If you’re contemplating business expansion into Saudi Arabia, an EOR (Employer of Record) solution presents itself as an ideal avenue for seizing the opportunities in this dynamic market without the need for entity formation.
Our unified and automated global HR platform provides you with a hassle-free approach to onboard your remote workforce, efficiently manage their payroll, benefits, and other HR-related tasks while adhering to compliance requirements. Additionally, we extend our expertise in guiding you through the intricacies of Saudi Arabia’s intricate hiring procedures, regulations, and employment laws.
With Marzuna’s EOR solution, you can expedite your international growth initiatives, all the while focusing on your core competency: expanding your business. There’s no need to grapple with the complexities of establishing a distinct legal entity, as we take care of the entire spectrum, encompassing hiring, employee management, probation periods, and regulatory compliance.
Given that Saudi Arabia is rapidly emerging as a hub for business and talent in the Middle East, Marzuna’s EOR solution offers a convenient avenue for seamlessly tapping into this promising market. To gain deeper insights into how we can facilitate your business expansion into Saudi Arabia with utmost ease, don’t hesitate to reach out to our experts today.
It may be challenging to navigate Saudi Arabia’s legal system for individuals who are unfamiliar with the Quran and Sharia law, which form the foundation of the nation’s legal system. New regulations such as the Saudi legislation further complicate issues for foreign companies seeking to fill positions with Saudi labor. Saudi Arabia allows women to work, yet there are still restrictions. Nonetheless, by collaborating with an Employer of Record (EOR), businesses can overcome these regulatory obstacles. An expert EOR partner who can guide them through the complexities of Saudi Arabian law can make it easier for businesses to open a local office and expand in the area.
| Entitlements | Explanation |
|---|---|
| Statutory Working Hours | Normally, there are 48 hours in a workweek, however (for Muslim employees) there are only 36 hours during Ramadan. |
| Overtime Eligibility | Article 107 of the Saudi Labor Law stipulates that overtime compensation is increased by 150% over regular salary.
The maximum daily overtime hours are 11 hours; however, the employee may go beyond that amount. the same. |
| Paid Public Holidays | Compared to other Arab countries, Saudi Arabia has fewer paid public holidays, and as they are frequently associated with religious occasions, the dates might change from year to year. Al Fitr, Eid Al Adha, and National Day will all be commemorated in 2023 on May 22, July 28, and September 23 respectively. It’s important to note that those working for the government often get more vacation time than people working for businesses. |
| Holiday Pay | Employees in Saudi Arabia have the right to paid time off for federal holidays, authorised medical leave, and maternity or paternity leave. Additionally, after five years of service, they are eligible for 30 days of paid leave, up from the standard 21 days. After two years of employment, Muslim employees are also entitled to an extra 10 to 15 days of paid religious leave to perform the Hajj to Mecca. Additionally, employees are given a paid educational leave that starts 15 days before exams begin and lasts until the end of the exam period. Additionally, an employee receives an additional five days of leave immediately following their marriage. |
| Medical Leave |
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| Maternity and Paternity Leave | For the first 30 days of their sick leave, employees who can show proof of a medical condition will be paid; after that, they will receive 60 days of paid sick time at a rate of 75%; and the final 30 days of the year will be unpaid. Employees have the choice to combine annual leave and sick leave, and if a worker’s sick leave and annual leave fall on the same day, the annual leave will be delayed until the sick leave is finished. If a worker’s weekly rest days and sick days fall on the same week, no further rest days will be granted. An employee is entitled to get their full pay for 60 days after an injury, during which time they are not allowed to ask for any further compensation.
Additionally, Article 151 of the Labor Law expressly mandates maternity leave, allowing working women up to 10 weeks of leave, of which no more than four weeks may be taken prior to the due date indicated by a medical certificate. A woman may extend her leave for an additional month of paid leave and an additional month of unpaid leave if she gave birth to a sick or handicapped kid. A total of three days of parental leave are available to fathers. When a spouse passes away, male employees are granted five days of leave while female employees are granted 15 days. |
| Leave Expiry | Every Saudi Arabian employee is required to use their annual vacation time. If an employee fails to comply, the company may decide to either lose the benefit or provide them leaves for subsequent years. |
| Leave Cash Out | A leaving employee is the only exception to the prohibition on leave encashment under Article 109 of the Saudi Labor Law. |
| Accrued Leave at Termination | According to Saudi Labor Law Article 111, a leaving employee’s accrued leave balance may be exchanged for cash. |
| Employee Protection and Anti-discrimination Rights | