Contracts must be in Arabic, and bilingual contracts are also acceptable. They must be signed by both parties on the government portal. There will be amendments later, such as documents issued by the government for visa application submission or logging in on the QIWA portal, with the revised content covering additional clauses (non – competition, privacy policy, etc.).
Contracts must include name, start date, employment term (all employment contracts shall not exceed three years), job description, and termination conditions.
For employees with visas, the contract term can be 1 year (visa term), with a maximum of 3 years, and the visa is renewed annually. For Saudi nationals, if a fixed – term contract is renewed, it will become an indefinite – term contract.
Part – time Employees: IC Contracts: Only Saudi locals or foreigners outside Saudi Arabia can be ICs; foreigners cannot engage in part – time work/IC within Saudi Arabia.
2. Overview of Local Statutory Welfare Systems
Interns: There must be an internship contract including job description, working hours, internship information, etc.
Salary Payment:
Employers in Saudi Arabia must pay all salaries and other benefits in Saudi Riyals (SAR) and deposit them directly into employees’ bank accounts through Saudi Arabian banks to ensure that employees receive their salaries and benefits accurately and on time.
The payment frequency depends on the time – related basis of employees’ salaries. Monthly – paid employees receive payments at least once a month, and daily – or weekly – paid employees receive payments at least once a week.
Monthly Minimum Wage: In Saudi Arabia, the minimum wage depends on the employee’s nationality. For Saudi nationals, the minimum wage is 4,000 Saudi Riyals, and there is no minimum wage requirement for employees with visas.
Probation Period: The probation period is 90 days, which can be extended up to 180 days at most. No notice is required during the probation period.
3. Salary Payment and Statutory Holiday Responsibilities
Employer Costs:
The employer’s monthly expenses depend on the employee’s nationality, the selected health insurance category, and the gender and marital status of the employee and their dependents.
Social security: 2% for foreigners; 11.75% for locals (based on basic salary and housing allowance).
The cost of mandatory medical insurance ranges from 1,000 Saudi Riyals to 20,700 Saudi Riyals, depending on various factors.
The employer’s monthly expenses do not include visa fees.
Foreign employees are entitled to a one – way ticket back to their home country in case of resignation, contract expiration, or termination.
A foreign employee fee of $54 is required for each entry and exit from Saudi Arabia, and the maximum fee for multiple entry and exit applications within a year can reach $615.
If the employee is an engineer, an annual fee of 800 Saudi Engineering Council is required.
Personal Income Tax: There is no income tax in the Kingdom of Saudi Arabia.
Overtime Pay and Maximum Working Hours:
The standard working hours are 8 hours a day and 40 hours a week, with the standard working week from Sunday to Thursday. However, according to business needs, employees’ working hours can be extended to 8 hours a day and 48 hours a week from Saturday to Thursday.
During Ramadan, the working hours are 6 hours a day.
Overtime pay must be paid to non – management employees.
All working hours during holidays and Eid al – Fitr are considered overtime hours.
Employees can work a maximum of 10 hours a day and 60 hours a week (including overtime), with a maximum of 481 overtime hours a year. Overtime pay is 150% of the basic salary (calculated hourly).
Employees must obtain the employer’s written consent in advance for overtime work.
Employees in management positions are entitled to one day of rest in lieu of overtime pay. Overtime pay for management employees is not mandatory but can be given with the employer’s approval.
Statutory Holidays:
Full – time employees are entitled to 21 working days of paid time off (PTO) per year. PTO accumulates at 1.75 working days per month.
Employees who have worked in the company for more than five years are entitled to 30 days of annual leave.
Treatment or Conversion Logic for Unused Annual Leave at the End of the Year: The total annual leave is 21 days. The salary corresponding to the unused annual leave will be paid to employees according to the daily salary standard.
National Holidays: There are 4 national holidays in Saudi Arabia, including the Founding Day, Eid al – Fitr holiday (4 days), Eid al – Adha holiday (4 days), and National Day.
Other Holidays:
Maternity Leave: Employees are entitled to 10 weeks of paid leave, and 4 weeks can be taken before the child is born. During this period, employees will receive 100% of their salary, and the employer will be responsible for paying this salary.
Paternity Leave: Employees are entitled to 3 days of paid paternity leave, which must be taken after the child is born. During this period, employees will receive 100% of their salary, and the employer will be responsible for paying this salary.
Sick Leave: Employees are entitled to a maximum of 60 days of paid sick leave. The salary rate and payer of sick leave vary according to the length of the sick leave.
Calculation Logic for Incomplete – Attendance Salaries (including Absence or Unpaid Leave): Monthly salary / number of natural days in the month * number of absent days.
Local Minimum Wage Required for Split Payroll Work Visas of Expatriate Employees: 20,00 Saudi Riyals.
4. Dismissal Rules and Compensation Arrangements
Whether Local Social Welfare Can Be Withdrawn (e.g., Provident Fund): It can be withdrawn in case of work – related injuries.
Dismissal (Legal Requirements and Best Practices):
Notice Period: The shortest notice period is 60 days and varies according to the type of employment.
