How to hire in Saudi Arabia

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Hiring in Saudi Arabia - Brief Overview

Saudi Arabia is a major player in the global economy. While it is the world’s largest exporter and producer of oil, the kingdom is now actively pursuing diversification initiatives. With a keen focus on sectors like tourism, technology, and infrastructure, Saudi Arabia is embracing a multifaceted approach to economic growth.

Located at the crossroads of Asia, Europe, and Africa, Saudi Arabia is also a key player in international trade.

When it comes to hiring in Saudi Arabia, employers and recruiters need to be aware of the local customs and legislations around recruitment. Currently, there is a growing emphasis on Saudization, which means there's a focus on hiring Saudi nationals, particularly in industries like IT..

Additionally, a significant portion of hiring occurs through referrals, which can pose challenges for newcomers to the country. To overcome this hurdle, companies can advertise on multiple job boards or utilize an AI recruitment platform, like Iris, to find the right candidates for the job.

Facts & Stats

Population

35.34M (16.1M labor force)

Caspital City

Riyadh

Languages Spoken

Arabic

Currency

Saudi Riyal (SAR)

GDP Per Capita

$19,162

Ease of Doing Business

52nd in the world

Minimun Wage

4,000 SAR/month

Average Wage

16,600 SAR/month

Paid Leave

21-30 days

Labor Laws in Saudi Arabia

Here are some crucial aspects to be aware of when hiring in Saudi Arabia:

Saudization

Employers are obligated to attract, hire, and retain Saudi nationals, with a minimum requirement of 75% Saudi workforce in any organization, although temporary reductions may apply under specific circumstances. 

The Nitaqat scheme, which covers private sector companies with six or more employees, mandates quotas for hiring Saudi nationals based on company size and sector. Each company must employ at least one Saudi national. By categorizing companies according to their Saudization compliance, the scheme impacts their ability to obtain visas and residence permits for foreign workers.

Certain designated jobs are exclusively reserved for Saudi nationals, and recruiting Saudi or foreign nationals requires obtaining a license from the Ministry of Human Resource and Social Development.

Working Hours in Saudi

The standard workweek in Saudi Arabia comprises 8 hours per day over 5 days, totaling not more than 48 hours weekly. During Ramadan, daily working hours may be reduced to 6 hours. 

Overtime beyond the standard 48-hour workweek is compensable at a rate of 150% of the employee’s average salary rate, with additional compensation for work during rest days or holidays.

Minimum Wage Requirements

The minimum wage in Saudi Arabia is SAR 4,000 for Saudi nationals, while there is no stipulated minimum wage for employees with visas.

Income Tax

There is no individual income tax in Saudi Arabia.

Employee Probation Period

An employee may undergo a probationary period of up to 90 calendar days, extendable to 180 days with mutual consent, during which the contract can be terminated without notice.

Navigating Employment Taxes in Saudi Arabia

Understanding employment taxes in Saudi Arabia is crucial for both employers and employees when operating in Saudi Arabia's business landscape. This section explains tax contributions by employers, employees, and individuals and other tax considerations.

Employer Tax Contributions

10%

Employers in Saudi Arabia typically contribute an additional 2% - 12% on top of the employee's salary towards various social insurance taxes. These contributions vary depending on whether the employee is a Saudi national or non-Saudi.

Employer Tax

2% - 12%

Employers in Saudi Arabia typically contribute an additional 2% - 12% on top of the employee's salary towards various social insurance taxes. These contributions vary depending on whether the employee is a Saudi national or non-Saudi.

Individual Tax

0%

Saudi Arabia does not impose any income tax on individuals, providing a tax-free income environment for employees.

Pension in Saudi Arabia

To qualify for Saudi Arabia's old-age retirement pension, individuals must contribute for a minimum of 120 months to the General Organization for Social Insurance (GOSI) and be at least 58 years old. Those with 300 months of contributions are eligible for retirement at any age, with the minimum monthly old-age state pension set at 1,984 SAR.

Understanding Employment Termination in Saudi Arabia

Comprehending termination of employment in Saudi Arabia requires a thorough understanding of legal obligations regarding termination protocols. Below, we dive into the essential aspects that both employers and employees should consider.

Termination Process

In Saudi Arabia, the termination procedure must be clearly outlined in writing, aligning with the terms of the employment agreement, and is based on the contract type and the reason for termination. This may potentially include the termination of visa sponsorship. 

