Engage In Saudi Arabia

Table of Contents

About Saudi Arabia

Capital City

Riyadh

Population

As of March 2024, the estimated population of Saudi Arabia is 36,947,025 people.

Currency

The currency in Saudi Arabia is the Saudi riyal (SAR). The currency symbol is ر.س.

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Overview

Saudi Arabia, officially known as the Kingdom of Saudi Arabia, is the largest Arab state in Western Asia and the second-largest in the Arab world. It is situated on the Arabian Peninsula, bordered by Jordan and Iraq to the north, Kuwait, Qatar, Bahrain, and the United Arab Emirates to the east, Oman to the southeast, and Yemen to the south. The Red Sea lies to the west, and the Persian Gulf lies to the east of the country. With a vast land area of approximately 2,250,000 square kilometers, Saudi Arabia is predominantly desert, with rugged mountains in the southwest. The country’s government system is a monarchy, with the King serving as the chief of state and head of government. Saudi Arabia is a member of the League of Arab States and the Gulf Cooperation Council. Known as “The Land of the Two Holy Mosques,” Saudi Arabia holds great religious significance as it is home to the cities of Mecca and Medina, the holiest sites in Islam. With its abundant oil reserves, the kingdom has become one of the world’s leading oil producers, fueling its economy and shaping its political and social landscape. Additionally, Saudi Arabia’s unique culture and traditions, deeply rooted in Islamic heritage, greatly influence its day-to-day life and overall society.

Employment Relationship

Permanent Employment

Indefinite contracts are contracts made for more than 3 years. Fixed-term contracts convert into indefinite term contracts upon their third renewal or if the contract is continued even after its expiry, without explicit renewal. Foreign employees can only be employed under fixed-term contracts. Indefinite-term contracts are terminated by the mutual consent of both the employee and employer or at the initiative of either party based on a legitimate reason, which must be stated by a notice addressed to the other party in writing.

Fixed-Term or Specific-Purpose Contracts

A fixed-term contract terminates upon the expiry of its term. It can be renewed in writing a maximum of 2 times. The maximum duration of a fixed-term contract is 4 years, including renewals. If the contract is not renewed upon expiry, but the employment relation continues, it becomes an indefinite term contract. A contract for a specific project terminates upon the completion of the work. An employment contract must clearly define the type of contract.  Non-Saudi employees can only be employed in fixed-term contracts, the duration of which depends on the work permit issued to them. 

Temporary Employment Contratcs

Temporary work is defined as work considered by its nature to be part of the employer’s activities, requiring a specific period or relating to a specific job, and ending with its completion. It must not exceed 90 days in either case. Temporary employment contracts that continue beyond 90 days will become indefinite term employment contracts. Temporary employees are not entitled to end of service benefits. According to the Labor Law, these employees are subject to provisions on duties and disciplinary rules, maximum working hours, daily and weekly rest intervals, overtime work, official holidays, safety rules, occupational health, work injuries, compensation, as well as whatever is decided by the Minister of Labor. 

Probationary Period

The Labor Law of the Kingdom of Saudi Arabia provides that an employment contract can designate the first 90 days of employment as a probationary period. Probationary period can be extended by an additional 90 days with the written agreement of both parties. Probationary period must be explicitly stated in the employment contract. An employee cannot be subject to more than one probationary period with the same employer in the same position or role. Both the employee and employer have the right to terminate the employment contract without any notice period during probation. Such termination does not entitle the employee to payment of severance or damages.

Working Hours

The maximum number of working hours is generally eight hours per day or 48 hours per week, except for the holy month of Ramadan. During Ramadan, working hours for Muslim employees may not exceed six hours per day or 36 hours per week. Under exceptional circumstances, employees may be asked to work beyond normal hours, limited to ten hours per day or 60 hours per week. Employees cannot be allowed to work for more than five hours continuously. *According to a new regulation, in view of COVID-19, employers are allowed to reduce employees' salaries with a corresponding reduction in working hours. This reduction cannot exceed 40% of the normal salary. After these regulations cease to be in effect, employees must increase the salary to normal levels. If employers are not able to pay even the reduced salary, they can dismiss employees. These regulations do not apply to companies that benefit from government subsidies. 