Voluntary Resignation:
Employees can resign at any time according to the employment agreement.
Severance pay includes salary and benefits during the notice period or payment in lieu of notice, salary for accumulated but unused annual leave days, service termination gratuity if the employee has served for more than 2 years, repatriation flight/ticket expenses, and any payable bonuses or commissions in the contract.
Dismissal during Probation Period:
Employers are allowed to terminate the employment relationship at any time during the probation period, with reasons including poor performance, bad behavior, etc.
Employers must be prepared to explain the reasons for dismissal and must not discriminate; the employment relationship can be terminated at any time during the probation period, unless otherwise stipulated in the contract.
Negotiated Dismissal:
Employers and employees are allowed to mutually agree to terminate the employment relationship at any time. Common reasons include potential disputes or lawsuits involving employees.
Severance pay must be higher than the legally required amount, including salary and benefits during the notice period or payment in lieu of notice, salary for accumulated but unused annual leave days, service termination gratuity if the employee has served for more than one year, and any payable bonuses or commissions in the contract.
Dismissal with Just Cause:
Employers are allowed to dismiss employees for willful misconduct. Reasons include serious misconduct, repeated violations of company policies, etc.
Employers must conduct an appropriate investigation into the alleged misconduct and hold a disciplinary hearing to allow employees to respond to the allegations or defend themselves.
Severance pay includes salary and benefits during the notice period or payment in lieu of notice, salary for accumulated but unused annual leave days, repatriation flight/ticket expenses, and any payable bonuses or commissions in the contract.
Conversion of Annual Leave for Departing Employees: Monthly salary / 30 * number of unused annual leave days.
5. Analysis of Local Government Incentive Measures and Policies for Local Company Establishment and Local Employment
Local Employment Protection Policy: Saudi Arabia’s local employment protection policy focuses on “Saudization” and the “Nitaqat” program. Its core goal is to reduce dependence on foreign labor and increase the participation of Saudi citizens in the local labor market. Key policy points include the Nitaqat program for company classification management, restrictions on foreign labor, setting a minimum wage for Saudi citizens, training and development programs, and promoting female employment.
Quota Ratio of Work Permits for Foreign Employees: It depends on the company’s scope of business. In some industries, there are special requirements for the quota ratio of certain positions. For example, the sales quota ratio in some industries is 1:1, and some positions can only be held by Saudis (e.g., HRM).
6. Local Human Resources Analysis and Employment Suggestions
Unemployment Rate: In the first quarter of 2024, the overall unemployment rate in Saudi Arabia (including Saudi nationals and foreign residents) dropped to 3.5%, while the unemployment rate of Saudi nationals in the first quarter reached 7.6%, a year – on – year decrease of 1.1%. https://www.stats.gov.sa/en
Average Salary Trend:
The average monthly salary ranges from 5,042 SAR to 20,382 SAR.
Hire appropriately according to different nationalities. Talents of certain nationalities are generally suitable for market development and customer relationship maintenance, while technicians of certain nationalities are stronger.
Pay attention to the diversification of the nationality of self – employed employees, which helps improve the company’s rating at the labor bureau and reduce work permit fees.
Salary payment should be made through WPS for compliance.
7. Local Cultural Adaptation
Language: The official language is Arabic, and English is commonly used in business.
Religious Customs:
Islam is the state religion, with Sunnis accounting for 85% and Shias accounting for 15%. Religious activities other than Islam are prohibited in public places. There are two major religious festivals in Saudi Arabia each year: Eid al – Fitr and Eid al – Adha. During Ramadan, people (except the sick, pregnant women, nursing mothers, and those who start a journey before sunrise) are prohibited from drinking water and eating from sunrise to sunset.
Saudis are warm – hearted, sincere, and helpful. Their diet is mainly based on pasta, beef, and mutton, and they like sweets. Saudi women often wear black robes and headscarves when going out, and some still wear veils. The marriages of young men and women are decided by their parents. Saudis dress simply. Men wear white robes, white headscarves, and are bound with black rope circles. Many people like to wear red – checked headscarves. People with high social status wear a black or golden – edged silk robe over their white robes. Royal family members and big sheikhs wear this kind of silk robe.
Traditional taboos include strict prohibition of alcohol, no random photography (especially of women, religious facilities, and royal buildings), fasting of pork and all ugly and unclean things, and avoiding using the left hand to deliver things or food.
Business Culture:
Saudis are very particular about greeting etiquette. When meeting, they first greet each other, and some Saudis will put their left hand on the other person’s right shoulder and kiss both cheeks.
Saudis value loyalty. When visiting a Saudi family, if the guest refuses to drink the tea or coffee provided by the host, the host may think that the guest does not trust him.
Saudis like to entertain guests with their unique coffee.
When invited to a host’s home, guests can bring some small gifts, such as candies and handicrafts.
Alcohol is strictly prohibited locally. Do not bring alcohol – related gifts, and it is strictly prohibited to brew or sell alcohol privately locally.
Do not talk about royal family topics.
Unless it is an emergency, it is recommended not to disturb Saudis on Fridays and Saturdays, which are rest days.
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