dance, the world’s largest sand desert, and stunning architecture in mosques and palaces.

Saudi Arabia has a limited public transportation system. Most residents get around with their own vehicle or they hire a taxi. The country’s bus system offers intercity transportation, as well as a railway line that runs through a couple major cities.

Saudi Arabia is revered for its history, spirituality, natural beauty, and architecture. If you’re venturing to expand your business in the Middle Eastern and Arab world, Saudi Arabia is a keen option to explore.

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