Employee Benefits In Saudi Arabia Labour Law (Guide For Employers)

Employee Benefits In Saudi Arabia Labour Law (Guide For Employers)

Employee benefits in Saudi Arabia have undergone significant changes in recent years. Several factors have driven these changes, including the country’s Vision 2030 plan, which aims to diversify the economy and reduce its dependence on oil. As part of this plan, the government is improving the business environment and making Saudi Arabia more attractive for foreign companies. One way it is doing this is by updating the labour laws to better protect employees' rights. Additionally, understanding the recruitment process in the UAE can offer valuable insights, especially for companies and professionals operating across the GCC. Comparing employee benefits and recruitment practices between Saudi Arabia and the UAE can help businesses attract top talent while ensuring compliance with regional labor standards.

The new regulations, which took effect in March 2022, introduce several changes to employee benefits and leave entitlements. Integrating these updates into a global HR system can help employers efficiently manage compliance and consistently apply the new rules across their international workforce. This article provides a comprehensive overview of the updated labour laws in Saudi Arabia, focusing on the key changes to employee benefits that employers need to be aware of.

Statutory Employee Benefits in Saudi Arabian Labour Law

Employees in the Kingdom generally work eight hours per day or 48 hours per week. After five consecutive hours of work, a minimum 30-minute break is required. Employees are also entitled to one full day of rest each week, typically on Fridays. These provisions aim to support both operational efficiency and employee welfare.

Reduced Working Hours During Ramadan for Muslim Employees

Muslim employees are entitled to reduced hours during the holy month of Ramadan. The daily working limit is reduced to six hours, enabling time for: 

• Religious observances
• Rest
• Family responsibilities

Public Holidays: Paid Leave Entitlements

Employees are entitled to paid leave on official public holidays, which typically include: 

• Eid Al-Fitr
• Eid Al-Adha
• National Day

These holidays, other than National day, follow the Hijri calendar. The total number of public holiday days typically ranges from 10 to 12 per year.

Leave Entitlements by Type

Annual Leave

Annual paid leave increases based on the length of service:

• 21 calendar days per year for employees with up to five years of service.
• 30 calendar days per year for those with more than five years of service.

Leave is calculated from the employee’s date of joining and is expected to be used within the same calendar year. If unused, it must be compensated in cash.

Sick Leave

Employees are eligible for up to 120 days of sick leave per year, divided as follows:

• 30 days at full pay
• 60 days at 75% pay
• 30 days of unpaid

A medical certificate is required to receive paid sick leave.

Maternity Leave

Female employees are entitled to 10 weeks of maternity leave, taken as:

• 4 weeks before childbirth
• 6 weeks after childbirth

The leave may be extended by an additional month without pay. Maternity leave pay depends on the employee’s length of service:

• Half salary if employed for one year or more
• Full salary if employed for three years or more

Paternity Leave

Fathers are entitled to three days of fully paid paternity leave to support their spouse and child in the days immediately following birth.

Bereavement Leave

Employees are entitled to five days of fully paid bereavement leave following the death of a close family member.

Hajj Leave

Muslim employees with at least two years of continuous service are eligible for up to 10 days of unpaid leave to perform Hajj. This leave is available once every five years.

Social Security Contributions (GOSI): Safety Net for Employees

Employers are legally required to:

• Register all Saudi nationals and qualifying expatriates with the General Organization for Social Insurance (GOSI) within 15 days of employment.
• Contribute to GOSI on behalf of employees. These contributions are: 
  
  • Fund retirement pensions
  • Occupational injury insurance
  • Disability benefits

Employers must comply with contribution rates, which vary based on the employee’s nationality and the type of coverage.

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Additional Benefits For Employees In Saudi Arabia

Employee benefits in Saudi Arabia often extend beyond the statutory requirements. Many employers offer additional benefits to improve the employee experience and attract and retain talent. These benefits may include: 

• Health
• Housing
• Education
• Long-term financial planning support

Below is a summary of some of the most common non-statutory benefits offered in employment packages in the Kingdom.

1. Health Insurance

Private health insurance is commonly included in employment packages, particularly for mid to senior-level roles. It provides access to private healthcare and is often extended to include an employee’s spouse and children. This reflects broader national efforts to support employee health and wellbeing.

2. Housing Allowance

Due to the cost of housing in cities such as Riyadh, Jeddah and Dammam, many employers provide a housing allowance. This helps employees find appropriate accommodation and is particularly useful for expatriates moving to Saudi Arabia.

3. Transportation Allowance

Because public transport is limited in some areas, many employers provide a transportation allowance to help cover commuting costs. It may cover fuel, maintenance, or car payments and is usually paid monthly.

4. Annual Airfare Allowance

An annual return airfare to the employee’s home country is a common benefit in Saudi Arabia, especially for expatriate staff. This allowance supports family visits and helps employees maintain connections with their home country, which can encourage retention.

5. Mobile Phone and Communication Support

It is common for companies to provide mobile phones and cover monthly mobile usage costs. This benefit helps employees stay connected, especially in regular communication roles.

6. Savings and Retirement Plans

Some employers have started to offer structured savings plans or enhance end-of-service benefits, such as matching contributions towards retirement. These benefits support long-term financial planning and may reflect an employer’s commitment to staff wellbeing.

7. Educational Support

Some employers offer support for: 

• Continuing education
• Covering tuition fees
• Professional development
• School costs for employees’ children

Support may include: 

• Scholarships
• Reimbursement for training expenses
• Paid study leave

This reflects an understanding of how education contributes to personal development and organizational success.

Supporting Employee Wellbeing in Line with Vision 2030

These additional benefits demonstrate employers’ focus on employee wellbeing and align with Saudi Arabia’s Vision 2030 goals to enhance the working environment. Although benefits vary by sector and company size, they support employee retention and satisfaction throughout the Kingdom.

