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February 4, 2025
Saudi Arabia has a rapidly growing workforce and a structured labor law system that governs employer-employee relationships. Whether you are a startup, SME, or multinational company, understanding Saudi labor laws is crucial for hiring employees in Saudi Arabia and ensuring compliance with government regulations.
This guide provides a comprehensive overview of employment laws, Saudization requirements, and best practices for hiring in Saudi Arabia.
Overview of Saudi Labor Laws
Saudization (Nitaqat) Requirements
Employee Work Visas and Sponsorships
Employment Contracts and Probation Periods
Salary, Wages, and Payroll Regulations
Employee Benefits and Leave Policies
Termination and Employee Rights
Common Challenges and How to Overcome Them
Conclusion
The Saudi Labor Law, regulated by the Ministry of Human Resources and Social Development (MHRSD), establishes rules for employment rights, employer obligations, and labor relations. Key aspects include:
Standard Work Hours: 48 hours per week (40 during Ramadan for Muslim employees)
Overtime Pay: 150% of regular pay for extra hours
Rest Days: At least one rest day per week (usually Friday)
Contracts: Must be in writing and specify job roles, wages, and duration
Employers must register employees with GOSI (General Organization for Social Insurance) for medical and pension benefits.
The Nitaqat program is a government initiative requiring companies to hire a minimum percentage of Saudi nationals. The classification system is:
| Category | Saudization Requirement |
|---|---|
| Red | Below minimum Saudization percentage |
| Yellow | Below targeted Saudization but better than Red |
| Green | Meets required Saudization level |
| Platinum | Exceeds Saudization targets |
Failure to meet Saudization quotas can lead to penalties, visa restrictions, and operational challenges.
Foreign employees must obtain a work visa (Iqama) sponsored by a Saudi employer. The steps include:
Job Offer & Contract Signing
Work Visa Application via MHRSD
Medical Examination & Background Checks
Residence Permit (Iqama) Issuance
Employee Registration with GOSI
Employers are responsible for renewing Iqamas and covering associated costs.
Saudi labor law mandates written employment contracts, specifying:
Job title & responsibilities
Salary & benefits
Contract duration (fixed-term or indefinite)
Termination conditions
A probation period (maximum of 90 days) is allowed, during which both employer and employee can terminate the contract without compensation.
Minimum Wage: SAR 4,000 for Saudi nationals (no minimum for expats)
Payment Mode: Salaries must be paid via Wages Protection System (WPS)
Deductions: Employers must contribute 10% to GOSI pension fund for Saudi employees
End-of-Service Benefits (ESB): Employees receive gratuity based on service years
Employees in Saudi Arabia are entitled to various benefits and leaves, including:
Annual Leave: Minimum 21 days, increasing to 30 days after five years
Sick Leave: Up to 120 days per year (first 30 days paid in full)
Maternity Leave: 10 weeks (fully paid for first six weeks)
Hajj Leave: 10-15 days for Muslim employees (once in service period)
Healthcare insurance is mandatory for all employees under Saudi labor law.
Termination must follow strict guidelines:
Valid Reasons: Performance issues, redundancy, or contract violations
Notice Period: 30-60 days depending on contract type
End-of-Service Benefits (ESB): Employees receive severance pay based on tenure
Unlawful Termination: Employees can file claims with Saudi Labor Courts
| Challenge | Solution |
| Complex Saudization Requirements | Partner with HR consultants & recruitment firms |
| Iqama & Visa Processing Delays | Use MHRSD’s online Muqeem system for faster approvals |
| Labor Disputes | Maintain clear contracts and document performance reviews |
We are committed to providing exceptional service and ensuring your long-term success in Saudi Arabia. Our team of experts will guide you through every step of the process, from initial consultation to post-incorporation support.
Before hiring employees, it’s essential to familiarize yourself with the key provisions of Saudi labor laws. The Saudi Labor Law (Royal Decree No. M/51) governs employment relationships in the Kingdom. Here are the main aspects to consider:
All employees must have a written employment contract in Arabic.
The contract should include details such as job title, salary, working hours, and termination conditions.
Standard working hours are 8 hours per day or 48 hours per week.
Overtime pay is mandatory for hours worked beyond the standard limit.
Wages must be paid on time and in Saudi Riyals (SAR).
Employees are entitled to annual leave, sick leave, and end-of-service benefits.
Employers must provide notice and valid reasons for termination.
Employees can resign with proper notice, as per their contract terms.
The Saudization program requires businesses to hire a certain percentage of Saudi nationals.
Compliance with Nitaqat is mandatory for all companies operating in the Kingdom.
Hiring the right talent is crucial for your business’s success. Here’s how to navigate the recruitment process in Saudi Arabia:
Advertise job openings on local job portals, social media, and recruitment agencies.
Ensure job descriptions comply with Saudization requirements.
Conduct interviews to assess candidates’ skills and cultural fit.
Verify qualifications and work experience through background checks.
Provide a formal offer letter outlining the job role, salary, and benefits.
Ensure the offer aligns with the terms of the employment contract.
Once you’ve selected a candidate, the next step is to formalize the employment relationship.
Use a standardized template in Arabic to draft the employment contract.
Include key details such as job title, salary, working hours, and probation period.
Collect necessary documents from the employee, including:
Passport copy
Residency permit (Iqama)
Educational certificates
Previous employment references
Submit the contract to the Ministry of Human Resources and Social Development (MHRSD) for approval.
Ensure the contract is signed by both parties.
A smooth onboarding process sets the tone for a positive employee experience.
Introduce new hires to your company’s culture, policies, and procedures.
Provide an overview of their role and responsibilities.
Offer training programs to help employees develop their skills.
Ensure compliance with Saudization training requirements, if applicable.
Saudi labor laws mandate specific benefits for employees. Here’s what you need to know:
Pay employees on time and in SAR.
Ensure wages meet the minimum wage requirements (if applicable).
Employees are entitled to 21 days of paid annual leave, increasing to 30 days after 5 years of service.
Employees can take up to 30 days of paid sick leave per year, with additional unpaid leave if needed.
Employees are entitled to a gratuity payment based on their length of service.
The Saudization program aims to increase employment opportunities for Saudi nationals. Here’s how to comply:
Businesses are classified into Platinum, Green, Yellow, and Red categories based on Saudization compliance.
Higher categories enjoy benefits like faster visa processing and reduced fees.
Ensure your workforce meets the required Saudization percentage for your industry.
Use government platforms like Qiwa to manage Saudization quotas.
Employee disputes and terminations must be handled carefully to avoid legal issues.
Address employee grievances through internal mediation.
If unresolved, disputes can be escalated to the Labor Office or Labor Courts.
Provide valid reasons for termination, such as poor performance or misconduct.
Follow the notice period and payment requirements outlined in the contract.
