With its windswept deserts and fascinating history and culture, Saudi Arabia is a bucket listdestination for many travelers. Add in the large workforce, huge petroleum-poweredeconomy, and minimal employer taxes, and the country is also an appealing prospect forinternational business expansion.
Saudi law establishes and maintains strong worker protections, so you’ll need in-depthknowledge of the country’s regulations as you build your teams. We’ve developed this guideto hiring employees to explore essential employment topics and give you some general tipsfor hiring in Saudi Arabia.
Table of ContentsWhat to know before hiring in Saudi Arabia
1. Saudization/Nitaqat2. Contract employment3. Payroll and taxes4. Wages and working hours5. Time off6. Anti-discrimination law and restrictions
As you consider how to hire in Saudi Arabia, you’ll need to understand the nuances of topicslike working hours, leave policies, termination requirements, and other critical elements ofemployment.
1. Saudization/Nitaqat
Saudi Arabia, a nation with a population of about 34 million people, employs around 10million foreign nationals. Workers travel from countries like Egypt, Bangladesh, Yemen, India,Pakistan, and the Philippines to work in the country, sometimes competing with Saudinationals for jobs.
Companies expanding to Saudi Arabia should be aware of a national program known asSaudization, or Nitaqat. This program creates incentives for companies to hire Saudinationals over international workers. Obtaining a new work visa for an international workercan be challenging. Additionally, Saudi law requires some industries to employ only Saudinationals, and it incentivizes hiring Saudi nationals in many other cases. For instance, atprivate companies with five or more of the relevant positions, the Ministry of HumanResources and Social Development requires 25 percent of IT and communications rolesto goto Saudi nationals.
2. Contract employment
Saudi employment law requires employers to have a contract with each employee. Contractsmay be fixed-term contracts or unlimited contracts, and each one should specify the
Hiring practices in Saudi ArabiaWhat does a company need to hire employees in Saudi Arabia?Hiring remote employees in Saudi ArabiaAdditional tips for how to hire in Saudi ArabiaBuilding international teams with Globalization Partners
Employers must generally abide by strict termination and severance rules when they wish topart ways with an employee. Saudi Arabia’s employment law allows for probation periods ofup to 90 days, extendable for another 90 days if both parties agree. During this time, acompany can quickly terminate an employee if the relationship is not working out. After that,notice periods and severance requirements apply.
Employees with fixed-term contracts must receive 30 days’ notice or additionalcompensation, and employees with unlimited contracts must receive 60 days’ notice oradditional compensation. All employees must receive 15 days’ pay in severance for each oftheir first five years with the company and then a month’s worth of pay for each additionalyear of service.
3. Payroll and taxes
Saudi Arabia has social security programs for its citizens, and each company must contribute
to them. Employers must pay Saudi social insurance tax to the General Organization forSocial Insurance (GOSI). This contribution generally equals 10 percent of each employee’stotal compensation, including base salary, allowances, and commissions.
Companies must pay additional contributions for occupational hazards their employees face.This rate generally works out to about 2 percent of each employee’s salary.
4. Wages and working hours
The standard workweek in Saudi Arabia ranges from 40 to 48 hours, eight hours five or sixdays a week, and employees earn overtime of 150 percent of their regular salaries for anyhours worked beyond 40. Work on Friday or a public holiday also qualifies for overtimepay. During the Islamic month of Ramadan, the workday shrinks from eight to six hours forMuslim employees.
Compensation in Saudi Arabia must have two components: the base salary and additionalallowances for transportation and housing.
Saudi Arabian employees must receive at least 4,000 Saudi riyals per month to count asnational employees for Saudization program quotas. Employees who earn between 3,000 and4,000 riyals per month each count as half a national citizen for Saudization purposes.
5. Time off
Employment law requires companies to offer their employees a minimum of 21 paid vacationdays, and employees who have worked for a company for more than five years must receivea minimum of 30 paid vacation days. In practice, however, many companies give theiremployers 30 annual paid vacation days from the beginning of their employment, andemployees in management roles commonly receive as many as 40 paid vacation days.
After two years of employment with a company, Muslim employees may also take additionalHajj leave of up to 10 days to make their pilgrimages to Mecca. Employees may only take this
leave once every five years with the same employer.
Additionally, employees in Saudi Arabia receive up to four months of annual sick leave, aslong as they provide an official medical certificate confirming the need for leave. Sick leavepay generally breaks down as follows:
First 30 days of illness: Employees receive 100 percent of their usual pay.Next 31 to 90 days of illness: Employees receive 75 percent of their usual pay.Beyond 91 to 120 days of illness: Employees must take these days unpaid.
Pregnant employees in Saudi Arabia may also take 10 weeks of maternity leave for eachchild. An employee who has been with the company for between one and two years willreceive half pay during her leave, and an employee who has been with the company for twoyears or more will receive 100 percent of her usual salary. Fathers are eligible for only threedays of paternity leave.
In addition to these days off, employees in Saudi Arabia should receive time off for holidays.The number of days varies — the government determines the amount of time off andannounces it each year. Major holidays in Saudi Arabia include:
Eid al-Fitr: This holiday marks the end of the sunup-to-sundown fasting that occursduring the month of Ramadan. Eid al-Fitr officially lasts for three days but is generally a10-day public holiday.Eid al-Adha: This religious holiday celebrating the prophet Ibrahim lasts for four daysand is generally also a 10-day public holiday. It takes place in the month of Dhu al-Hijjah in the Islamic calendar, usually from the fifth day to the 15th.Unification of the Kingdom Day: This holiday celebrates the day of the kingdom’sunification under the House of Saud in 1932. It always occurs on Sept. 22.