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Pay Regulations in Saudi Arabia

Fair and competitive remuneration is fundamental to maintaining a stable labour market. Saudi Arabia acknowledges this and has developed its pay regulations to international standards to: 

• Support fairness
• Transparency
• Adherence

These regulations align with the Kingdom's broader goals of enhancing employment conditions for nationals and expatriates. Understanding and complying with these regulations is essential for organizations in Saudi Arabia to foster a motivated workforce and achieve business success.

1. Minimum Wage and Saudization (Nitaqat Programme)

There is no nationwide minimum wage for the private sector. The government sets a minimum salary of SAR 3,000 per month for public sector positions. Certain industries, such as construction and domestic labour, also have their own minimums.

The Saudi Ministry of Human Resources and Social Development has set the minimum wage for Saudi nationals registered under the Nitaqat programme at SAR 4,000. This threshold is crucial for determining an organization’s compliance with the Saudization policy.

A Saudi employee earning SAR 4,000 or more is counted fully towards the company’s Saudization quota. Employees earning between SAR 3,000 and SAR 4,000 are counted as half of a Saudi national towards the quota. Employees earning less than SAR 3,000 do not contribute to the Saudization quota.

This regulation promotes fairer pay for Saudi workers while assisting companies in meeting national workforce targets.

2. Overtime Pay

Labour law in the Kingdom specifies overtime entitlements for hours worked beyond the legal daily or weekly maximums, that is, more than 8 hours per day or 48 hours per week.

• Standard Overtime: Employees are entitled to 1.5 times their usual hourly wage for extra hours worked during weekdays.
• Weekend and Public Holiday Work: Work performed on Fridays or official public holidays is paid at double the usual hourly rate.
  

Employers must ensure these premiums are accurately calculated and paid, particularly in sectors with variable shift patterns.

3. End of Service Gratuity

Saudi Arabia requires end-of-service benefits as a statutory right for all employees who complete at least two years of continuous service. 

These gratuity payments are a form of severance and are calculated as follows:

• 15 days' wages for each of the first five years of service
• One full month's wages for each additional year beyond five years
• If an employee has worked more than six months in a year, it is typically rounded up and treated as a full year of service

These benefits are payable upon contract termination, resignation, or retirement, providing financial security for long-serving employees.

4. Wage Protection System (WPS)

Saudi Arabia has implemented the Wage Protection System to monitor and ensure the timely and accurate payment of salaries. Under this system, the following applies:

• Employers must pay all wages via bank transfer into the employee’s registered account.
• The system enables the Ministry to track salary disbursements, identify discrepancies, and take action on late or incomplete payments.
• Compliance with the WPS is mandatory and regularly monitored. This ensures employees are paid according to their contracts and fosters trust in the labour market.

These wage regulations reflect the Kingdom's commitment to ensuring fair compensation, transparency, and compliance with international labour standards. Meeting these requirements is a legal obligation for businesses operating in Saudi Arabia and crucial for maintaining a stable and motivated workforce.

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Building A Competitive Benefits Plan For Your Employees

Designing a competitive benefits package is crucial for attracting and retaining skilled talent in Saudi Arabia's changing labour market. As the Kingdom continues attracting international businesses and supporting national employment objectives, offering well-structured and relevant benefits helps employers remain attractive to local and expatriate professionals.

Below are key factors to consider when developing a benefits plan that meets employee expectations and supports business objectives:

Benchmark Competitors

Start by researching the benefit structures of similar organizations in your sector within Saudi Arabia and the broader Gulf region. Understanding what other employers offer provides a valuable benchmark for determining what is standard, what is considered generous, and where your company might differentiate itself. 

This comparison can help identify gaps in your current offering or confirm areas where you already meet market expectations.

Prioritise Flexibility

The workforce in Saudi Arabia is increasingly diverse, spanning different: 

• Age groups
• Cultures
• Family situations 

Flexible benefit options, such as health insurance plans with a choice of approved providers or other levels of cover, can better support these varied needs. Flexibility in working hours, leave, or remote work (where appropriate) can increase employee satisfaction.

Focus on Convenience

Even well-designed benefits may be overlooked if they are difficult to access or understand. It is important to simplify processes for employees wherever possible. This could include: 

• Digitising forms
• Offering a self-service portal for benefits
• Streamlining the approval process for claims and requests

Improving accessibility enhances how benefits are perceived and reflects positively on the employer.

Communicate the Value

Employees may not always recognise the full extent of what they receive beyond their basic salary. Organizations should communicate the total compensation package, including: 

• Insurance
• Allowances
• Bonuses
• Statutory benefits

Clearly outlining this helps employees appreciate the overall value of their role, which can support retention and morale.

Gather Regular Feedback

Employee needs and preferences change over time. Regular feedback gathered through surveys, performance reviews or informal discussions can help assess whether your benefits plan meets employee needs. This feedback can inform future improvements and show employees that their views help shape workplace policies.

Strengthening Employment Relationships Through Structured Benefits

A clear and structured benefits plan helps build strong employment relationships and demonstrates an employer’s commitment to its workforce. In Saudi Arabia’s job market, a well-designed benefits plan can support recruitment and long-term employee retention.

Related Reading

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• HR Duties And Responsibilities In UAE
• Hiring Process in Middle East
• Saudi Labor Law
• Withholding Tax Saudi Arabia
• Best Job Sites in Saudi Arabia
• Egyptian Labor Law

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By consolidating key HR functions, Cercli helps reduce reliance on separate tools and supports compliance with local employment laws. Whether you are managing a team of 25 or coordinating a workforce across several countries, Cercli offers region-specific support to help MENA-based organizations manage HR operations efficiently.

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