Saudi Arabia payroll and benefits guide
What global businesses need to know about payroll in Saudi Arabia
Saudi Arabia’s Vision 2030 strategy is delivering huge opportunities for foreign businesses all over the world. What was a relatively insular and devoutly Islamic country not so long ago is increasingly and rapidly opening up to international investment.
As part of these efforts, previous rules that restricted foreign businesses to certain sectors in Saudi Arabia have now been relaxed. But this also means that its employment and payroll regulations are in a near-constant state of reform, bringing the country more in line with the kind of employee experience that is standard in the West.
This transformation is occurring so quickly that it’s vital to stay on the pulse of what foreign businesses are required to do. This guide gives you all the latest information around running payroll in Saudi Arabia.
Getting Started with Saudi Arabia payroll
Saudi Arabia has streamlined its foreign investment process in 2025. The requirement to obtain an investment license has been scrapped — in its place is a simpler registration process with the Ministry of Investment that treats domestic and foreign businesses equally. Furthermore, there are no longer any sectors that are restricted to domestic business: foreign enterprises can operate in any sectors — except those deemed a risk to national security.
The most common kind of business entity used by foreign enterprises in Saudi Arabia is a limited liability company (LLC). This enables the company to engage with both the public and private sector, and to sponsor incoming employees for residency. There is no minimum share capital required for a Saudi LLC.
You should then reserve a company name with the Ministry of Commerce and Industry. Articles of incorporation/association are then submitted to the Ministry to be authenticated. Once this is done, the notary public will officially notarize the articles with a stamp. None of these processes has an independent charge or fee.
Other requirements include publishing the summary of the articles of incorporation, submitting all approved documents to the Ministry of Commerce to obtain a Certificate of Registration, formation of an official company seal, and becoming a member of the Chamber of Commerce. None of the fees associated with these processes are significant.
A company must then open a bank account with a bank that is domestic to Saudi Arabia. This can be a slow process and often takes more than a month. You’ll also need to complete a number of other registrations: local business license (if applicable); registration with the Zakat, Tax and Customs Authority (ZATCA), registration with the General Organization for Social Insurance (GOSI), and registering the address of the business with the “Wasel” post office.
Employment Considerations
Contracts are a huge part of the employer/employee relationship in Saudi Arabia. All employers in Saudi Arabia are required to upload employment contracts to the General Organization for Social Insurance’s online portal.
Part-time workers must have contracts that state an official termination date; furthermore, fixed-term contracts automatically become rolling contracts if they run for four years continuously, or are renewed three times. Foreign workers are required to have a fixed-term contract and are not eligible for part-time work. Any back pay owed to employees is also prioritized by law in the case of a company bankruptcy.
The maximum working time for employees is eight hours per day or 48 hours a week, but is reduced during Ramadan to six hours per day and 36 hours per week. A minimum of one rest day is mandated per week; many companies make this Friday due to its status as the holy day in Islam.
Employees must take a break of at least 30 minutes for rest, prayer and food after working five hours consecutively. Additionally, between June 15 and September 15, employees are banned from working outdoors between midday and 3 pm due to the exceptionally high summer temperatures.
Working overtime in Saudi Arabia generates an extra 50% on top of the normal hourly wage. This applies for working time beyond the maximum daily or weekly limits, and for working any time on Fridays or on national holidays. Employees must not work more than 11 hours per day, and timesheets must be kept to track overtime worked.
Overtime compensation rules in Saudi Arabia have been overhauled. As of 2025, employers can choose to pay overtime at 150% of normal rate, or alternatively provide compensatory leave of 1.5 hours per hour of overtime worked. The leave must be granted to employees within 60 days of the overtime being worked, and employees cannot accrue more than 30 days of compensatory leave each year.
Notice periods run for 60 days on normal open-ended contracts and 30 days under fixed-term contracts. Notice must be served on a fixed-term contract, even if it is approaching its date of expiry. Under new legislation, employers can delay the acceptance of an employee’s resignation for up to 60 days, if they can provide proper justification that it’s in the interests of the business to do so. Probation periods are generally three months, but can be extended up to six months with the written agreement of the employee. During probation periods, the notice period is one day.
Compensation & Severance
Compensation, severances and bonuses are usually detailed specifically in employment contracts. Labor unions are not a huge force in the country — but the court system to handle cases of compensation is quite robust.
