Saudi Arabia is the epicenter of innovation and development in the Middle East. With new-age projects like Neom, the country requires a large workforce influx to realize its ambitions. To create an attractive work environment, Saudi Arabia has made amendments in recent years. Aiming to create a balanced and fair work environment for employers and employees.
This guide on Saudi Arabia’s labour law aims to introduce employers to the new provisions and regulations they must comply with.
Table of Contents
Understanding Saudi Arabia's Employment Laws
Saudi Arabia’s employment law provides a legal framework to regulate the relationship between employers and employees, ensuring that both parties know their rights and obligations. While employees must be familiar with rights, employers must also know their obligations and rights. The provisions in the Saudi labour law include employment contracts, working hours, wages, leave entitlements, and termination of employment.
What are Saudi Arabia Employment Laws?
The Saudi Arabia Employment Laws are primarily governed by the Saudi Labour Law issued by Royal Decree No. M/51 of 23 Sha’ban 1426 (September 27, 2005). It sets the legal framework for employment in the Kingdom. However, the Kingdom made some significant amendments to the existing labour laws under Resolution No. 51848/1442 that took effect in March 2021. These updates address new challenges and improve worker protections.
Let’s delve deeper into Saudi Arabia labour laws employers must know in 2024.
Recent Labour Law Reform
The amendments brought in by Resolution No. 51848/1442 make it a lot easier for employees to look for, change, and leave their jobs. Before these reforms, foreign workers had to seek permission from their employers to change jobs or perform any other administrative tasks.
The essential changes outlined in the resolution are:
- Employees can leave their jobs without their employer’s consent when their contract ends.
- Employees can leave their jobs during the contract period if they have been in the country for a year and serve 90 days’ notice.
- Now, employees can change their employment within the first year under certain conditions.
- Use the electronic portal to look for jobs, notify employers, and input transfer requests.
These reforms are part of a broader effort to modernize the labour market, reduce unemployment, and ensure fair treatment of all workers in Saudi Arabia.
As for the employers, the latest labour law reform states:
- Employers can terminate employees on indefinite contracts if they have cause like employee misconduct
- The notice period is 60 days for employees that get a monthly salary and 30 days otherwise. Still the work contract may stipulate longer notice period and the employer can offer pay in lieu of the notice.
- Also, employers can even terminate fixed term contracts with a just cause. But the assumption is that the employers will not renew the fixed term contract after the end date. As per KSA labour law, both the parties should agree on notice period in their contract. If the contract doesn’t say any notice period, then it is 60 days.
Saudi Arabia Laws Regarding Employment
- The Kingdom of Saudi Arabia has strict employment laws that apply to all employees regardless of nationality.
- Saudi Arabia has a minimum age requirement. Male employees must be 21 or older to be legally employed. For females, the minimum age requirement for employment is 22 years.
- Any person under 18 and 15 or older is recognized as a minor. Minors cannot be employed in any hazardous work or a role that may endanger their health, safety, or morals.
- Any person below the age of 15 cannot be employed or allowed to enter a place of work.
- All employees should undergo a medical examination from an accredited authority to prove their fitness for the position.
- All female workers must adhere to specific dress codes in the workplace. This means that as a woman, you must wear a long sleeved top or dress, high neckline and should be loose fitted. On the bottom, one must wear full length and loose skirts or bottoms.
- These regulations are designed to create a safe and equitable work environment for all employees, regardless of age or gender.
Labour Regulations for Saudi Nationals/ Saudisation
To support the nationals and economy, Saudi Arabia has introduced the policy of Saudi Nationalisation, popularly known as the Saudisation policy or Nitaqat, in local terms. The Saudisation regulation requires businesses operating in Saudi Arabia to fulfill a quota for hiring Saudi Arabians.
Note that Saudisation requirements depend on three factors:
- Classification of a business
- Size of the business
- Percentage of current Saudi employees in the workforce
The 2024 updates to the Saudi Labour Law reinforced this policy with several key measures:
- Companies with five or fewer employees must have at least 1 Saudi employee.