Holidays / PTO

Statutory Holidays

National Public Holidays in Saudi Arabia are the following:

  • Eid Al Fitr (The Feast of the end of Ramadan) Observed officially for 10 days, by private institutions from 3 to 7 days.
  • Eid Al Adha (The Feast of the end of Hajj, date varies on Lunar cycle): Observed officially for 10 days, by private institutions from 3 to 7 days)
  • Saudi National Day (The day of the Unification of the Kingdom) Officially for one day

Paid Annual Leave

The minimum entitlement to paid annual leave is 21 days a year, increasing to 30 days a year after five years of service. The annual leave cannot be forfeited by the employer nor can it be paid in lieu of leave. Employers decide the dates of the leave according to work requirements. They must inform their employees of the leave at least 30 days in advance.  The employee has the right to request that their employer defer their entire annual leave or part thereof to the next year. An employer may postpone an employee's leave for up to 90 days after the end of the year during which it is due if required by work conditions with the employee's written approval. *According to a new measure for mitigating the impact of COVID-19, the government has allowed employers to place employees on paid annual leave or unpaid leave (with the employee's agreement) to cope with a decrease in work.

Sick Leave

According to the Kingdom of Saudi Arabia's Labor Law, the minimum entitlement to sick leave is 120 calendar days a year, implemented as follows: First 30 Days – fully paid Next 60 Days – 75% of the total wages Next 30 Days – unpaid Sick leave can be continuous or intermittent. An employer cannot terminate the worker's services on account of illness prior to allowing them sick leave. Sick leave may be combined with annual leave. If the sick leave days coincide with the annual leave days, the annual leave days are suspended until the end of the sick leave days. If weekly days off coincide with sick leave days, the worker may not be compensated for those days. *According to a Ministerial Decision by the Ministry of Health, in view of COVID-19, the following employees are entitled to a compulsory paid sick leave of two weeks: Pregnant women Employees suffering from respiratory diseases Employees with immunodeficiency and users of immunosuppressive drugs Employees suffering from tumors or chronic diseases

Maternity Leave

A female worker is entitled to a minimum of ten weeks' paid maternity leave, divided into four weeks before the expected date of delivery and then six weeks following the child's birth. Employees who have worked for at least one year with the employer are entitled to 50% of wages during maternity leave, and those who have worked for at least three years with the same employer are entitled to 100% of wages. Employees are not eligible for annual leave in the year they avail themselves of maternity leave. Employers are prohibited from dismissing or suspending an employee while she's on maternity leave or in the period of 180 days before her maternity leave begins. *In view of COVID-19, the government has granted compulsory paid leave of two weeks to all pregnant employees.

Paternity Leave

In the Kingdom of Saudi Arabia, male employees are entitled to paid paternity leave of three days for their child's birth. Employers have the right to request supporting documents.

Termination of Employment

Notice Period

According to the Kingdom of Saudi Arabia's Labor Law, indefinite term contracts may be terminated by either party by providing at least 60 days' written notice to the other party if the employee is paid monthly. If the employee is paid at a different frequency, at least 30 days' notice must be provided. Payment in lieu of notice is permitted if both parties agree to it. 

Severance Benefits

Saudi Arabia's Labor Law provides for an end-of-service award due at the end of employment, regardless of the reason for termination (retirement, end of the fixed-term contract, force majeure, resignation, or redundancy). Such an award amounts to 15 days' wages for each of the first five years of service and one month's wages each year for the following years. This benefit is calculated based on the last drawn wage. Where employment is terminated due to an employee’s resignation, the amount of severance benefits decreases depending on the number of years of experience. In case of a female employee's resignation within six months from the date of her marriage or three months from her delivery date, full severance is paid irrespective of the years of work experience. 

Social Security

Pension

Insured employees are eligible for a retirement pension if they have reached 60 years of age with at least 120 months of paid contributions. Early retirement may be taken at any age if the employee has made at least 300 monthly contributions. The pension is 2.5% of the insured’s average monthly earnings during the last two years for each year of contributions after 2001. For contributions made before 2001, the pension is calculated as 2% of the average wage over the last two years per year of contributions. The maximum pension is 100% of the average salary.  The minimum pension is SAR 1,983.75 (Saudi riyals) a month. If the insured does not satisfy the qualifying conditions for an old-age pension, an old-age settlement is paid as a lump sum of 10% of the insured’s average monthly earnings during the last two years before retirement for each month of the first 60 months of contributions, plus 12% for each additional month of contribution for contributions made after 2001.