The national minimum wage in Saudi Arabia is 4,000 riyals per month (approx. £790; $1,070; €920). Part-time workers are also subject to this rate on a pro-rata basis. However, higher minimum rates are applied for certain professions:
- Accounting (with degree qualification): 6,000 riyals per month (approx. £1,190; $1,600; €1,370)
- Dentistry: 9,000 riyals per month (approx. £1,780; $2,400; €2,060)
- Engineering: 5,000 riyals per month (approx. £990; $1,330; €1,150)
- Pharmacy: 7,000 riyals per month (approx. £1,390; $1,870; €1,600)
Payroll is generally run on a weekly or monthly basis by bank transfer. Bonuses based on performance can be paid, at the discretion of the employer, although the payment of Ramadan bonuses is common. The fiscal year runs to the Gregorian calendar year, and so ends on 31 December.
Severance pay is mandated by law to be 15 days of wages for each of an employee’s first five years of employment. Employees receive a full month of wages for every year over and above this. If an employee resigns, they are only entitled to one-third of these levels if they have between two and five years of service, and two-thirds if they have between five and ten years. The full payout can only be given to resigning employees if they have at least ten years of service.
Tax and Withholding Requirements
Saudi residents pay no personal income tax. Foreign residents, however, may be subject to Withholding Tax on the income they make in Saudi Arabia. The rates of these vary, depending on the tax treaties established between Saudi Arabia and around 57 different countries. As a guide, the rate for nationals of non-treaty countries is 5% on dividends, 5% on interest, and 15% on royalties; most of the treaty rates are fairly close to these, but are generally lower for royalties.
Social insurance contributions are gradually being increased. As of July 2025, the rate for both employers and employees was increased from 9% to 9.5%. There will be further 0.5% increases each July, until 2028 when the rate will reach 11% for each party. Both employers and employees pay 1% for unemployment insurance, while employees also pay 2% for occupational hazard contribution. Non-resident employees are only subject to the 2% for occupational hazards.
Holiday and Leave Considerations in Saudi Arabia
Employees in Saudi Arabia are entitled to 21 days’ paid leave each year, increasing to 30 days after five years of service. Additionally, five days’ paid leave is granted immediately after a marriage. In the event of a bereavement, five days’ paid leave should be granted for the death of a spouse, child or parent, and (as of February 2025) three days for the death of a sibling. Employees are also entitled to Hajj pilgrimage leave of 10-15 days as long as they have at least two years’ service, and have not performed the Hajj before.
New legislation introduced in July 2025 has increased the retirement age in Saudi Arabia to 65, but this is being applied on a gradual basis. Employees born before July 3 1975, will still be subject to the previous retirement age of 60. Those born after that date who are already in the workforce may have their retirement age extended, depending on their age. Anyone who started their first job after July 3 2024 will be subject to the new retirement age of 65.
Saudi Arabia has four public holidays. Founding Day and the Saudi National Day always fall on 22 February and 23 September respectively, but the other two — Eid ul-Fitr (the end of Ramadan) and Eid ul-Adha (the end of Hajj) — last several days each and move annually. This is because Saudi Arabia observes the Islamic calendar, in which years last only 354 or 355 days. As of 2025, these holidays are around late March and early June respectively, but are moving 10-12 days earlier in the Gregorian calendar every year.
Maternity leave entitlement was extended from 10 weeks to 12 in February 2025. The first six weeks after the birth are mandatory, while the other six weeks can be taken before and/or after this period at the mother’s discretion (starting four weeks before the due date). Employers pay maternity pay at the employee’s full rate if they have at least three years’ service, and half that if they have between one and three years. Paternity leave entitlement is three days.
Sick leave entitlement is a maximum of 120 days per year, as long as the illness is certified by a doctor. Sick pay is paid by the employer at the employee’s full rate for the first 30 days, and at one-third of their normal rate for the next 60 days. Any sick leave beyond 90 days in a year is unpaid. In the event of an employee suffering an injury at work, the employer must cover all expenses relating to treatment.
Payroll in Saudi Arabia: A summary
As this guide demonstrates, there has been a huge amount of change in Saudi Arabian employment and payroll law in the last couple of years. And as the country continues to modernize and open up for global business, it’s highly likely that more sweeping changes are to follow in the years to come. Keeping track of all these changes and implications can be challenging, and that’s where in-country payroll expertise, easily accessible when you need it, can make a real difference.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional. Click here to see more country payroll guides from CloudPay.