- For international companies, a Saudi national must hold the role next to the General Manager.
- Businesses with more than 100 employees must have 30% Saudisation.
Companies must meet specific Saudisation quotas based on which they are given Premium, Green, and Red status. Premium and Green-status companies can apply for block visas, while red-status businesses can only obtain visas for expatriate employees through a transfer of sponsorship. This means that Red status businesses can only hire foreign workers if they are already in the country and have requisite work authorizations from their current employers.
Distinct Labour Regulations for Expatriate Employees
Expatriate employees form a significant portion of the workforce in Saudi Arabia. 66% of the total workforce in Saudi Arabia is made of expatriates. Therefore, there are distinct labour regulations to regulate foreign worker employment and ensure their rights are protected.
Regulations for Expatriate Employees
The 2024 updates to the Saudi Labour Law introduce several significant changes for expatriate workers:
- Employers must have the approval of the Ministry of Human Resources and Social Development to hire expatriates.
- Expatriate employees must have valid work permits and residency visas (Iqama). Employers are responsible for obtaining and renewing these permits.
- New labour law in Saudi Arabia requires non-Saudi workers to have a written work contract with a fixed term.
- An employer cannot employ non-Saudis for a role other than specified in their work permit.
- Foreigners cannot change their profession without taking the necessary legal measures.
- Employers must follow stipulated rules and procedures before allowing foreign workers to work for others.
Iqama Visa
The Iqama visa is a residency permit that allows expatriates to live and work in Saudi Arabia for the long term. It is an essential document for expatriate employees and must be obtained and renewed regularly.
To obtain an Iqama visa, expatriates must comply with all these regulations:
- Have sponsorship from an employer.
- Sponsorship must be from a Saudi company or a business licensed to conduct business in Saudi Arabia.
- Take medical examinations for a residential permit
- Foreign workers must apply for Iqama within 90 days of arrival in Saudi Arabia.
What are the Time Management Laws in Saudi Arabia?
Time management laws in Saudi Arabia regulate working hours, rest periods, and overtime to ensure a fair balance between work and personal life.
Key provisions include
Standard Working Hours: The standard working hours are eight hours per day and 48 hours per week. However, during Ramadan, the working hours are reduced to six hours per day or 36 hours per week.
Rest Periods: Employees are entitled to a break of at least 30 minutes for rest, prayer, or meals after five consecutive work hours.
Overtime: Employees who work beyond the standard hours are entitled to overtime pay at 1.5 times their regular hourly wage. Alternatively, employers and employees can also agree to compensatory time off instead of overtime pay.
Weekly Rest: Friday is the official weekly off for employees in Saudi Arabia. Businesses can change the weekly off day, but all workers are entitled to at least one full day of rest per week.
Public Holidays: Employers must provide paid leave for officially recognized public holidays in Saudi Arabia. There are 5 public holidays in Saudi Arabia- Saudi Founding Day, Eid-al-Fitr, Arafat Day, Eid-al-Adha and Saudi National Day.
These regulations ensure that employees have adequate rest and are compensated fairly for extra work.
Additional Rights and Obligations of Employers in Saudi Arabia
Employers must know several additional rights and obligations under the labour law, such as anti-discrimination laws, health and safety regulations, leave entitlements, and social security provisions.
Anti-discrimination Laws
The new amendments to the Saudi Labour Law include specific anti-discrimination provisions to protect employees from unfair treatment based on race, gender, nationality, religion, or disability. Employers must ensure a workplace free from discrimination and promote equality and diversity.
Health and Safety Regulations
The health and safety regulations require employers to provide regular safety training sessions for employees to ensure they are aware of potential hazards and how to avoid them. All necessary safety equipment must be installed and must be in good condition. Also, there must be clear emergency procedures, including fire drills and evacuation plans.
Annual Leave and Holidays
Employees in Saudi Arabia are entitled to annual leave and public holidays, including:
21 days of paid annual leave after 1-5 years of service, which increases to 30 days after five years of service.
