By Globalization Partners
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With its windswept deserts and fascinating history and culture, Saudi Arabia is a bucket list destination for many travelers. Add in the large workforce, huge petroleum-powered economy, and minimal employer taxes, and the country is also an appealing prospect for international business expansion.
Saudi law establishes and maintains strong worker protections, so you’ll need in-depth knowledge of the country’s regulations as you build your teams. We’ve developed this guide to hiring employees to explore essential employment topics and give you some general tips for hiring in Saudi Arabia.
What to know before hiring in Saudi Arabia
As you consider how to hire in Saudi Arabia, you’ll need to understand the nuances of topics like working hours, leave policies, termination requirements, and other critical elements of employment.
Saudi Arabia, a nation with a population of about 34 million people, employs around 10 million foreign nationals. Workers travel from countries like Egypt, Bangladesh, Yemen, India, Pakistan, and the Philippines to work in the country, sometimes competing with Saudi nationals for jobs.
Companies expanding to Saudi Arabia should be aware of a national program known as Saudization, or Nitaqat. This program creates incentives for companies to hire Saudi nationals over international workers. Obtaining a new work visa for an international worker can be challenging. Additionally, Saudi law requires some industries to employ only Saudi nationals, and it incentivizes hiring Saudi nationals in many other cases. For instance, at private companies with five or more of the relevant positions, the Ministry of Human Resources and Social Development requires 25 percent of IT and communications rolesto go to Saudi nationals.
2. Contract employment
Saudi employment law requires employers to have a contract with each employee. Contracts may be fixed-term contracts or unlimited contracts, and each one should specify the following terms:
- Termination requirements
Employers must generally abide by strict termination and severance rules when they wish to part ways with an employee. Saudi Arabia’s employment law allows for probation periods of up to 90 days, extendable for another 90 days if both parties agree. During this time, a company can quickly terminate an employee if the relationship is not working out. After that, notice periods and severance requirements apply.
Employees with fixed-term contracts must receive 30 days’ notice or additional compensation, and employees with unlimited contracts must receive 60 days’ notice or additional compensation. All employees must receive 15 days’ pay in severance for each of their first five years with the company and then a month’s worth of pay for each additional year of service.
3. Payroll and taxes
Saudi Arabia has social security programs for its citizens, and each company must contribute to them. Employers must pay Saudi social insurance tax to the General Organization for Social Insurance (GOSI). This contribution generally equals 10 percent of each employee’s total compensation, including base salary, allowances, and commissions.
Companies must pay additional contributions for occupational hazards their employees face. This rate generally works out to about 2 percent of each employee’s salary.
4. Wages and working hours
The standard workweek in Saudi Arabia ranges from 40 to 48 hours, eight hours five or six days a week, and employees earn overtime of 150 percent of their regular salaries for any hours worked beyond 40. Work on Friday or a public holiday also qualifies for overtime pay. During the Islamic month of Ramadan, the workday shrinks from eight to six hours for Muslim employees.
Compensation in Saudi Arabia must have two components: the base salary and additional allowances for transportation and housing.
Saudi Arabian employees must receive at least 4,000 Saudi riyals per month to count as national employees for Saudization program quotas. Employees who earn between 3,000 and 4,000 riyals per month each count as half a national citizen for Saudization purposes.
5. Time off
Employment law requires companies to offer their employees a minimum of 21 paid vacation days, and employees who have worked for a company for more than five years must receive a minimum of 30 paid vacation days. In practice, however, many companies give their employers 30 annual paid vacation days from the beginning of their employment, and employees in management roles commonly receive as many as 40 paid vacation days.
After two years of employment with a company, Muslim employees may also take additional Hajj leave of up to 10 days to make their pilgrimages to Mecca. Employees may only take this leave once every five years with the same employer.
Additionally, employees in Saudi Arabia receive up to four months of annual sick leave, as long as they provide an official medical certificate confirming the need for leave. Sick leave pay generally breaks down as follows:
- First 30 days of illness: Employees receive 100 percent of their usual pay.
- Next 31 to 90 days of illness: Employees receive 75 percent of their usual pay.
- Beyond 91 to 120 days of illness: Employees must take these days unpaid.
Pregnant employees in Saudi Arabia may also take 10 weeks of maternity leave for each child. An employee who has been with the company for between one and two years will receive half pay during her leave, and an employee who has been with the company for two years or more will receive 100 percent of her usual salary. Fathers are eligible for only three days of paternity leave.
In addition to these days off, employees in Saudi Arabia should receive time off for holidays. The number of days varies — the government determines the amount of time off and announces it each year. Major holidays in Saudi Arabia include:
- Eid al-Fitr: This holiday marks the end of the sunup-to-sundown fasting that occurs during the month of Ramadan. Eid al-Fitr officially lasts for three days but is generally a 10-day public holiday.
- Eid al-Adha: This religious holiday celebrating the prophet Ibrahim lasts for four days and is generally also a 10-day public holiday. It takes place in the month of Dhu al-Hijjah in the Islamic calendar, usually from the fifth day to the 15th.
- Unification of the Kingdom Day: This holiday celebrates the day of the kingdom’s unification under the House of Saud in 1932. It always occurs on Sept. 22.
