The Payroll System in Saudi Arabia is different and unique to some extent. Saudi Arabia is one of the biggest economies in MENA with an annual GDP of $785 billion as of 2019. Even though much of that growth is owed to oil; the kingdom is exploring ways to reduce oil dependency through Saudi Vision 2030.
Additionally, the employment culture and payroll systems are pretty much different compared to other countries around the world. This is due to a population of around 34 million people inside a devout Muslim country. In addition to a government eyeing a more open business and cultural environment.
Contracts are the main pillar of the relationship between employers and employees in the kingdom. And as of 2019, it became mandatory that all employers upload detailed employees’ contracts to the online portal of the General Organization for Social Insurance.
Part-time workers are required by the law to have a contract stating a termination date, and can only be renewed once. Moreover, foreign workers are not eligible for part time work and must sign a fixed-time contract.
Furthermore, a few changes were introduced to the law in regards to foreign workers. The new changes are in line with the initiative to improve the contractual relationship inside the kingdom. They grant a worker the ability to move the sponsorship to another job in the event that his contract expires. Workers can now do that with the approval of their current employer. Or else, they can notify the current employer 90 days in advance and after spending at least 12 months in Saudi.
Workers by law are eligible for a maximum of 8 working hours per day, or 48 hours/week. And in Ramadan, these hours are reduced to 6 hours/day or 36 hours/week. Additionally, workers must get a minimum of one day to rest weekly, and it’s mostly Friday.
All workers get to have a break of at least 30 minutes daily after working for 5 hours to rest, pray, and eat. Moreover, working outdoors is prohibited between 12 pm and 3 pm during the hottest months, starting the 15th of June to the 15th of September.
Compensation and Severance
The kingdom has no minimum wage required by the law for the private sector. The minimum wage for the public sector though is SAR3,000/month (~$800).
Overtime hours pay an additional 50% on top of the hourly wage. This applies to working over the daily limit, on Fridays, and on national holidays. Even though a worker cannot work more than 11 hours a day.
Accordingly, severance is mandated by the law to 15-day-wage for the first 5 years of employment, and a month for every year after.
It is worth mentioning though that compensation, severances, and bonuses are usually stated in detail in the contract.
Leave and Holiday
Workers in the kingdom are entitled to a 21-day paid leave per year, increasing to 30 days after five years. Male workers receive a 5-day paid leave in case of the wife’s death, while females get a 15-day paid leave. Additionally, Marriage leave is 5 days according to the law. And the current retirement age is 60 for men and 55 for women.
Not to mention that women get 10 weeks of paid maternity leave: 4 weeks before birth and 6 weeks after. While the husband gets three days only.
Workers as well get up to a maximum of 30-day paid sick leave, given they present a doctor’s report. Also, the sick leave coverage is reduced to 75% for the remaining 60 days of sick leave. And employers are required to cover all the treatment expenses in case the injury took place at work.
There are 3 main holidays in the kingdom: The Saudi National Day on the 23rd of September, Eid Al-Fitr, and Eid Al-Adha.
Taxes and Social Security
There is no personal income tax on Saudi residents, yet foreign residents may be subject to a tax on their income. Albeit these taxes differ depending on the foreigner’s country and its tax treaties with Saudi Arabia.
Saudi residents on the other hand pay up to 22% for social security, partly covered by the employer. Conversely, foreigners are only subject to a rate of 2% for occupational hazards.
Automating the Payroll System in Saudi Arabia
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