Labor Law Compliance Guide for Saudi Arabia

This labor law guide for Saudi Arabia has important information for businesses looking to hire employees or contractors in the country. Saudi Arabia is a country in the middle east.

Category	Details
Minimum Wage	SAR 4,000/month (Saudi nationals); no statutory minimum for expatriates
Overtime Wage	150% of regular hourly wage
Meal Breaks	One hour
Rest Breaks	Two breaks of 15 minutes each
Working Hours	8 hours/day, 48 hours/week (6 hours/day during Ramadan for Muslims)
Salary Payment Cycle	Monthly (electronic payslips required)
Payroll Taxes	GOSI: 11.75% employer / 9.75% employee (Saudi); 2% employer (expat)
Paid Vacation	21 days (increases to 30 days after 5 years of service)
Overtime Hours	Max 18 overtime hours/week; max 11 hours in any single workday
Night Shift Hours	Standard pay rates apply
Public Holidays	4 (Founding Day, Eid al-Fitr, Eid al-Adha, National Day)
No Work Days	Friday and Saturday

Saudi Arabia’s nominal GDP reached approximately $1.27 trillion in 2025, with real GDP growth of 3.2-4.0% driven by higher oil production and a robust non-oil sector. Growth is forecast at 4.0-4.3% for 2026. The Vision 2030 initiative continues to steer the country toward economic diversification, reducing dependency on oil revenues and attracting significant foreign investment across sectors including petrochemicals, mining, construction, finance, and tourism.

The currency used in Saudi Arabia is the Saudi Riyal (SAR). There is no personal income tax on employment salaries. VAT is charged at 15% on most goods and services.

Hiring Laws in Saudi Arabia

When hiring in Saudi Arabia, businesses must adhere to several regulations and legal requirements. Firstly, it is necessary to register locally to hire workers. The cost and time required to set up or incorporate a business entity can vary, but it typically takes about 10-15 days, depending on the business type and required documentation.

Employers must sign written contracts with employees, detailing employment terms, job description, salary, work hours, leave entitlements, and termination terms.

The law treats employees and contractors separately, wherein contractors may not enjoy the same employment benefits and protections as traditional employees.

Minimum Wage in Saudi Arabia

Saudi Arabia's minimum wage for Saudi nationals is SAR 4,000 per month in the private sector. This is the minimum salary threshold for a Saudi employee to count toward Saudization/Nitaqat quotas. The public sector minimum is SAR 3,000 per month.

There is no formal statutory minimum wage for expatriate workers. Salaries for foreign employees are negotiated contractually based on role, qualifications, and market rates.

While the minimum wage primarily applies to Saudis, holiday pay is required by law for all employees.

Working Hours in Saudi Arabia

The standard working hours in Saudi Arabia are 8 hours per day and 48 hours per week. During the month of Ramadan, Muslim employees work 6 hours per day and 36 hours per week. The maximum permitted in any single workday is 11 hours, and overtime is capped at 18 hours per week.

Overtime hours are any hours worked in excess of the standard working hours. The overtime pay rate is 150% of the regular hourly wage (Article 107 of the Saudi Labor Law). Weekend and holiday work is paid at the regular wage plus the 150% overtime premium. As of the 2025 labor law reforms, employers and employees may agree to compensate overtime with paid leave instead of monetary payment, provided the employee consents.

Employers must issue monthly electronic payslips detailing gross salary, deductions, hours worked, and allowances. Records must be retained for a minimum of 5 years.

Night shifts do not receive additional pay, meaning the standard pay rates apply.

The minimum age for employment is 15 years, and strict laws prohibit child labor.

Payroll and Taxes in Saudi Arabia

Employers are mandated to make several payroll deductions under Saudi law, primarily for social security (GOSI) purposes.

