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Global HR Compliance: Mastering Employment in Saudi Arabia

As businesses become increasingly global, navigating the intricacies of employment compliance in countries like Saudi Arabia is essential. Understanding local labour legislation is paramount to expanding into this dynamic market or leveraging its vast talent pool.

Reasons for Engaging an International Workforce

Tapping into New Markets

When a business decides to expand globally, it’s essential to understand the nuances of the new market, including customer behaviours, preferences, and cultural norms. Local sales representatives or team members can offer valuable insights that resonate with the target audience. They will also likely understand local regulations, market trends, and competition. This insider knowledge can distinguish between success and failure when entering a new geographical market.

Global Talent Acquisition

Finding the right talent can be challenging, especially for specialized roles. Sometimes, the local talent pool may either lack the skills needed or be more expensive to hire compared to international candidates. By looking beyond borders, companies can access a broader and more diverse talent pool. This could include experts in a particular technology, experienced leaders, or individuals with rare skills. International hiring allows companies to benefit from various perspectives and approaches, enhancing innovation and problem-solving capabilities.

By employing an international workforce, companies increase their chances of succeeding in new markets and enrich their talent assets, boosting their competitive edge globally.

The Advantage of Partnering with a Global Employer of Record (EOR) in Saudi Arabia: Why Express Global Employment Stands Out

Global expansion comes with a labyrinth of challenges, particularly in regions with complex labour regulations like Saudi Arabia. In such a complicated environment, having a reliable Global Employer of Record (EOR) becomes more than a convenience—it becomes a necessity. This is where Express Global Employment stands out, offering comprehensive solutions that address the multi-faceted demands of international employment. Here’s what sets us apart:

Holistic Employment Solutions

We go beyond simply handling payroll and benefits. As your Global EOR partner, we legally represent your Saudi-based workforce, which means we take on the responsibility of ensuring that all employment matters comply with local laws. This streamlines your operations and lets you focus on your core business activities.

Seamless Payroll & Benefits Management

Navigating the intricacies of payroll cycles, especially in commission-centric roles, can be a daunting task. Our robust infrastructure eliminates these complexities. We ensure that your Saudi-based employees receive their salaries on time and benefit from competitive perks. All of this is done without the need for you to establish a legal entity in Saudi Arabia, thus reducing your administrative burden.

Centralized Expertise

Rather than liaising with multiple local staffing agencies, we provide a one-stop solution. By consolidating these services under one umbrella, Express Global Employment saves you time, effort, and resources. This allows us to deliver tailored solutions that are consistent and of high quality, ensuring that your needs are met comprehensively.

Local Compliance Mastery

Compliance with local regulations is non-negotiable, and mistakes can be costly. Our in-depth knowledge of Saudi Arabian tax laws, social security requirements, labour regulations, and immigration policies ensures your operations are fully compliant. We navigate the complexities for you and stay updated on legal changes so you’re always one step ahead.

Round-the-Clock Professional Engagement

In a globalized world, business doesn’t sleep. Neither do we. Time zones and language barriers are non-issues with our team of English-proficient professionals. We offer unwavering support around the clock, ensuring that you have immediate assistance for any employment-related concerns whenever you need it.

By leveraging our extensive experience and local expertise, Express Global Employment provides a robust framework for your global expansion, particularly into the Saudi Arabian market. With us, you are not just surviving the complexities of international employment—you are thriving.

Comprehensive Guide to Hiring and Firing Workforce in Saudi Arabia

Navigating the employment landscape in Saudi Arabia requires a deep understanding of local labour laws and customs. As Global Employer of Record solutions experts, we’ve compiled essential guidance on employment contracts and termination procedures in Saudi Arabia.

Employment Agreements in Saudi Arabia

Permanent employment contracts

Employment contracts for non-Saudi nationals must be for a fixed term. If a term is not explicitly stated, the work permit’s validity will be deemed as the contract’s duration. Once the fixed-term contract expires, it is automatically terminated unless both parties continue to engage, making the contract indefinite (note: this does not apply to non-Saudi employees).

Fixed-term Contract Extensions

The maximum allowed duration for fixed-term contracts has recently been extended from three to four years.

Employment Termination and Severance Pay in Saudi Arabia

Employment contracts may be terminated under the following conditions:

  1. Mutual agreement between both parties, with written consent from the employee.
  2. Expiration of the contract term, unless explicitly renewed as per legal provisions.
  3. Employee’s attainment of retirement age, as per the Social Insurance Law, unless agreed otherwise.
  4. Force majeure events.
  5. Permanent closure of the establishment.
  6. Termination of the specific activity in which the worker is employed unless otherwise agreed.
  7. Any other circumstances specified by additional regulations.

Special Considerations for Expats vs. Locals

For expatriate employees, employers often require the resigning individual to work until a suitable replacement is found, primarily because the employer controls the issuance of an exit-only visa. For Saudi nationals, there are no such constraints.