Employees are entitled to public holidays, usually 10-12 days, including Eid Al-Fitr, Eid Al-Adha, and National Day.
Social Security and Health Insurance
Employers must provide social security and health insurance benefits to their employees. The General Organization for Social Insurance (GOSI) provides social security benefits, including pensions and disability benefits. Employers must register their employees by the GOSI. Additionally, employers must provide health insurance coverage for their employees, ensuring access to medical care.
Leave Entitlements
Employees in Saudi Arabia are entitled to various types of leave, including:
Sick Leave: Employees are entitled to up to 30 days of paid sick leave annually, with a medical certificate. The next 60 days may go from one third to three quarter.
Maternity Leave: All female employees are entitled to 10 weeks of paid maternity leave.
Paternity Leave: Fathers are entitled to three days of paid paternity leave.
Bereavement Leave: Employees are entitled to five days of leave in case of the death of a spouse, relative, or close family member.
Hajj Leave: Muslim employees who have completed two years of service are entitled to 10 days to perform the Hajj pilgrimage. This is 10-15 days of paid religious leave.
Working Hours and Overtime
The Saudi Labour Law mandates employers to fix regular work hours to 8 hours per day and 48 hours per week, reduced to six hours per day during Ramadan. Any additional hours must be considered overtime and compensated at 150% of the regular hourly wage.
Public Holidays
Employees are entitled to public holidays, including Eid Al-Fitr, four days; Eid Al-Adha, four days; and National Day, one day.
Payroll Rules in Saudi Arabia
Compensation regulations are essential for compliance in Saudi Arabia. Key provisions are designed to ensure employees are paid fairly and on time.
Minimum Wage & Payment of Wages
There is no universal minimum wage mandate in the private sector in Saudi Arabia. However, the public sector has a monthly minimum salary requirement of SAR 3,000.
Employers must pay wages at least once a month and ensure that payments are made on time. Wages must be paid in Saudi Riyals unless otherwise agreed.
Deductions from Wages
Employers are allowed to make deductions from an employee’s wages. Deductions for taxes and social security contributions are allowed. Deductions for fines imposed for violations of company policies, provided they are documented and communicated to the employee.
Any deduction without the employees’ consent or those reducing the wages below the minimum threshold is prohibited.
What is an Employment Contract under the Saudi Arabia Labour Law?
An employment contract in Saudi Arabia is a legally binding agreement between an employer and an employee that outlines the terms and conditions of employment. The employment contract is necessary and must comply with the provisions of Saudi Labour Law and clearly define both parties’ rights and obligations.
Types of Employment Contracts in Saudi Arabia
In Saudi Arabia, two broad types of employment contracts are allowed to ensure compliance with labour laws.
Definite Term Contracts: These contracts are for a specified duration and automatically terminate upon the expiry of the contract term. They are commonly used for temporary or project-based employment.
Indefinite Term Contracts: These are open contracts without any specified end date and continue until either party terminates the agreement.
Saudi Labour Law Requirements for Employment Contracts
For a valid employment contract, the following specifications must be included in the contract:
Compensation and Benefits
Employment contracts must clearly outline the compensation and benefits the employee is entitled to, including salary, allowances, bonuses, and other financial benefits.
Probation Period
The employment contract must specify the probation period and cannot exceed 90 days. During this period, either party can terminate the contract without notice. Additionally, the probation terms must be included in the contract.
Termination Conditions
An employment contract must have specified conditions under which it can be terminated, including notice periods and grounds for termination.
Employee Rights
Employee’s rights, such as leave entitlements, working hours, and other statutory benefits, must be included in the contract.
Working Hours and Days Off
The contract must specify the working hours and days off in compliance with the labour law’s requirements.
Written Contract
Saudi Arabia labour law requires that all employment contracts be in writing and signed by both parties. Verbal agreements are not legally binding.
Duration and Renewal
The duration and conditions for renewal must be clearly specified for definite-term contracts.