GOSI Contributions for Saudi Nationals (pre-July 2024 employees) -- Total: 21.5%

Component	Employer	Employee	Total
Annuities (Retirement)	9%	9%	18%
Occupational Hazard	2%	0%	2%
SANED (Unemployment)	0.75%	0.75%	1.5%
Total	11.75%	9.75%	21.5%

GOSI Contributions for Saudi Nationals (post-July 2024 employees) -- Total: 22.5%

Component	Employer	Employee	Total
Annuities (Retirement)	9.5%	9.5%	19%
Occupational Hazard	2%	0%	2%
SANED (Unemployment)	0.75%	0.75%	1.5%
Total	12.25%	10.25%	22.5%

The annuities rate for new employees is increasing by 0.5% per year (split between employer and employee) until it reaches 11% each by 2028.

Expatriates

Employers pay 2% for occupational hazard insurance only. No annuities or SANED contributions apply.

Tax Rules

Saudi Arabia imposes no income tax on personal employment income. Therefore, there are no monthly income tax deductions from salaries. VAT is charged at 15% on most goods and services. Corporate income tax of 20% applies to profits attributable to foreign ownership; Saudi/GCC-owned businesses pay Zakat (2.5% on net worth) instead.

Statutory Leave Policies in Saudi Arabia

Saudi labor law requires employers to give employees various leaves:

• Paid Vacation: 21 days of paid leave per year, increasing to 30 days after five years of service.
• Maternity Leave: 10 weeks, with 4 weeks before and 6 weeks after delivery.
• Paternity Leave: 3 days.
• Sick Leave: Up to 120 days (30 days fully paid, 60 days at 75% pay, remaining at no pay).

Employees must be in service for at least one year to qualify for annual leave. The mandatory public holidays in Saudi Arabia for 2026 are listed below:

Holiday	Date(s)	Notes
Founding Day	Feb 22 (Sun)	Commemorates 1727 founding of Saudi state
Eid al-Fitr	~Mar 19-24 (Thu-Tue)	4 days private sector; dates subject to moon sighting
Eid al-Adha	~May 26-30 (Tue-Sat)	Day of Arafah May 26; 4 days private sector; dates subject to moon sighting
Saudi National Day	Sep 23 (Wed)	Unification of the Kingdom

Employee Benefits in Saudi Arabia

In Saudi Arabia, employers are required to provide several employee benefits, including social security and other mandated benefits:

• Retirement Benefits: Provided through GOSI.
• Healthcare Benefits: Employers must provide medical insurance.
• Gratuity: End-of-service gratuity for employees based on their service period.
• Annual Bonuses: Generally provided at employer discretion.

Saudization and Nitaqat Requirements

Saudi Arabia's Saudization (Nitaqat) program requires employers to meet minimum quotas for hiring Saudi nationals. The February 2025 labor law reforms -- the most significant since 2015 -- introduced several key changes:

• Non-Saudi employees must have a documented, fixed-term contract (defaults to 1 year, auto-renews unless notice is given)
• Employers must settle wage disputes within 15 days of formal notification
• Expanded Saudization quotas across 269 professions, phased from mid-2025, including dentistry (45-55%), pharmacy (35-65%), engineering (30%), and accounting (40-70% over 5 years)
• GCC nationals count as Saudis for Nitaqat purposes
• Foreign investors who own Saudi private establishments count as Saudi nationals in Saudization calculations (since April 2024)
• Increased digital compliance monitoring through the Qiwa platform

Employee Termination in Saudi Arabia

Saudi Arabia does not follow an At-Will Employment regime. Employment termination requires just cause and adherence to legal processes. Employers must provide adequate notice, which is generally 30 days for employees under a monthly contract.

Termination benefits include the end-of-service gratuity, which is calculated based on the years of service. Employees can challenge dismissals legally through the labor courts. Valid reasons for termination include poor performance, misconduct, redundancy, or breach of contract terms.

Navigating the labor laws of Saudi Arabia effectively ensures compliance and fosters a harmonious working environment. Understanding and adhering to these laws is crucial for any business intending to operate successfully within the Kingdom.