Differences between terminating employment with locals and ex-pats 

In the case of expatriate employees, usually, the employer forces the employee who resigns to continue working until a replacement is found since the employer has the power to issue an exit-only visa and the employee prefers not to initiate legal action against the employer. In the сase of Saudi nationals, there are no such restrictions.

Prohibited Dismissals and Compensation

Unless the contract contains specific compensation against termination by either party for an illegitimate reason, the aggrieved party is entitled to compensation as follows:

  • A fifty-day pay for the worker’s each year of service if the contract is not of a fixed term
  • The wage for the remaining period of the contract if the contract is of a fixed term.

Notice Period Requirements in Saudi Arabia

For indefinite-term contracts, employers must provide written notice stating the reason for dismissal. Employees paid monthly should receive at least 60 days’ notice, while all other employees should get at least 30 days. Employers may pay an equivalent salary instead of adhering to the notice period, known as ‘pay in lieu of notice’.

Severance Payments

Understanding severance payments is crucial for both employers and employees in Saudi Arabia. Here’s an enhanced guide on what the law stipulates regarding end-of-service benefits and other related entitlements:

Calculation of End-of-Service Benefits

Upon the termination of the employment relationship, the employer is obligated to provide end-of-service benefits to the departing employee. These benefits are calculated based on the last drawn wage as follows:

  • A half month’s salary for the first five years of service.
  • A full month’s salary for each year thereafter.

Employees are also entitled to pro-rated end-of-service benefits for any fractional years worked, calculated proportionally to the time spent on the job.

Severance for Resignation

If the employment relationship is terminated due to voluntary resignation, the departing employee is entitled to varying proportions of their end-of-service benefits, contingent on their length of service:

  • One-third of the benefits after continuous service of at least two years but less than five years.
  • Two-thirds of the benefits for service lasting over five years but less than ten years.
  • Full end-of-service benefits for service extending ten years or more.

Exceptions for Force Majeure and Special Cases

If an employee leaves the job due to circumstances beyond their control (force majeure), they are entitled to full end-of-service benefits. Likewise, female employees are entitled to full benefits if they terminate their contract within:

  • Six months from the date of their marriage.
  • Three months from the date of childbirth.

Timeline for Settlement

Employers must settle any outstanding wages and end-of-service entitlements within a maximum period of one week from the date of termination if the employer initiates the contract termination. If the employee is the one terminating the contract, all due entitlements must be settled within a period not exceeding two weeks.

Deductions for Outstanding Debts

The employer can deduct any work-related debts the employee owes from their final severance payments and other entitlements.

By being well-informed about these guidelines, employers and employees can ensure that they adhere to the laws and regulations governing severance payments in Saudi Arabia.

Employee Benefits and Contributions

Mandatory benefits required by law to be provided by an employer 

Minimum annual paid holiday, sick leave, and payment on termination are core mandatory employee benefits in Saudi Arabia. A worker shall be entitled to a paid leave of 10-15 days to perform Hajj only once during service. To be eligible for this leave, the worker shall have spent at least two consecutive years of service with the employer. Saudi Arabia does not have obligatory state or employer-contribution insurance schemes.

Non-mandatory benefits that are offered by an employer 

Annual bonus, Airline tickets, Transportation and housing Allowances, International schools.

Minimum Statutory Salary

The current minimum wage in Saudi Arabia for Saudi nationals working in the private sector is 4,000 Saudi riyals (SAR) per month. This was increased from 3,000 SAR in December 2022. There is no minimum wage for expats working in the private sector.

The minimum wage applies to all full-time employees, regardless of nationality, age, or gender. It also applies to all types of work, including manual labour, clerical work, and professional work.

Employees paid less than the minimum wage are entitled to receive the difference between their actual and minimum wages. They can also file a complaint with the Ministry of Human Resources and Social Development.

The minimum wage is not intended to be a living wage. It is a basic wage intended to ensure that all workers have a basic standard of living. Workers paid the minimum wage may still need to supplement their income with other sources, such as government assistance or family support.

The government of Saudi Arabia is considering introducing a minimum wage for expats working in the private sector. However, no decision has been made yet.

Probationary Period

The probation period can not exceed ninety days. In addition, under a written agreement between the worker and the employer, this probationary period may be extended by an additional 90 days and make no more than one hundred and eighty days. Such probationary period excludes Eid al-Fitr and Eid al-Adha holidays and sick leaves. Each party is entitled to terminate the contract during this period unless the contract includes a clause giving the right of termination of the contract to only one of them.  A worker may not be subject to a probationary period more than once by the same employer.

Overtime

Employees should not work more than five consecutive hours without a break of at least 30 minutes in any working day and should not remain at the workplace for more than 11 hours. Working hours do not include periods designated for rest, prayers and meals. Overtime is payable at 100% of the employee’s usual hourly wage, plus a bonus rate of 50% of basic pay. All work on Fridays and public holidays is considered to be overtime.

