Employer of Record Guide in 

Saudi Arabia

Annual Leave

• Entitlement: Minimum 21 calendar days per year after completing one year of service
• Accrual: Increases to 30 calendar days after 5 years of continuous service
• Payout: Unused leave must be paid out upon termination
• Timing: Employee may take leave after completing 6 months of service

Sick Leave

• Paid Sick Leave: Up to 120 days per year
  • First 30 days: Full salary
  • Next 60 days: 75% of salary
  • Final 30 days: Unpaid (job protection continues)
• Medical Certificate: Required for absences exceeding 3 consecutive days
• Chronic Illness: Special provisions may apply for extended medical conditions

Maternity Leave

• Duration: 10 weeks total
  • 4 weeks before expected delivery
  • 6 weeks after delivery
• Pay: Full salary during entire period
• Flexibility: Employee may choose to work closer to delivery date and extend post-birth leave
• Job Protection: Position must be held during leave period

Paternity Leave

• Duration: 3 days for the birth of a child
• Pay: Full salary
• Timing: Must be taken within 30 days of birth

Hajj Leave

• Entitlement: Once during employment for Muslim employees
• Duration: Up to 2 weeks
• Pay: Unpaid leave, but job protection applies
• Eligibility: After completing 2 years of continuous service

Other Leave Types

• Bereavement: 3-5 days for immediate family members
• Marriage Leave: 5 days for employee's own marriage
• Study Leave: Available for approved educational programs (typically unpaid)

Summary

Termination Types

Termination With Cause:

• Immediate dismissal without notice or compensation
• Must involve serious misconduct as defined by Saudi Labour Law
• Examples: fraud, breach of confidentiality, repeated violations

Termination Without Cause:

• Requires notice period or payment in lieu
• Must provide end-of-service gratuity
• Cannot be discriminatory or retaliatory

Notice Period Requirements

Note: Employer may provide payment in lieu of notice.

End-of-Service Gratuity

Mandatory severance payment based on length of service:

For employees with indefinite contracts:

• First 5 years: Half month's salary per year
• After 5 years: One month's salary per year

For employees with fixed-term contracts:

• Gratuity calculated proportionally based on time served

Final Pay Requirements

Employers must settle all dues within 7 days of termination:

• Outstanding salary
• Accrued vacation pay
• End-of-service gratuity
• Any other contractual benefits

Probationary Periods

• Duration: Maximum 90 days (extendable to 180 days with employee consent)
• Termination: Either party may terminate with 24 hours' notice during probation
• Benefits: Limited benefits during probationary period

National Holidays

Saudi Arabia observes both Islamic holidays (based on lunar calendar) and national commemorative days:

Fixed National Days:

• National Day: September 23
• Founding Day: February 22

Islamic Holidays (dates vary annually):

• Eid Al-Fitr: 4-5 days
• Eid Al-Adha: 4-5 days
• Islamic New Year: 1 day
• Prophet Muhammad's Birthday: 1 day
• Day of Arafah: 1 day

Holiday Pay

• Eligibility: Employees who have completed 90 days of service
• Pay Rate: Full salary for holiday periods
• Working on Holidays: Double pay plus compensatory time off

Regional Considerations

• Islamic Calendar: Holiday dates shift approximately 11 days earlier each year
• Announcement: Exact dates typically confirmed by religious authorities closer to the time
• Business Impact: Extended closures during Eid periods are common

Required Documents

Employment Contract Requirements:

• Job title and description
• Salary and benefits
• Working hours and location
• Contract duration (if fixed-term)
• Termination clauses
• Must be in Arabic (English translation permitted)

Government Documentation:

• Iqama (residence permit) for foreign workers
• Saudi ID for nationals
• Educational certificates (attested)
• Medical fitness certificate
• Police clearance certificate (for foreign workers)

Work Authorization

For Foreign Workers:

• Valid work visa and Iqama required
• Sponsored by employing company
• Cannot change employers without proper transfer procedures
• Must exit and re-enter Kingdom if changing sponsors (in most cases)

For Saudi Nationals:

• Saudi ID required
• No work authorization restrictions

Language Requirements

• Arabic: Official language for all legal documents and government communications
• English: Widely used in business, especially in international companies
• Contracts: Must be available in Arabic; English versions are supplementary

Medical Requirements

• Medical Examination: Required for all employees
• Health Insurance: Mandatory for all employees and their dependents
• Specific Tests: May include screening for communicable diseases

Saudization Compliance

• Nitaqat Program: Companies must maintain minimum percentages of Saudi employees
• Reporting: Regular reporting to Ministry of Human Resources required
• Penalties: Non-compliance can result in restrictions on visa issuance and renewals

Cultural Onboarding

• Islamic Practices: Respect for prayer times and religious observances
• Dress Code: Conservative dress requirements, especially in traditional sectors
• Gender Considerations: Understanding of cultural norms regarding workplace interactions
• Business Hours: Adjustment for prayer times and cultural practices

Worker Classification

Saudi Labour Law distinguishes between employees and contractors, with strict criteria:

Employees:

• Subject to employer control and supervision
• Entitled to full labour law protections
• Covered by GOSI contributions
• Eligible for end-of-service benefits

Independent Contractors:

• Operate independently with minimal supervision
• Not covered by labour law protections
• Responsible for own social insurance
• Invoice for services rather than receive salary

Note: Misclassification can result in significant penalties and back-payment of benefits.

Saudization Requirements

The Nitaqat program requires companies to maintain specific ratios of Saudi to foreign workers:

• Platinum: 50%+ Saudi employees
• Green: Varies by sector (typically 25-40%)
• Yellow: Below target ratios
• Red: Significantly below requirements

Benefits of higher Saudization include easier visa processing and government contract eligibility.

Cultural Workplace Norms

Religious Considerations:

• Five daily prayer times accommodated
• Ramadan working hour adjustments
• Respect for Islamic holidays and practices

Business Culture:

• Relationship-building is crucial
• Patience with decision-making processes
• Respect for hierarchy and seniority
• Friday is the holy day (equivalent to Sunday)

Communication Style:

• Formal and respectful approach preferred
• Arabic greetings and courtesies appreciated
• Direct confrontation generally avoided

Remote Work Considerations

Remote work policies have evolved significantly, especially post-COVID:

• Legal Framework: Permitted under updated labour regulations
• Equipment: Employer typically provides necessary technology
• Working Hours: Must still comply with standard hour limitations
• Supervision: Regular check-ins and performance monitoring expected

Cross-Border Considerations:

• Foreign employees working remotely from Saudi Arabia must maintain valid Iqama
• Tax implications for employees working across borders
• Compliance with both Saudi and home country regulations may be required

Health and Safety Requirements

• Workplace Safety: Comprehensive health and safety regulations apply
• Insurance: Mandatory health insurance for all employees and dependents
• Reporting: Workplace incidents must be reported to relevant authorities
• Training: Safety training requirements vary by industry