Acceptable circumstances for termination include:

  • Voluntary resignation by the employee
  • Mutual agreement between both parties
  • Unilateral termination by the employer (based on the probation period, specific grounds, disciplinary dismissal, or inadequate performance on the job)
  • Expiration of the employment contract

Notice Period

Notice periods vary based on the type of employment contract. During the probation period, a one-day notice is required, while indefinite contracts necessitate a 60-day notice for termination or resignation. Fixed-term contracts mandate a 30-day notice period.

Severance Pay

Upon termination, employees in Saudi Arabia are entitled to End-of-Service Gratuity (EOSG). 

For employer terminations, the calculation involves adding half a month's salary for the first 5 years and one month's wage for each subsequent year of service. Fractional years are compensated based on the last salary. In the case of employee resignation, entitlements are prorated based on years of service.

  • 2-5 years of service ‚Äď 1/3 of the award
  • 5-10 years of service ‚Äď 2/3 of the award
  • More than 10 years of service ‚Äď full award

Leaves and Company Policies in Saudi Arabia

Here's an overview of the various types of leaves and their corresponding regulations:

Annual Leave

Employees are entitled to 21 days of paid annual leave per year, which increases to 30 days after five consecutive years of service. All annual leaves should be granted in full at the start of the year. However, employees will need to ask for permission before taking time off. 

All leave has to be taken in the year it was granted, and employees are not allowed to forgo time off or receive any compensation in its place. 

Sick Leave

Employers must provide 90 paid sick days, with full wages for the first 30 days and three-quarters of normal wages for the subsequent 60 days. Additional unpaid sick leave may be granted if needed.

Maternity and Paternity Leave

Female employees are entitled to ten weeks of paid maternity leave, while new fathers receive three days of paid parental leave. Maternity leave is granted with varying wage percentages based on the duration of service.

Hajj Leave

Employees who have not performed the pilgrimage to Mecca and Medina are entitled to 10-15 days of paid leave once during their tenure.

Student Leave

Student workers are granted paid leave on examination days, provided they are not repeating a school year.

Marriage Leave

Newly married employees receive three days of paid leave from the Saudi government.

Bereavement Leave

Employees are allowed up to 5 days of leave in the event of the death of a spouse or child. Female employees may be entitled to 15-30 days of paid leave based on religious conditions.

Public holidays in Saudi Arabia

Saudi Arabia observes the following public holidays:

  • Eid al-Fitr (4 consecutive days)
  • Arafat Day
  • Eid al-Adha (3 consecutive days)
  • National Day
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Paid Time Off

Full-time employees are entitled to 21 working days of paid time off (PTO) a year, accruing monthly at 1.75 working days per month. Employees with more than five years of service are entitled to 30 days of annual leave.

Frequently asked questions

What makes Iris unique for hiring in Saudi Arabia?

Iris offers AI-powered features such as job description generation, video interviews, and advanced applicant tracking system (ATS), along with personalized outreach capabilities. It also provides access to over 100 job boards and is accessible in more than 20 languages, making it an ideal solution for hiring diverse talent in Saudi Arabia.

Why is Saudization important for employers in Saudi Arabia?

Saudization requires companies to hire a certain percentage of Saudi nationals. Compliance with Saudization quotas affects a company's eligibility for visas and residence permits for foreign workers, making it crucial for employers to prioritize the hiring of Saudi nationals.

What are the key labor laws employers should be aware of in Saudi Arabia?

Employers should understand the regulations surrounding Saudization, working hours, minimum wage requirements, and termination procedures. Additionally, knowledge of employee probation periods, pension schemes, and taxation laws is essential for compliance with Saudi labor laws.

How does termination of employment work in Saudi Arabia?

Termination of employment in Saudi Arabia must adhere to written procedures outlined in the employment agreement. Acceptable reasons for termination include voluntary resignation, mutual agreement, unilateral termination by the employer, or expiration of the employment contract. Notice periods and severance pay entitlements vary based on the type of employment contract.

What are the leave policies and entitlements in Saudi Arabia?

Saudi Arabia mandates paid annual leave, sick leave, maternity and paternity leave, hajj leave, student leave, marriage leave, and bereavement leave for employees. Additionally, the country observes public holidays, and full-time employees are entitled to paid time off (PTO) annually, with increased entitlements for employees with more than five years of service.

How can I get started with Iris for hiring in Saudi Arabia?

To get started with Iris, you can either book a demo or sign up directly through our website. Our team will guide you through the process of utilizing Iris's features to discover exceptional talent and streamline your hiring process in Saudi Arabia.