Dependents/Survivors Benefit

Survivors of a deceased employee are entitled to survivors benefits if the employee had paid contributions for at least three consecutive months/six non-consecutive months, was a pension recipient, or died due to work injury. If the deceased was no longer in covered employment and did not receive any pension, their survivors will be eligible for pension if the deceased had paid at least 120 monthly contributions. If there are three or more survivors, they are entitled to 100% of the pension the deceased received or would have been entitled to receive; two survivors are entitled to 75% of the deceased employee's pension; one survivor will receive 50% of the pension. The pension is split equally among eligible survivors. An additional death grant is paid to survivors as a lump sum of three months' pension, divided equally among eligible survivors.  If the deceased employee did not fulfill the conditions for survivors' benefit, a lump-sum is paid. It is calculated as 10% of the insured's average monthly earnings during the last two years before death for each month of the first five years of contributions, plus 12% for each additional month.

Invalidity Benefit

Insured employees who become permanently disabled before age 60 are entitled to a pension if they have at least 12 consecutive months or 18 non-consecutive contribution months (this amount is doubled for voluntarily insured persons who joined the scheme aged 50 or older). The disability must begin while the insured is in covered employment. Pension is calculated as a percentage of the average wage per year of contributions. The average monthly earnings used in the calculation of benefits must not exceed 150% of the monthly earnings of the insured at the beginning of the last five-year contribution period. The pension is increased by 50% if the insured member needs others' assistance, provided that the allowance does not exceed the amount of SAR 3,500 (Saudi riyals). The maximum pension is 100% of the average salary. The amount of pension cannot be less than 50% of the average monthly wage. The minimum pension is SAR 1,983.75 a month. In the case of disability caused due to an occupational hazard, employers are required to cover medical care expenses and provide monetary compensation (pension and lump-sum benefits), depending on the type and degree of disability. 

Taxation of Compensation and Benefits

Personal Income Tax

There is no personal income tax on income from employment in the Kingdom of Saudi Arabia. Resident as well as non-resident non-Saudis who conduct a business or profession in the country are subject to tax. The tax year runs from January 1 to December 31. The tax rate for the income of individuals obtained from taxable activities in Saudi Arabia is 20%. Dividends, interest, rent, payments made for technical and consulting services, payments for flights, freight or marine shipping, international telephone services, and insurance or reinsurance premiums are taxed at 5%.

Immigration

Types of Visas

Business/commercial visa – issued to persons with commercial interests in Saudi Arabia for short-term visits (three to 12 months, depending on nationality, up to five years for citizens of countries that signed bilateral visa agreements). Diplomatic and official visa – issued to diplomatic passport holders visiting Saudi Arabia. Employment visa – issued to persons coming to Saudi Arabia for long-term employment (one year). Escort visa – for the spouse and children of the principal traveler Family visit visa – issued to persons visiting their first-degree relatives (parents, spouse, and children). Residence visa – issued to persons for long-term stay in Saudi Arabia for employment or business purposes. Student visa – issued to persons traveling to Saudi Arabia for education (valid for three months, allows stay for up to 30 days). Hajj visa – issued to persons traveling to Saudi Arabia for Hajj pilgrimage. Umrah visa – issued to persons traveling to Saudi Arabia for a pilgrimage to Mecca and other holy sites (valid for one year, allows multiple entries with a maximum stay of 90 days). Tourist visa – issued to persons visiting Saudi Arabia for tourism purposes (allows stay for up to 90 days). Medical treatment visa – issued to persons traveling for medical treatment. Transit Visa – issued to persons passing through the country and is applicable for short stays over 12 hours. 

Work Permit

Foreign nationals who wish to work in Saudi Arabia must obtain work visas sponsored by their employers. This visa is issued with a validity of three months, and employees must apply for a residence permit after coming to Saudi Arabia. To obtain a work visa, the employer must prove that no Saudi citizens were available to fill the position. Employers must apply for a work visa to the Ministry of Human Resources and Social Development. After receiving authorization from the Ministry, a work visa is issued by the Ministry of Foreign Affairs. Documents to be submitted include the employment contract, proof of qualifications, medical certificate, Letter of sponsoring from the employer, Zakat Certificate, Company Registration, etc. In March 2021, the existing Saudi immigration regulations were amended as part of the Kingdom's Labor Reform Initiative. The reforms affect foreign workers in Saudi Arabia and aim to ease the strict "kafala" employer sponsorship system. The reforms allow foreign workers to change jobs by transferring their sponsorship from one employer to another and re-enter and exit the country without the consent of their employer.

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