Employer of Record in Saudi Arabia

An Employer of Record (EOR) in Saudi Arabia is a company that legally hires employees on your behalf. This means you can build a team in Saudi Arabia without setting up a local entity. An EOR handles all the legal and HR work, like payroll, taxes, benefits, and compliance with Saudi labor law. You manage your team's day to day work, while the EOR takes care of the employment paperwork. Providers like Rivermate offer these services to simplify your expansion.

How an Employer of Record (EOR) Works in Saudi Arabia

Using an EOR in Saudi Arabia simplifies hiring. The process is straightforward.

• You Find the Talent: You recruit and select the person you want to hire in Saudi Arabia.
• The EOR Hires: The EOR legally hires the employee through a compliant local employment contract.
• Onboarding: The EOR manages the onboarding process, including any necessary visa and work permit applications (Iqama) for expatriates.
• HR and Payroll: The EOR handles all HR tasks. This includes running payroll, withholding taxes, and making social security contributions.
• Compliance: The EOR ensures that all employment practices follow Saudi labor laws and regulations.
• You Manage Your Team: You direct your employee's daily tasks and responsibilities, just like any other member of your team.

Why use an Employer of Record in Saudi Arabia

Using an EOR in Saudi Arabia offers a practical way to grow your business in the country. It allows you to enter the market quickly and efficiently, without the major step of establishing a legal entity there.

Here are some of the key benefits:

• Faster Market Entry: You can hire employees and start operations in a matter of weeks, not months.
• Reduced Costs: Avoid the significant expenses and complexities of setting up a local company.
• Compliance Assurance: EORs are experts in Saudi labor law, reducing the risk of non compliance.
• Simplified HR: Outsource payroll, benefits administration, and other HR functions.
• Focus on Your Business: You can concentrate on your core business goals while the EOR handles employment administration.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Saudi Arabia includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Saudi Arabia.

Hiring in Saudi Arabia is a unique landscape shaped by a drive to increase local employment. The government's "Saudization" (Nitaqat) program requires companies to hire a certain percentage of Saudi nationals. This is a key factor to consider as you build your team. For any non-Saudi employees, you will need to sponsor their work permit, known as an "Iqama."

Employment contracts & must-have clauses

Written employment contracts are mandatory in Saudi Arabia, and you must provide two copies, one for you and one for the employee. For non-Saudi nationals, the contract must be for a fixed term. If a fixed-term contract for a non-Saudi doesn't specify a duration, the length of the work permit is considered the contract term.

Your contracts should be in Arabic, even if you provide a translated version in another language. In case of any disagreement, the Arabic version is the one that counts.

Here are the essential details to include in an employment contract:

• Employer and Employee Information: Full names, addresses, and identification numbers. For non-Saudis, include their passport number.
• Job Details: A clear job title and a description of the work.
• Location of Work: Where the employee will be based.
• Compensation: The salary and any allowances, like housing or transportation, must be clearly stated in Saudi Riyals (SAR).
• Contract Start Date and Duration: Specify the start date and, for fixed-term contracts, the end date.
• Working Hours: Outline the daily or weekly work schedule.
• Leave Policies: Detail the annual leave entitlement.
• Probation Period: If there is a probation period, it must be stated in the contract.
• Termination Conditions: The notice period and conditions for ending the contract.

Probation periods

You can include a probation period in the employment contract to see if a new hire is a good fit. The probation period is typically 90 days. You can extend it up to 180 days if the employee agrees to it in writing. During this time, either you or the employee can end the contract without cause, but it's always best to provide notice.

Working hours & overtime

A standard work week in Saudi Arabia is 48 hours, with a maximum of 8 hours per day. During the holy month of Ramadan, the workday for Muslim employees is reduced to 6 hours per day or 36 hours per week.

Work performed beyond the standard hours is considered overtime. You must pay employees 1.5 times their regular hourly wage for any overtime hours.

Public & regional holidays

Your employees are entitled to paid time off for public holidays. The main public holidays in Saudi Arabia are:

Please note that Islamic holidays are based on the lunar calendar, so dates may vary slightly.

Hiring contractors in Saudi Arabia

You can hire independent contractors for project-based work. This can give you flexibility and access to specialized skills without the commitment of hiring a full-time employee. When you hire a contractor, you should have a clear contract that outlines the scope of work, payment terms, and project duration.

It is crucial to correctly classify your workers. In Saudi Arabia, the law distinguishes between employees and independent contractors based on factors like the level of control you have over their work. If a contractor is treated like an employee (for example, they work exclusively for you and follow your direct instructions), they could be misclassified.

Misclassification can lead to significant risks, including fines and being required to pay back benefits and social security contributions. An Employer of Record (EOR) can help you avoid these risks. An EOR acts as the legal employer for your workers, ensuring they are classified correctly and that you comply with all local labor laws. This lets you focus on your business while the EOR handles the legal and HR complexities of employment.

In Saudi Arabia, your approach to compensation and payroll is a key factor in attracting and keeping good people. The country's labor laws outline specific rules for how you pay your employees, from minimum wages to overtime calculations. Understanding these regulations helps you stay compliant and build a strong team. Saudi Arabia's low taxes make it an attractive place for talent, but you still need to manage legally required benefits and contributions.

Payroll cycles & wage structure

You can pay your employees either weekly or monthly. If you pay weekly, you must process payroll once a week. For salaried employees, you pay them once a month.

A typical compensation package in Saudi Arabia includes more than just a base salary. It often comes with allowances for housing and transportation. Bonuses are also common, with many companies offering annual bonuses equivalent to one or two months' salary.