6. Anti-discrimination law and restrictions
Saudi Arabia’s laws prohibit workplace and hiring discrimination based on these characteristics:
Historically, unemployment rates for women in Saudi Arabia have been astronomical compared with the rates for men — in 2010, the workforce included only 15.8 percent women. However, the country has made strides in closing this gap. From 2016 to 2020, the unemployment rate for women dropped by 13.9 percent as more jobs opened up to women, literacy rates among female Saudis improved, and more young Saudi women entered the workforce. In 2019, new legislation allowed Saudi women to drive, apply for passports, and obtain official documents without a male guardian’s permission, clearing a few additional barriers to employment.
Cost of hiring an employee in Saudi Arabia
The costs to hire employees in Saudi Arabia will likely depend on several factors, including your company’s policies toward supplementary insurance and various extra perks, as well as how competitive you want your compensation and benefits packages to be. Below are a few of the direct and indirect hiring costs you may incur:
- Job advertisements
- Hours spent on applicant review and interviewing
Some of the miscellaneous expenses you incur in providing a competitive package may include education expenses, retirement plans, and allowances for things like housing, transportation, and mobile phones. Employers commonly pay for airplane tickets so their expat workers can go home to see their families when they take annual leave. A good rule of thumb is to budget an additional 25 percent above each employee’s gross salary for the costs of benefits and perks.
Saudi Arabia has a robust, free national healthcare program that will meet a substantial portion of your Saudi national employees’ healthcare needs. Nevertheless, many employers offer supplementary health and life insurance, both to their expat employees, who cannot use the national service, and to their executives.
Additional costs arise when employees complete their contracts. These employees are entitled to receive an end-of-service award, which should generally equal half a month’s wages for each of the first five years of service plus one month’s wages for every additional year of service.
Hiring practices in Saudi Arabia
Hiring someone in Saudi Arabia may be similar to hiring a new employee in your home county. Even so, your company will want to take a few differences into account and adjust your practices accordingly:
- Use the local language and currency: Even if your applicants have studied your native language, your company should provide essential communications in Arabic, particularly contracts and offer letters. In these documents, you should also give monetary amounts in Saudi riyals instead of your home country’s currency.
- Rely on word of mouth: Many Saudi Arabian companies rely on personal recommendations to fill their open positions. If your company works with an EOR, your connections there can be invaluable in helping you recruit talented people. You can also find success in online advertisements and social media postings if you have few in-country personal connections.
What does a company need to hire employees in Saudi Arabia?
Hiring new employees in Saudi Arabia is complex and time-consuming, especially if your company decides to set up a subsidiary. If you choose this route, you will need to accomplish the following tasks:
- Reserve your company name with the Ministry of Commerce and Industry
- Open a Saudi Arabian bank account
- Obtain a business license
- Register your physical business address
- Publish the summary of your articles of incorporation
- Register with the Ministry of Labor, the Department of Zakat, and the General Organization of Social Insurance
- Obtain a certificate of registration from the Ministry of Commerce and Industry
- Develop an official company seal
- Pay membership fees to the Chamber of Commerce
This process can take weeks, even months, and eat through a substantial portion of your budget. An appealing alternative is to work with Globalization Partners’ global employment platform. Our AI-driven technology expedites this process, allowing you to start hiring employees immediately and get your Saudi Arabian business operations up and running within days. The platform enables you to hire and onboard new employees quickly and easily, all while navigating Saudi legal requirements adroitly to keep your operations compliant.
Hiring remote employees in Saudi Arabia
As you hire remote teams for your international operations, you’ll want to keep a few best practices in mind:
- Make your company an appealing prospect: Remember that hiring is a two-way street — your applicants in Saudi Arabia are assessing your strengths and looking for the right fit, just as your company is. Be sure your company has a supportive workplace culture and enough benefits to attract the talented people you need.
- Seek long-term partners: Your new hires will be your employees — and they will also be invaluable partners and teachers as you learn cross-cultural norms. They can also be points of valuable connection for new business partnerships. As you hire, ask targeted questions to help you determine which candidates will be good long-term fits and promote your company’s growth.
- Make efforts to meet in person: Time and distance may require you to do much of your interviewing and hiring remotely. If you can, though, send higher-level executives out to meet your new employees during their onboarding and training. Doing so demonstrates your commitment to your hires and helps them feel valued.
Additional tips for how to hire in Saudi Arabia
Here are a few more steps to hiring in Saudi Arabiafor your company to consider:
- Research your location: Saudi Arabia is a kingdom encompassing four distinct regions — Hejaz; Najd; parts of Eastern Arabia, or Al-Ahsa; and Southern Arabia, or Asir. Each one has its own customs and regulations, so you may want to seek expert advice about your chosen region before settling your employment practices.
- Prepare for a limited pool of Saudi national applicants: Because of the push for increased Saudization and the addition of 1.2 million private-sector jobs by 2022, you might expect your candidate pools to contain a high percentage of Saudi nationals. However, many Saudi nationals prefer to work in the public sector because of the perception of higher salaries and more stable jobs there. Most private-sector employees are international workers, so most of your applicants will likely be expatriates.
- Expect to hire in-country expats: Businesses can sponsor work visas and work and residence permits — known as iqamas — for new expats, but generally only at steep costs. You may find it easier to hire international employees who already have work permits and visas.
Building international teams with Globalization Partners
When you’re ready to expand to Saudi Arabia, Globalization Partners is here to boost your new endeavor’s success. Our full-stack global employment platform allows you to overcome compliance barriers and streamline your hiring processes. You’ll save time and labor, and you’ll be able to focus your attention on your primary business goals.