With remote work becoming the new norm, employers have been able to access talent pools that span continents. There are skilled workers everywhere, but currently, Saudi Arabia has a spotlight on it. With a highly skilled workforce backed by innovation, employers are eager to recruit talent from there.
However, hiring abroad can pose significant challenges. Work with an Employer of Record (EOR) to simplify the process. It provides everything you need to hire employees from Saudi Arabia seamlessly.
This article will guide you through the reasons and benefits of using an EOR to hire employees in Saudi Arabia.
How Does an Employer of Record Help with Remote Work?
Without permanent establishment (PE) status, a company cannot legally hire employees in a foreign country. An employer of record (EOR) is the legal employer on paper for a foreign company. Working with a foreign employer, an EOR oversees the major areas of global employment. These include hiring, tax withholding, and structuring compensation and benefits packages.
Why Hire Talent in Saudi Arabia?
The minimum wage for Saudi national employees in the private sector is SAR (Saudi Arabian Riyals) 4,000 per month (2021). At around USD 1,066, this wage level is lower than anywhere else in North America and much of Europe. The standard corporate income tax rate is a flat 20%.
Regarding payroll, the cost of hiring an employee in Saudi Arabia is about 1.24 times base pay. This translates into a very affordable cost for foreign employers hiring employees in the Middle East.
Not needing permanent establishment status to hire in Saudi Arabia results in reduced costs of global hiring. Through an EOR, a foreign employer would typically only be subject to taxes on payments such as service or commission fees. For this reason, among several, EOR is one of the most economical ways of global hiring.
Saudi Arabia also has incredibly skilled and innovative workers. The nation has committed to investing USD 20 billion in artificial intelligence (AI) by 2030. This is merely a single objective of Vision 2030, the country's comprehensive plan for social, economic, and environmental development.
Saudi Arabia’s investment into research and development, digital infrastructure, and critically, education has successfully shifted it away from an oil-heavy to a tech-focused economy. Furthermore, these efforts have produced graduates from Ivy League schools and world-renowned institutions. With the support of global tech firms, the engineering expertise of this talented group of individuals continues making momentous strides across various fields. These include biotechnology and artificial intelligence, among technology at large.
Saudi Arabia’s explosive growth continues to propel its innovation-driven economy to new heights. For foreign employers, the Middle Eastern nation is an ideal destination for business and global hiring.
What Does an Employer of Record Do?
An EOR provides employers with an efficient and compliant way to recruit and hire talent from abroad. EORs take care of tedious administrative tasks associated with employment contracts, onboarding, tax documentation and filing, payroll processing, intellectual property protection, and termination.
With labor laws constantly changing across the world, using an EOR guarantees that you maintain strict compliance, no matter where you hire talent from.
Employment Contracts and Documentation
All employment contracts must be written in Arabic and may include a version in a foreign language. In practice, bilingual versions in Arabic and English are common. Probationary periods not exceeding 90 days must be included in employment contracts. With an employee’s agreement in writing, it may be extended, limited to a total of 180 days.
Although both definite and indefinite employment contracts can be concluded, non-Saudi employees may only work within a fixed-term contract. An unspecified end date of a foreign employee’s fixed-term contract finishes when the work visa or permit expires. For national Saudi employees, a fixed-term contract may be renewable twice to a total duration of four years. A fixed-term contract will become indefinite if it is renewed three times or if its duration exceeds four years.
Working with an EOR will ensure that the right contract is in place with all the correct information. An EOR will also ensure all the necessary documentation is collected, such as work permits, banking information, and more.
Paid Time Off, Leave, and Public Holidays
Employees are entitled to a number of leave entitlements in Saudi Arabia.
Employees are entitled to 21 days of leave after one year of employment. After five years, they are entitled to 30 days. Employees are also entitled to sick leave, in which the first 30 days are fully paid. An employee can take a maximum of 120 days of sick leave. However, they will not receive full pay.
A maternity leave of 10 days and paternity leave of three days with full pay can be taken. Marriage leave, examination leave, Hajj leave, and Iddah leave are among the leave entitlements available to employees.
There are also numerous holidays across Saudi Arabia. As of 2023, they are as follows:
- February 22: Foundation Day
- March 11: Saudi Flag Day
- April 21-24: Eid Al Fitr
- June 27-30: Eid al Adha
- September 23: National Day
There are other holidays for government employees, as well as seasonal and religious observances. Navigating paid time off, leave, and holidays in Saudi Arabia can be complicated, especially with different regional holidays. While there are guides and practices for employers to manage PTO on a global team, an EOR will ensure everything is properly tracked and calculated.
Tax Obligations
Employer taxes in Saudi Arabia are 10%, which includes social insurance and unemployment insurance. Despite this sounding relatively straightforward, taxes in Saudi Arabia are complex. To avoid complexities and compliance risks, work with an EOR. An EOR will handle all the logistics and file taxes correctly.
Employer Responsibilities
While the EOR takes care of all legal and HR procedures, like contracts, payroll, and taxes, the employer also has some responsibilities. The employer needs to take on responsibilities as if hiring a local candidate; this includes recruitment, interviewing, and onboarding. Once the employee is onboarded, it’s the employer’s responsibility to maintain the subordinate working relationship.
It’s also up to the employer to be aware of the working culture in Saudi Arabia and connect with employees. This will create a positive and welcoming work environment that encourages communication and inclusivity, ultimately helping with employee performance and retention.
Choosing the Right EOR for Your Business
Here are several key considerations for foreign employers to make the most informed decisions in choosing the best EOR for global hiring.
- Geographic coverage: Make sure that your EOR of choice can legally operate in Saudi Arabia.
- Employment services: The suite of employment services offered by a competitive EOR should cover hiring, onboarding, payroll, benefits, and HR management.
- Reputation: When selecting an EOR, get a sense of its past work and experience. Make sure that it has a great track record and the local know-how in the country you’re hiring from..
- Cost: A high-value EOR’s pricing should be transparent and reasonable.
- Flexibility: An EOR should offer customized employment solutions to meet your specific needs and requirements.
Overall, foreign employers should choose an EOR that can provide cost-effective, reliable, and compliance-first employment solutions. This will enable you to navigate and expand into foreign waters with confidence, ease, and trust.
An EOR Like Borderless Can Help
In over 170 countries, we are ready to help you hire, onboard, manage, and pay remote employees, wherever you are. Our experienced team of legal experts provides guidance on compliance and assists employers all over the world in navigating global hiring.
Whichever country you choose to do business in, book a demo today and discover what Borderless can do for you.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
