Saudi Arabia PEO & Employer of Record

WeHG offers an International PEO and global Employer of Record service in Saudi Arabia to companies willing to enter the Saudi Arabian market or hire local/expat employees in this region.

The traditional approach requires establishing a subsidiary in Saudi Arabia.  Nevertheless, our solution affords you to start the operations in Saudi Arabia within days hence save time and expenses.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf.

Saudi Arabia fast facts

Population, million: 34
Land area: 2,149,690 km²
Capital: Riyadh
Local currency: Saudi Riyal (SR) (SAR)

GDP per capita:$ 1.924 trillion
GDP in currency:$ 56,817

Saudi Arabia, arid, sparsely populated kingdom of the Middle East. Extending across most of the northern and central Arabian Peninsula, Saudi Arabia is a young country that is heir to a rich history. In its western highlands, along the Red Sea, lies the Hejaz, which is the cradle of Islam and the site of that religion’s holiest cities, Mecca and Medina. In the country’s geographic heartland is a region known as Najd (“Highland”), a vast arid zone that until recent times was populated by nomadic tribes. To the east, along the Persian Gulf, are the country’s abundant oil fields that, since the 1960s, have made Saudi Arabia synonymous with petroleum wealth. Those three elements—religion, tribalism, and untold wealth—have fueled the country’s subsequent history.

Hiring, Negotiating and Doing Business in Saudi Arabia

Necessity of written employment contract

Generally, this contract shall be in writing, and each party should have one copy. This provision for a written contract can be an optional provision since the law still validates an unwritten work contract. In the case of an unwritten work contract, the interpretation of the terms will be in favor of the employee. At any time one can demand that the contract shall be in writing, no matter if such person is the employer or employee, according to Article 51 of the Labor Law. There are some exceptions to this general rule about the work contract. The work contract for foreign workers needs to be in writing and of a specific period according to Article 37 of the Labor Law.

Different forms of engagement: employment, contracting, work with private entrepreneur

The Labour Law does not distinguish between different categories of employees and there are no specific regulations for managerial or executive-level employees, except in relation to working hours and rest periods. However, it does distinguish between Saudi and non-Saudi employees. The Nitaqat program and the immigration rules mean that there are major differences in how these two categories of employees are dealt with.
The concept of self-employment or contracting is extremely limited. The concept of part-time working is recognized, particularly in sectors such as agriculture. However, any commercial activity in Saudi Arabia must be licensed, and thus to have true self-employed status an individual should hold a trade license.

Saudi Arabia Employment Contract

Types of employment agreements

There are two types of work contracts:

• Term contracts, which consist of fixed-term contracts and indefinite term contract.
• Project-based contracts

Saudi Arabia working hours

An employment contract in Saudi Arabia should give details of vacation time, days per week, and daily working hours. Usually, they are 6 days per week; working daily for 8 hours. There are 10 public holidays yearly.

Overtime

• Overtime hours is an exception to the employees or persons who is on high-ranking positions of management or who have authority over workers and employees. 
• Guards and Janitors, excluding civil security guards.
• Supplements works or preparatory which must be completed before commencement of work or after commencement of work. 
• Work that is intermittent by necessity.

Vacation leave in Saudi Arabia

The workman shall be entitled each year to a prepaid annual leave of not less than 21 days, to be increased to 30 days if the workman spends five consecutive years in the service of the employer.

The workman shall avail himself of the leave in the year of accrual. Such leave shall not be forfeited, waived or paid for by cash in lieu during the workman’s period of service. The employer may set the dates of such leaves according to work requirements or may grant them on a rotational basis to ensure the smooth progress of the work. The employer shall notify the workman of the dates of his leave adequately in advance, by not less than 30 days.