Saudi Arabia’s laws prohibit workplace and hiring discrimination based on thesecharacteristics:
AgeSexDisability
Historically, unemployment rates for women in Saudi Arabia have been astronomicalcompared with the rates for men — in 2010, the workforce included only 15.8 percentwomen. However, the country has made strides in closing this gap. From 2016 to 2020, theunemployment rate for women dropped by 13.9 percent as more jobs opened up to women,literacy rates among female Saudis improved, and more young Saudi women entered theworkforce. In 2019, new legislation allowed Saudi women to drive, apply for passports, andobtain official documents without a male guardian’s permission, clearing a few additionalbarriers to employment.
Cost of hiring an employee in Saudi Arabia
The costs to hire employees in Saudi Arabia will likely depend on several factors, includingyour company’s policies toward supplementary insurance and various extra perks, as well ashow competitive you want your compensation and benefits packages to be. Below are a fewof the direct and indirect hiring costs you may incur:
Job advertisementsHours spent on applicant review and interviewingPayrollTaxesSalariesBenefitsBonusesAllowancesInsurance
Some of the miscellaneous expenses you incur in providing a competitive package mayinclude education expenses, retirement plans, and allowances for things like housing,
transportation, and mobile phones. Employers commonly pay for airplane tickets so theirexpat workers can go home to see their families when they take annual leave. A good rule ofthumb is to budget an additional 25 percent above each employee’s gross salary for thecosts of benefits and perks.
Saudi Arabia has a robust, free national healthcare program that will meet a substantialportion of your Saudi national employees’ healthcare needs. Nevertheless, many employersoffer supplementary health and life insurance, both to their expat employees, who cannotuse the national service, and to their executives.
Additional costs arise when employees complete their contracts. These employees areentitled to receive an end-of-service award, which should generally equal half a month’swages for each of the first five years of service plus one month’s wages for every additionalyear of service.
Hiring practices in Saudi Arabia
Hiring someone in Saudi Arabia may be similar to hiring a new employee in your homecounty. Even so, your company will want to take a few differences into account and adjustyour practices accordingly:
Use the local language and currency: Even if your applicants have studied your nativelanguage, your company should provide essential communications in Arabic,particularly contracts and offer letters. In these documents, you should also givemonetary amounts in Saudi riyals instead of your home country’s currency.Rely on word of mouth: Many Saudi Arabian companies rely on personalrecommendations to fill their open positions. If your company works with an EOR, yourconnections there can be invaluable in helping you recruit talented people. You can alsofind success in online advertisements and social media postings if you have few in-country personal connections.
What does a company need to hire employees in Saudi Arabia?
Hiring new employees in Saudi Arabia is complex and time-consuming, especially if yourcompany decides to set up a subsidiary. If you choose this route, you will need to accomplishthe following tasks:
Reserve your company name with the Ministry of Commerce and IndustryOpen a Saudi Arabian bank accountObtain a business licenseRegister your physical business addressPublish the summary of your articles of incorporationRegister with the Ministry of Labor, the Department of Zakat, and the GeneralOrganization of Social InsuranceObtain a certificate of registration from the Ministry of Commerce and IndustryDevelop an official company sealPay membership fees to the Chamber of Commerce
This process can take weeks, even months, and eat through a substantial portion of yourbudget. An appealing alternative is to work with Globalization Partners’ global employmentplatform. Our AI-driven technology expedites this process, allowing you to start hiringemployees immediately and get your Saudi Arabian business operations up and runningwithin days. The platform enables you to hire and onboard new employees quickly and easily,all while navigating Saudi legal requirements adroitly to keep your operations compliant.
As you hire remote teams for your international operations, you’ll want to keep a few bestpractices in mind:
Make your company an appealing prospect: Remember that hiring is a two-way street— your applicants in Saudi Arabia are assessing your strengths and looking for the rightfit, just as your company is. Be sure your company has a supportive workplace cultureand enough benefits to attract the talented people you need.Seek long-term partners: Your new hires will be your employees — and they will also beinvaluable partners and teachers as you learn cross-cultural norms. They can also bepoints of valuable connection for new business partnerships. As you hire, ask targetedquestions to help you determine which candidates will be good long-term fits andpromote your company’s growth.Make efforts to meet in person: Time and distance may require you to do much of yourinterviewing and hiring remotely. If you can, though, send higher-level executives out tomeet your new employees during their onboarding and training. Doing so demonstratesyour commitment to your hires and helps them feel valued.
Additional tips for how to hire in Saudi Arabia
Here are a few more steps to hiring in Saudi Arabiafor your company to consider:
Research your location: Saudi Arabia is a kingdom encompassing four distinct regions— Hejaz; Najd; parts of Eastern Arabia, or Al-Ahsa; and Southern Arabia, or Asir. Eachone has its own customs and regulations, so you may want to seek expert advice aboutyour chosen region before settling your employment practices.Prepare for a limited pool of Saudi national applicants: Because of the push forincreased Saudization and the addition of 1.2 million private-sector jobs by 2022, youmight expect your candidate pools to contain a high percentage of Saudi nationals.However, many Saudi nationals prefer to work in the public sector because of theperception of higher salaries and more stable jobs there. Most private-sectoremployees are international workers, so most of your applicants will likely beexpatriates.Expect to hire in-country expats: Businesses can sponsor work visas and work andresidence permits — known as iqamas — for new expats, but generally only at steep
costs. You may find it easier to hire international employees who already have workpermits and visas.
Building international teams with Globalization Partners
When you’re ready to expand to Saudi Arabia, Globalization Partners is here to boost yournew endeavor’s success. Our full-stack global employment platform allows you to overcomecompliance barriers and streamline your hiring processes. You’ll save time and labor, andyou’ll be able to focus your attention on your primary business goals.
Request a proposal today, or get in touch to learn more about our AI-driven technology and98 percent customer satisfaction rating.
