Saudi Arabia ‒ Payroll and HR-Service

Population

Saudi Arabia has a population of approximately 36 million people (as of 2023). A significant portion of this population consists of foreign workers employed in various sectors such as construction, healthcare, and services. The native population is predominantly Arab, and Islam is the dominant religion.

Capital

The capital of Saudi Arabia is Riyadh, which serves as the political, administrative, and economic center of the country. Riyadh has experienced rapid growth over the past few decades and is home to numerous government institutions, businesses, and cultural facilities.

Economic Strength

Saudi Arabia has the largest economy in the Arab world, primarily based on oil production, with the country holding about 17% of the world’s oil reserves and being one of the leading oil exporters globally. To reduce its dependence on oil, the Saudi government launched Vision 2030, a comprehensive reform plan aimed at diversifying the economy into sectors such as renewable energy, tourism, technology, and finance.

Culture

Saudi Arabian culture is deeply rooted in Islamic traditions, as the country is home to the holy cities of Mecca and Medina. Saudi society is conservative, with Islamic values and laws playing a central role in daily life. Traditional music, dance, and poetry are important elements of Saudi culture, and Arabic is the official language.

Currency

The official currency of Saudi Arabia is the Saudi Riyal (SAR). One Riyal is divided into 100 Halalas. The Riyal has long been pegged to the US Dollar, with 1 USD approximately equaling 3.75 SAR.

Health Insurance and Social Security System

Saudi Arabia provides a social security system that covers both Saudi citizens and foreign workers. Citizens have access to free public healthcare services, while foreign employees are required to have private health insurance, usually provided by their employers. The General Organization for Social Insurance (GOSI) administers the social security system, which includes benefits for retirement, disability, and death.

Employer Costs

Employers in Saudi Arabia are required to contribute to social security (GOSI). For Saudi employees, the total contribution is 22% of the salary, with the employer paying 12% and the employee contributing 10%. For non-Saudi employees, the contribution is 2%, entirely covered by the employer. Additionally, employers are responsible for providing compulsory health insurance for foreign workers.

Salary and Bonuses

Salaries in Saudi Arabia are generally competitive and tax-free, which makes the country an attractive destination for expatriates. Many companies offer additional benefits, including housing, transportation, and education allowances for children. Bonuses are common and may be based on individual or company performance. A 13th-month salary is not legally required but may be offered by some companies.

Payslip

Salaries are typically paid on a monthly basis. Employers are required to pay wages on time and to make the necessary contributions to social security (GOSI). Since there is no personal income tax in Saudi Arabia, employees do not have income tax deductions from their salaries.

Public Holidays

Public holidays in Saudi Arabia are predominantly religious in nature. The key holidays include:

• Eid al-Fitr (celebrating the end of Ramadan) – typically 3-4 days
• Eid al-Adha (Festival of Sacrifice) – typically 3-4 days
• Saudi National Day – September 23

The exact dates of Islamic holidays vary as they follow the Islamic lunar calendar.

Working Hours

The standard working hours in Saudi Arabia are 8 hours per day or 48 hours per week. During the holy month of Ramadan, working hours for Muslim employees are reduced to 6 hours per day. The weekend in Saudi Arabia falls on Friday and Saturday.

Vacation

Employees are entitled to at least 21 days of paid annual leave, which increases to 30 days after five years of service. In addition, employees may receive paid leave for performing the Hajj pilgrimage (up to 10 days once during their employment) and for personal events such as marriage or the birth of a child.

Sick Leave

In cases of illness, employees are entitled to sick leave as follows:

• First 30 days: Full salary
• Next 60 days: Three-quarters of the salary
• Additional 30 days: Unpaid

These rules apply within a 12-month period, and employees must provide a medical certificate to qualify for sick leave.

Termination/Severance

Termination must comply with Saudi labor laws. The notice periods are:

• Unlimited contract: 60 days’ notice for employees on a monthly wage or 30 days for other payment schedules
• Fixed-term contract: Can only be terminated for valid reasons

Employees are entitled to severance pay based on the length of service:

• Half a month’s salary for each of the first five years
• One month’s salary for each subsequent year

Severance is calculated based on the employee’s final salary. If the employee resigns, severance entitlement is typically reduced.