Working Hours

As per the labour law, working hours are 8 hours daily and 48 hours per week.  During Ramadan, working hours are reduced to six hours a day and 36 hours a week for Muslim workers. For jobs involving “intermittent works” working hours shall not exceed 10 hours/day. This is reduced to 8 hours/day during Ramadan. For those employed as Guards and Janitors, working hours shall not exceed 12 hours/day.

This is reduced to 10 hours/day during Ramadan. Friday is the weekly rest day, which may be replaced with any other day. 30-minute rest period during the work day should be provided, and the worker shall not be made to work for more than 5 hours continuously. In no case, total working hours should be 12 hours per day. Friday is the Muslim day of rest, and if the company has a five-day working week, the other day off would probably be Thursday or Saturday. Saudi Arabia now enjoys a Sunday-Thursday work week, with Friday-Saturday as its official weekend.

Annual Leave

Minimum paid holiday entitlement 

A worker has a right to annual leave of at least twenty-one days, to be increased to a period of not less than thirty days if the worker spends five consecutive years in the employer’s service.

Unpaid vacation entitlement

Subject to the employer’s consent, a worker may obtain unpaid leave for a duration agreed upon by both parties. The employment contract shall be deemed suspended for the duration of the leave over twenty days unless both parties agree otherwise.

Sick Leave

Entitlement to paid time off 

A worker whose illness has been proven can be entitled to a paid sick leave for:

  • The first thirty days – the full amount
  • Next sixty days – 75% of the wage
  • Following thirty days – without pay
  • During a single year, whether such leaves are continuous or intermittent. A single year shall mean the year which begins from the date of the first sick leave.

Parental Leave

Maternity rights 

A female worker is entitled to maternity leave with full pay for a period of ten weeks, distributed as she wishes, up to a maximum of four weeks before the likely date of delivery, which date of delivery shall be determined by a health certificate certified by a health authority. It is prohibited to employ women after the birth in any way during the next six weeks and with the right to extend the leave for one month without pay. When a female worker returns to work following a maternity leave, she is entitled to take a period or periods of rest not exceeding one hour per day in addition to the rest periods granted to all workers. Such  periods shall be calculated as part of the actual working hours and not entail any wage reduction.

Paternity Rights 

Employees are entitled to one day’s paternity leave for the birth of a child. However, in many multinationals, offering male employees an additional leave period is market practice.

How Express Global Employment Facilitates Your Business Expansion in Saudi Arabia

Navigating the complexities of entering and expanding your business in a foreign market like Saudi Arabia can be overwhelming. Express Global Employment alleviates these challenges through our specialized Employer of Record (EOR) services, designed to fast-track your global market entry and ongoing operations. Here’s how we add value to your global business strategy:

Immediate Operational Launch

Traditional routes of business expansion often involve lengthy and expensive processes to set up a legal entity in a foreign country. Our Global EOR services bypass this need, enabling you to initiate your business operations instantly. This means you can focus on strategic activities, like market penetration and brand building, while we handle the operational details.

Cost-Effective Solutions

Establishing a legal entity takes time and incurs significant costs, from registration fees to ongoing compliance costs. By leveraging our EOR services, you avoid these expenses, thus optimizing your operational budget. This makes allocating resources to core business functions that drive growth and profitability easier.

Compliance Assurance

Saudi Arabia has intricate labour laws, tax regulations, and compliance requirements that can be difficult for foreign businesses to navigate. As your Global EOR partner in Saudi Arabia, we have the local expertise to manage your operations’ legal and regulatory aspects. This includes but is not limited to, employment contracts, payroll, tax submissions, and social security contributions, ensuring your business remains fully compliant with Saudi Arabian laws.

Flexibility and Scalability

Whether you want to test the Saudi Arabian market with a small team or plan a larger operation, our Global EOR services provide the flexibility and scalability to suit your needs. As your business grows, we can easily adapt our services to accommodate additional employees, new job roles, and even new business functions.

Streamlined Human Resource Management

Our comprehensive EOR solutions cover the full employee lifecycle from talent acquisition to ongoing personnel management. Our localized HR expertise allows you to offer competitive employment packages, retain top talent, and maintain high employee satisfaction, all crucial factors for long-term success.

Risk Mitigation

Any form of international expansion comes with risks, including legal liabilities and financial uncertainties. Our EOR services act as a safety net, mitigating these risks by ensuring all aspects of your business operations are compliant and well-managed.

By partnering with Express Global Employment, you’re not just finding a service provider; you’re gaining a strategic partner committed to accelerating your business growth in Saudi Arabia. Our unique blend of Global PEO/EOR solutions enables you to launch and scale your operations in a timely, cost-effective, and compliant manner, eliminating the need to establish a legal entity before or after your market entry.

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