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Mercans CountryIntel ® Saudi Arabia Payroll And HR Insights

Mercans offers complete payroll, PEO and HR services in Saudi Arabia

The world’s largest producer and exporter of oil, Saudi Arabia has increasingly diversified its economy and produces a variety of industrial goods including petrochemicals, plastics, metal goods, construction materials and electrical appliances. The private sector is playing a much larger role in the local economy, now accounting for 48% of the GDP. Saudi Arabia is the 19th largest exporter and the 20th largest import market in the world with a young, highly educated population of over 30 million.

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Doing Business in Saudi Arabia

The government offers an array of incentives to the private sector including sweeping reductions in utility and public service fees. Private entrepreneurs are also given access to government information systems. Government agencies such as the Saudi Arabian General Investment Authority (SAGIA) provide free consulting and support services and publish a list of investment opportunities. Game-changing opportunities are presented thanks to Saudi Arabia’s Vision 2030 which is strengthened by the country’s ambitious reform journey. Further, its resilient banking system and large asset base is helping Saudi Arabia strengthen its financial sector.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Saudi Arabia is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.


Banking Hours: 9:30 am to 4:30 pm from Sunday to Thursday

Working Week

The standard working week is from Sunday to Thursday from 9:00 am - 5:00 pm

Labor Law

An employer cannot be obliged to reemploy a workman under probation for a period exceeding three months in respect of workmen employed at a monthly rate, or exceeding one month for other types of workmen. Where the labor contract is for a specified period, the contract terminates on expiry of its term. Where the labor contract is for an unspecified period, either party may cancel the contract for a valid reason.

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Main Industries

Crude Oil Production, Petroleum Refining, Basic Petrochemicals, Ammonia

GDP Growth


Dates & Numbers


Official State Name

The Kingdom of Saudi Arabia


34.81 million



Major Languages



Saudi riyal

Internet Domain


International Dialing Code


Saudi Arabia
Riyadh, SA
11:28 am, September 4, 2022
clear sky


In general, wages shall include all increases and allowances of any kind. Companies who operate a multi-country payroll should note that except within the limits dictated by the need to attract foreign labor, an employer who employs foreign workers may not pay them wages in excess of what they pay to Saudi workmen of equal competence and technical proficiency.

It is acceptable to provide employees with online payslips


Payroll reports must be kept for 7 years


Employees are entitled to 21 days of paid annual leave for 1 - 5 years of service

Annual Leave

120 days of sick leave are granted where the first 30 days are fully paid

Sick Leave

10 weeks of paid maternity leave and 1 day of paid paternity leave

Maternity & Paternity Leave

30 days notice

Employee Termination

This is not compulsory but can be paid as a bonus based on performance

13th monthly salary

4,000 SAR per month

Minimum Wage

Where overtime exceeds 48 hours per week, it is paid at 150% of the salary rate


Half a month's wage for the first five years of service and one month wage for service beyond that

Severance Pay

Tax and Social Security

There is no individual income tax scheme in Saudi Arabia. The social protection system was developed to benefit certain groups including widows, divorced women, people with disabilities, elderly, unemployed persons, the poor and needy, orphans and those affected by disasters and pandemics.


Income tax is not imposed on an individual’s earnings if derived from employment in Saudi Arabia. Non-employment income is taxed as an entity or PE (permanent establishment).


Corporate Income Tax


Personal Income Tax


Sales Tax



Social Security

Social insurance contributions are paid monthly based on the monthly basic salary plus housing (paid or in kind).


Social Security Rate


Social Security Rate for Employers


Social Security Rate for Employees

Employment Law

In November 2020, a major labor reform initiative was launched to replace the kafala (sponsorship system) governing foreign worker mobility in Saudi Arabia. This eases job mobility and puts more emphasis on the contractual relationship between employers and their employees.

Employment Agreement

Labor contracts must be in writing and drawn up in Arabic. However, a contract will be treated as having existed if an employment relationship exists without a written contract.

Working condition

Normal working hours are eight hours per day for a six day week. Anything over that must be compensated at overtime rates except for certain categories of work (such as catering trade). During Ramadan, the maximum working hours for Muslim employees is reduced to six hours per day for a total of 36 hours per week. The rules on maximum daily and weekly normal working time and minimum rest/meal breaks do not apply to employees in senior management or where they have authority over other employees.


All employees are entitled under Labor Law to at least 21 days of paid annual leave and those with at least five years’ service with the employer are entitled to at least 30 days.

Employment termination

An employee’s employment may be terminated with a valid reason which includes termination by mutual agreement, expiry of a fixed term employment contract, notice being given by either party to terminate an unlimited term employment contract, employee reaching the statutory retirement age, ‘force majeure’ event occurring, business closes down or any other reason permitted by law.

30 days

Minimum notice period for terminating an employee

3 days

Total number of public holidays


Working hours per week

4 weeks

Total number of days for Compassionate & Bereavement Leave


Foreign nationals (excluding citizens of Bahrain, Kuwait, Oman and the UAE) cannot work in Saudi Arabia without a residence/work permit. This is granted only to workers who have a contract with an employer in Saudi Arabia.

Residency permits

All foreign nationals working in Saudi Arabia must be sponsored by an employer (usually a domestic or multinational company) in the country. A ‘block visa’ must be obtained from the Ministry of Human Resource and Social Development and authorization from the Ministry of Foreign Affairs. Once a work visa is issued, the employer must apply on the employee’s behalf for a residence permit (which also serves as a work permit). Residence permits are valid for up to two years and may be renewed by the employer.

Work Permit validity

One year

Required Documents

A passport valid for the duration of employment

A passport-size color photograph

Proof of online payment of the visa fee through the Enjazit website

Completed visa application

Three copies of a signed medical report

Letter of employment from the sponsoring company in Saudi Arabia, which must be certified by the Ministry of Foreign Affairs and the Saudi Chamber of Commerce

Signed copy of the employment contract

Certified copy of the applicant’s university diploma, validated by the Saudi Arabian Cultural Mission

Police report of any criminal record

Addressed and prepaid envelope

Compliant, reliable, error-free and touchless payroll in Saudi Arabia

Build the best team and hire top talent compliantly in Saudi Arabia. Get in touch with Saudi Arabia payroll outsourcing & PEO specialists for a free consultation!

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This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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