Guidelines for Creating an Employment Contract under Saudi Labour Laws
Two articles outline the essentials of an employment contract under the new labour law in Saudi Arabia. These are:
Article 51
Article 51 of the Saudi Labour Law stipulates that employment contracts must include specific information, such as the employee’s name, job title, salary, and work location. It also requires that contracts be in Arabic and signed by both parties.
Article 52
Article 52 further specifies the elements that must be included in an employment contract, such as the date of commencement, probation period, and conditions for termination. It ensures that both parties clearly understand their obligations and rights.
Termination of Service in Saudi Arabia
The termination process in Saudi Arabia depends on the employment setup, the type of employment contract, and the reason for termination. But the general workflow of termination of services is as follows:
Termination Procedures and Notice Periods
Termination procedures in Saudi Arabia must be lawful. Employers must provide a valid reason for termination and adhere to the required notice periods.
Employees with definite term contracts can be terminated upon the expiry of the term or by mutual agreement.
Those on indefinite contracts require a notice period of 30 days if terminated by the employer and 15 days if terminated by the employee.
Calculation and Payment of End-of-Service
Employees are entitled to end-of-service benefits based on their length of service. The benefits are calculated as follows:
First Five Years: Half a month’s salary for each year of service.
Subsequent Years: One month’s salary for each additional year of service.
Resignation and Termination Obligations of Employers
Employers must provide employees with a service certificate upon termination, outlining the duration of employment and the nature of the job performed. Employers must also settle all dues, including unpaid wages and end-of-service benefits.
Penalties for Improper Termination
In case of improper termination, such as without a valid reason or adherence to the notice period, the Ministry can levy legal penalties. Employees may be entitled to compensation for unfair dismissal.
Severance Pay
Employees are entitled to severance pay under certain conditions, including termination without cause or upon the expiry of a definite term contract. The severance pay is calculated based on the employee’s length of service and final salary.
How can Truein Help Businesses?
Truein is a cloud-based time and attendance management solution that can help businesses in Saudi Arabia with comprehensive workforce management.
It has a full suite of features for streamlining processes important for your business, including face recognition attendance, job tracking, employee scheduling, and compliance with state and federal labour laws. Truein assists time keepers and managersto keep track of attendance in real time, promoting punctuality and decreasing absenteeism.
Additionally, it streamlines the leave management process by offering an intuitive platform for employees to request leave.This software can be particularly beneficial in maintaining accurate records of working hours and leave entitlements and ensuring timely payment of wages, thereby reducing the risk of non-compliance and enhancing overall efficiency.
“Get centralized and foolproof Time & Attendance for your organization”
Book a Free Demo Now
Conclusion
Amendments in Saudi Arabia’s labour laws reflect the country’s growing economy and work ethic to accommodate the international workforce. These laws cover various issues, from employment contracts and working hours to leave entitlements and worker protections. Employers in Saudi Arabia must stay informed about these regulations to ensure compliance and foster a positive and productive workplace.
FAQs
Q: How are working hours regulated in Saudi Arabia?
Working hours in Saudi Arabia are regulated by labour law, with standard hours set at eight hours per day and 48 hours per week. During Ramadan, working hours are reduced to six hours per day. Employees are also entitled to rest periods and weekly days off.
Q: What are the minimum wage requirements in Saudi Arabia for 2024?
There is no universal minimum wage in Saudi Arabia for the private sector. However, public sector employers must provide a minimum wage of SAR 3,000 per month.
Q: What types of leaves are employees entitled to under Saudi labour laws?
Employees are entitled to various types of leave, including annual, sick, maternity, paternity, bereavement, and Hajj leave. Other leaves include special leaves, compassionate leave, marriage leave, examination leave to name a few.
Q: How is overtime pay calculated in Saudi Arabia?
Overtime pay in Saudi Arabia is calculated at 150% of the regular hourly wage for hours worked beyond the standard working hours. So, the overtime pay/hour is regular wage per hour plus 50 percent of the regular wage per hour.
