Employee Benefits and Compensation in Saudi Arabia

The ultimate guide for employers to employee compensation and benefits in Saudi Arabia.

Anam Javed
Reviewed by:
Faye Ameen
February 20, 2024
0 min read time
Anam Javed
Marketing Operations Manager

Employee benefits and compensation are important in attracting and retaining top talent in Saudi Arabia. With mega projects like Neom and a youthful population entering the workforce, the Kingdom presents tremendous opportunities for multinationals. However, navigating the regulatory landscape around benefits and pay can be complex for newcomers.

You get it wrong and risk fines, high turnover, and reputational damage. But get it right? You secure a productive workforce motivated to drive your Saudi expansion to new heights.

The following information will upgrade your knowledge and confidence, whether you are just getting started or looking to fine-tune an existing Saudi compensation strategy. 


Statutory Benefits in Saudi Labor Law

Saudi Arabia has comprehensive labor laws that mandate several statutory benefits employers must provide. Understanding these required offerings ensures compliance.

[fs-toc-omit] 1. Reduced Working Hours During Ramadan

Per Saudi labor law, Muslim employees are entitled to six-hour working days during the holy month of Ramadan. This reduced schedule allows them to have sufficient time for prayers and fasting.

Read more: Get tips on How to Find Jobs in Saudi Arabia

[fs-toc-omit] 2. Paid Leaves

Annual Leave

According to the leaves policy the statutory minimum annual leave increases incrementally based on years of service:

  • 21 calendar days for 1-5 years of service
  • 30 calendar days for 6+ years of service

The leave accrues from the employee’s start date. It must be granted within 12 months; otherwise, the company owes the employee cash instead of leave.

Public Holidays

Employers must provide time off for Saudi public holidays, announced at the start of each Hijri calendar year. There are usually 10-12 paid public holidays.

Sick Leave

Employees are entitled to sick leave of up to 30 days at full pay, 60 days at 75%, and 30 days without pay per year. However, a medical certificate is typically required.

Maternity Leave

Female employees are granted ten weeks of fully paid maternity leave. This covers six weeks before the expected birth date and four weeks after.

Paternity Leave

New fathers receive three days of fully paid paternity leave.

Bereavement Leave

In the unfortunate event of the death of an employee's spouse, relative, or family member, they are granted five days of fully paid bereavement leave.

Hajj Leave

Muslim employees are allowed up to 10 days of unpaid leave to complete the Islamic pilgrimage of Hajj to Mecca. They must have worked at least two consecutive years with the employer to be eligible. This leave can only be taken once every five years.

Common Additional Benefits For Employees in Saudi Arabia

On top of legally required offerings, most employers provide additional benefits to attract and retain talent. Common extra benefits include:

[fs-toc-omit] 1. Health Insurance

Providing comprehensive health insurance is an expected part of a competitive compensation package in Saudi Arabia. This gives employees access to private healthcare. Packages often include coverage for dependents as well.

Read more: What is Nitaqat's Classification?

[fs-toc-omit] 2. Housing Allowance

Due to a shortage of housing options in major Saudi cities, offering a monthly housing stipend is very common. This financial support helps employees cover all or part of their rent.

[fs-toc-omit] 3. Transportation Allowance

With limited public transportation available, employers usually provide a transportation stipend. This monthly allowance helps employees pay for travel costs like fuel, maintenance, and car payments.

[fs-toc-omit] 4. Annual Airfare Allowance

Allowing a yearly round-trip ticket to an employee's home country is a typical benefit. This gives expat workers the ability to visit family and friends back home.

[fs-toc-omit] 5. Mobile Phone

Providing mobile devices and monthly network/data allowances is common. This covers the business and personal phone usage needs of employees.

[fs-toc-omit] 6. Savings Plans

Some companies offer matching retirement savings plans or incentives to help employees prepare financially for the future. However, this is not yet widespread in Saudi Arabia.

Also read: What is Defined Contributions Plan? 

[fs-toc-omit] 7. Education Support

Certain employers financially support employees or their children to pursue educational opportunities. This can include allowances, scholarships, or paid time off for studying.

Pay Regulations in Saudi Arabia

In addition to benefits, understanding compensation regulations is key for business in the Kingdom.

[fs-toc-omit] Minimum Wage

There is no universal minimum wage mandated in the private sector. However, public sector roles have a minimum salary of 3,000 SAR per month set by the government. Specific industries like construction and domestic labor have their monthly minimums as well.

[fs-toc-omit] Overtime Rules

Any hours worked beyond the standard 8-hour day or 48-hour workweek are entitled to overtime premiums:

  • 1.5 times the normal hourly rate for extra hours during the workweek
  • 2 times the normal hourly rate for hours on Fridays (weekends in KSA) and public holidays

[fs-toc-omit] End of Service Gratuity

Saudi labor law mandates severance pay based on years of service, known as end-of-service gratuity. The minimum requirements are:

  • 15 calendar days pay for 1-5 years of service
  • One month's pay for each additional year after five years
  • Part years over six months are counted as a full year
Read more: What Is Employee Turnover & How to Reduce it?

[fs-toc-omit] Wage Protection System

As part of efforts to ensure workers receive owed compensation, Saudi Arabia launched the Wage Protection System. This electronic salary transfer system requires all wages to be paid directly to employees’ bank accounts on time.

Read more: Get tips on 2024 Recruitment Statistics

Tax Considerations for Benefits

With no personal income tax in Saudi Arabia, benefits provided by an employer are not considered a taxable form of income. However, Value Added Tax (VAT) does apply to certain goods and services.

Any benefits provided in the form of monetary allowances would not incur any VAT. However, the employer or provider may charge VAT if applicable for benefits like health insurance and housing where services are purchased. Employers are required to pay due VAT on purchases made to provide employee benefits.

Building a Competitive Benefits Plan

Crafting an attractive benefits and compensation package is key to recruiting and retaining top talent in Saudi Arabia’s private sector. With no mandated offerings beyond the legal minimums, companies have the flexibility to shape plans that help differentiate their employer brand.


Below are some best practices to consider.

Benchmark Competitors

Research what typical benefits and compensation look like at other companies in your industry. This gives a perspective on competitive norms to consider when structuring your offerings.

Prioritize Flexibility

Understand the diverse needs of your workforce and provide benefit choices that offer flexibility. For example, consider providing health insurance that gives employees provider options rather than mandating one offering.

Focus on Convenience

Simplify benefit access and usage as much as possible for employees. This can include digitizing paperwork, centralizing information online, and automating cumbersome processes.

Communicate the Value

Communicate the total monetary value of employee compensation and benefits. This helps them fully appreciate the investment being made in them.

Gather Regular Feedback

Check-in periodically with employees on their benefit needs and satisfaction. This input can reveal opportunities to adjust plans to suit their evolving requirements better.


Successfully operating in the Saudi Arabian market requires staying current on the latest employee compensation and benefits regulations. While certain offerings are mandated by law, companies have significant flexibility to shape plans tailored to their objectives and workforce demographics. Investing in attractive benefits demonstrates a commitment to employees that can provide a valuable competitive edge. 

With the insights in this guide, companies can make informed decisions on structuring employee rewards programs that comply with Saudi employment laws while supporting recruitment, retention, and productivity goals.

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