Saudi Arabia Maternity Leave

Female employees in Saudi Arabia are usually entitled to 10 week’s paid maternity leave, so long as they have been with their employer for at least one year. Four of these 10 weeks can be taken before the birth of the child, but at least six of the remaining 10 weeks must be taken after the birth.
Maternity leave is paid at half pay if an employee has been with their employer for at least one year. If an employee has been with their employer for at least three years, they are entitled to maternity leave at full pay. Employees can take their annual vacation during the same year that they take their maternity leave. However, if an employee chooses to do this, they are only entitled to half pay or no pay, depending on how much maternity leave has been granted.
Employers in Saudi Arabia are also required to pay for the female employee’s pregnancy and delivery medical expenses.
Fathers may take up to three day’s paid paternity leave.

Saudi Arabia Severance Laws

Employees are generally entitled to notice before being terminated. For employees with written, limited contracts, they are entitled to 30 days’ notice before termination. Those with unlimited contracts are entitled to 60 days’ notice. Alternatively, both the employer and employee can agree to compensation instead of notice.
There is no notice period for definite contracts.
During the notice period, employees can use up to eight hours each week to find alternative employment.
Once the employment contract ends, the employee is entitled to severance payment that is:

• Equal to half of one month’s average wages for each of the first five years of employment
• Equal to a full month’s wages for each year of work after the fifth year

Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. New Horizons’ Saudi Arabia PEO can mitigate risk for foreign companies and provide guidance through this process.

Saudi Arabia Tax

A flat income tax rate of 20% is applied to the tax-adjusted profit of resident non-Saudi and non-GCC individuals.
Non-residents who do not have a legal registration or a permanent establishment in Saudi Arabia are subject to withholding tax on their income derived from a source in Saudi Arabia. A Saudi resident entity must withhold tax from payments made to such non-residents with respect to income derived from Saudi Arabia. This rule applies regardless of whether the Saudi entity is a taxpayer. The withholding tax rates are:
Management fees are taxed at 20%.
Dividends, interest, rent, payments made for technical and consulting services, payments for air tickets, freight or marine, shipping, international telephone services, and insurance or reinsurance premiums are taxed at 5%.
Royalties, payments made to head office or an affiliated company for services and payments for other services are taxed at 15%.

Health Insurance Benefits in Saudi Arabia

An employee who is ill can take sick leave for a period of 4 months out of which:

• The first month will be fully paid
• The next two month will be paid at 75% of the total salary
• The fourth month will be unpaid

Additional Benefits in Saudi Arabia

While there are no minimum wages for Saudi Arabia’s private sector, public sector employees must make at least $7,585 a year, equal to approximately 28,444 Saudi Arabian riyal (SAR). Compensation laws also dictate overtime payments that are 100% of an employee’s normal hourly rate, plus a 50% bonus. Any work conducted on a Friday or public holiday is considered overtime.

Severance pay in Saudi Arabia is 15 day’s wages for an employee’s first five years of work, then a full month’s wages for every year thereafter. For Saudi Arabian nationals, they have rights to additional severance pay, as per their employment contract.

Employers in Saudi Arabia should be mindful of their employee’s sick leave. While employees are generally entitled to four month’s sick leave, they need a medical certificate to take that length of time. If an employee has a medical certificate, they are entitled to full pay for the first 30 days, 75% for 31 to 90 days, and unpaid time off from 91 to 120 days.

General market practice benefits/additional allowances

In their efforts to become more competitive in the global economy, Saudi Arabian organizations continuously seek ways to enhance organizational effectiveness. There’re concrete insights about employees’ views of compensation systems and also highly useful information about compensation practices for organizations across the world with business interests in Saudi Arabia and other Arab nations.

Clearly, because Saudi Arabian culture is viewed as more collective, one would have expected more of an emphasis on organizational or team outcomes versus individual performance and rewards as being strategies to creating more effective reward systems. There is some desire from employees to have their rewards linked to individual
performance.

The biggest influence that local cultures have on compensation philosophy is in terms of pay for performance.

Saudi Arabia Holidays

There 10 public holidays in Saudi Arabia: March Equinox, Ramadan begins, Eid al-Fitr (4 days), June Solstice Arafat Day, Eid al-Adha (9 days), Muharram (Muslim New Year), September Equinox, Saudi National Day (2 days), December Solstice.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.