Overtime & minimums

The standard workweek in Saudi Arabia is 48 hours, based on an 8-hour day. During Ramadan, the workday shortens to 6 hours. Any work you ask your team to do beyond these hours is overtime. You must pay them 150% of their regular hourly rate for any extra time. Keep in mind that employees cannot work more than 11 hours in a single day.

As of September 2023, the minimum wage for private-sector workers is 4,000 Saudi Riyals (SAR) per month. For the public sector, the minimum is 3,000 SAR.

Employer taxes and contributions

As an employer in Saudi Arabia, you contribute to social insurance for your Saudi employees. There is no personal income tax, but you are responsible for these contributions.

Employee taxes and deductions

Your employees in Saudi Arabia do not pay any income tax. However, Saudi nationals do have deductions taken from their pay for social insurance.

In Saudi Arabia, employee benefits and leave are a mix of mandatory provisions and extra perks. The government sets minimum standards for time off and benefits. Many companies offer more than the basics to attract and keep good people. This creates a competitive job market where benefits packages can make a real difference.

Statutory leave

The law in Saudi Arabia requires companies to provide several types of paid leave.

• Annual Leave You get 21 days of paid annual leave. This increases to 30 days after you have been with the same employer for five years.
• Sick Leave You are entitled to 120 days of sick leave per year. The first 30 days are at full pay. The next 60 days are at 75% pay. The last 30 days are unpaid.
• Maternity Leave Female employees get 10 weeks of fully paid maternity leave.
• Paternity Leave New fathers receive three days of paid leave.
• Marriage Leave You can take five days of paid leave when you get married.
• Bereavement Leave You get five days of paid leave for the death of a spouse or immediate family member.
• Hajj Leave Muslim employees who have been with a company for at least two years can take 10 to 15 days of leave to perform the Hajj pilgrimage. This is a one-time leave benefit.

Public holidays & regional holidays

Saudi Arabia celebrates several national and religious holidays. The dates for religious holidays change each year because they follow the Islamic lunar calendar.

Typical supplemental benefits

Companies often provide benefits beyond what the law requires. Here is a look at the difference between what is required by law and what is often offered as an extra.

How an EOR can help with setting up benefits

Setting up employee benefits in a new country can be tricky. An Employer of Record (EOR) can make it simple.

An EOR already understands the local laws and market. They can help you create a benefits package that is both compliant and competitive. This saves you time and reduces the risk of making mistakes.

An EOR handles the administration of benefits. This includes everything from enrolling employees in health insurance to managing payroll deductions for social security. This frees you up to focus on running your business. They can also help you stay up to date with any changes in labor laws. This ensures your benefits always meet the legal requirements.

When an employment relationship ends in Saudi Arabia, you need to follow a specific process. The country's labor laws outline clear steps for both you and your employee. This ensures that the process is fair and lawful. Following these rules helps you avoid legal issues and financial penalties.

Notice periods

The notice you need to give an employee depends on their contract type.

• Indefinite-term contracts: For employees paid monthly, you must provide at least 60 days' written notice. For all other employees on this type of contract, a 30-day notice is required.
• Fixed-term contracts: A 30-day notice period is standard, unless your contract specifies a different timeframe.
• Probationary period: During a probationary period, either you or the employee can end the contract with just one day's notice.

If you don't provide the correct notice, you may face legal disputes. It's important to clearly state the notice requirements in your employment contracts.

Severance pay

In Saudi Arabia, employees are entitled to a mandatory severance payment known as the End of Service Gratuity (EOSG). The amount depends on the employee's length of service and the reason for termination.

Here's how to calculate the EOSG if you terminate the contract:

If an employee resigns, their EOSG entitlement changes:

How Rivermate handles compliant exits

Navigating employee terminations in a different country can be complex. We make sure every step of the offboarding process is compliant with Saudi labor law.

We handle the details so you don't have to. This includes:

• Calculating the correct notice period based on the contract.
• Determining the accurate End of Service Gratuity payment.
• Managing all required paperwork.
• Ensuring a smooth and professional exit for your employee.

We take care of the complexities of offboarding. This gives you peace of mind and lets you focus on your business.

Navigating visas and work permits in Saudi Arabia can feel complex. The system is built on sponsorship, meaning you need a locally licensed company to support your application. This process is essential for anyone looking to work in the country long-term. It involves multiple government ministries and results in both a work visa and a residency permit, known as an Iqama.

Employment visas & sponsorship realities

An Employer of Record (EOR) can be your legal employer in Saudi Arabia. This means we can sponsor work permits for foreign workers. We handle the necessary paperwork and legal requirements, allowing you to focus on your work.

Here’s a look at the practical side of sponsorship:

• What we can do: As your EOR, we manage the entire visa process for you. This includes applying for your work visa, handling the issuance of your Iqama, and managing renewals.
• The process: We start by registering with the Saudi Arabian Ministry of Interior and opening an immigration file. Then, we apply for your employment visa through the Ministry of Labor. Once approved, the Ministry of Foreign Affairs issues a visa authorization number, which allows you to get your visa from the Saudi embassy in your home country.
• Your arrival: After you arrive in Saudi Arabia, we help you get your Iqama within 90 days. This permit is mandatory for legal work, opening a bank account, and renting a home.

Business travel compliance

For short-term trips, you'll likely need a business visit visa. It's important to use the right visa for your activities to stay compliant.

Here are the key things to know:

• Permitted activities: A business visit visa is for things like meetings, negotiations, and conferences. You cannot use this visa to perform hands-on work.
• Invitation letter: To get a commercial visa, you typically need a letter of invitation from a sponsoring company in Saudi Arabia.
• Application process: You can apply for your visa online, but you may need to submit your passport and other documents to a Saudi embassy or consulate.
• Validity: Business visas can be for single or multiple entries, with stays typically up to 90 days. Keep in mind that visa rules can change, so it's always good to check the latest regulations.