It’s vital to ensure you’re paying your employees the right amount and offering them the benefits required by Saudi Arabia law. Your company will have to hire an expert in Saudi Arabia compensation laws or train a current employee to make sure you’re compliant. Globalization Partners can take the stress out of Saudi Arabia benefit management. We have the expertise you require for a smooth expansion to Saudi Arabia, and we’ll make sure your employees get the right salary and benefits.
Saudi Arabia Compensation Laws
Saudi Arabia does not have a minimum wage for the private sector, but public sector employees must make at least 4,000 Saudi Arabian Riyal (SAR) per month as of April 2021. Saudi Arabia compensation laws also dictate overtime payment of 100% an employee’s normal hourly rate plus a 50% bonus. Work on Friday or a public holiday is considered overtime.
The country also has a generous severance pay, which is 15 days of wages for an employee’s first five years of work, then a full month of wages for every year after that. This severance package is different for Saudi nationals, who have rights to certain severance pay per their employment contract.
Guaranteed Benefits in Saudi Arabia
If you do not utilize Saudi Arabia benefit outsourcing services, you must at least provide the benefits outlined in the country’s employment laws. These statutory benefits include a reduced workday (six hours) for Muslim employees during Ramadan, 21 days of paid vacation, and time off for public holidays announced by the government each year.
Although the statutory minimum for paid vacation starts at 21 days, it increases to 30 days starting at the sixth year of employment on. Muslim employees are also entitled to leave for the Hajj after they’ve worked for your company for two years. The leave can only be taken once within five years of employment and can’t extend to more than 10 days.
Saudi Arabia Benefits Management
A strong Saudi Arabia benefit management plan must include additional benefits that will attract top talent to your open positions. It’s customary for Saudi Arabia employers to provide employees with:
- Supplementary health insurance
- Plane tickets to go home for vacation
- Money for education costs
- Retirement plans
- Mobile phones
- Housing allowances
- Transportation allowances
Globalization Partners recommends budgeting an additional 25% on top of gross salary for these benefits. You should also outline any supplemental benefits you will provide in an employment contract.
Restrictions for Benefits and Compensation
One restriction to watch for a Saudi Arabia benefit management plan includes sick leave. While employees are typically allowed up to four months of sick leave, they will need a medical certificate to take that time. If they can produce a certificate, they will get 100% of their pay for the first 30 days, 75% for 31 to 90 days, then unpaid time off from 91 to 120 days.
Saudi Arabia Competitive Benefits Planning
With a strategic employee benefits plan, you can set up your Saudi Arabian workers for success and optimize your business’s recruiting and hiring processes. A competitive, fully compliant benefits program will help you stand out among companies in the region and build an engaged international team.
Saudi Arabia Employee Benefits Plans
Creating a benefits plan that offers practical value for your local employees is fundamental to your business growth internationally. When you identify the unique needs of your in-country employees, you’ll be able to provide optimal support and resources for them.
Along with helping your business stay competitive in the region, a strategic benefits program also supports your employees throughout various life events. Your benefits plan can help set your employees up for success and ensure they feel appreciated at work. To complement mandatory benefits, you can provide fringe benefits to support employees’ quality of life. Some options include:
- Business travel reimbursements
- Mental health support
- Stipends for child care and education
- Fitness and wellness events
- Relocation assistance
- Performance awards and bonuses
Requirements for Employee Benefits in Saudi Arabia
National labor regulations have established these provisions as mandatory benefits for your employees:
- Reduced workdays for Muslim employees during Ramadan
- Public holiday leave
- Vacation leave
- Leave for Hajj after two years of service
- Sick leave
- Maternity leave
- Paternity leave
- Marriage leave
- Leave for the death of a family member
Designing Saudi Arabia Employee Benefits Plans
You can expect benefits requirements to look different in any country where you establish your business, but some fundamental principles can set you up for effective benefits planning anywhere.
1. Establish Your Budget and Goals
Understanding where you want to take your benefits program is your first step in the planning process. As you begin, take time to set your budget and determine the program scope you can sustain while remaining competitive in your industry and business region.
Consult with stakeholders, evaluate financial resources, and look at big-picture business goals in the region. What are your priorities for business growth? Are you planning to support a large team from day one, or will you start by investing in a smaller team that will grow over time? Identifying your program goals will help you set an appropriate scope for your benefits plan.
2. Conduct a Needs Assessment
Your next priority is identifying employee needs. Conduct a comprehensive needs assessment, researching local companies’ offerings and employee expectations.
To better understand your workers’ requirements, hold group or individual interviews with local employees. You can also mail questionnaires or post surveys asking respondents about their benefits needs and critical concerns in the economy. Take time to truly understand your employees’ situations and learn about what offerings matter to them most.
3. Develop Your Benefits Plan
After doing in-depth local research, you can use what you’ve learned to shape your business program. Incorporate your data into an optimized benefits plan that addresses key needs for your employees. When determining program costs, ensure you factor in employee contributions, outsourcing needs, cost containment features, and administration expenses.
Average Cost of Benefits Per Employee
Each country’s labor regulations, local market standards, and overall economic conditions are different. Benefits program costs can vary significantly, so there’s no true national average to aim for. However, you can shape your benefits distribution expenses based on how you build your program. Ensure you’re considering your budget and allowing room for growth as you prioritize your employee offerings.
How to Calculate Employee Benefits
You can consult Saudi Arabia’s labor laws for specific rates to calculate maternity leave, annual leave, sick leave, and other mandatory benefits payments.
Any supplemental benefits you provide for your workers can be based on local market conditions and competitive rates for your industry and region.
How Are Employee Benefits Taxed in Saudi Arabia?
Employees do not have to pay any income taxes within the country, so benefits are not technically taxable. However, non-Saudi or non-Gulf Cooperation Council (GCC) residents are subject to a flat tax of 20 percent for income, so you may need to calculate withholding taxes for non-national employees.
Employee Health Benefits Plans
In Saudi Arabia, all citizens receive free public health care. You may choose to provide private healthcare options for non-national employees or as supplemental coverage for nationals in the country.
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THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.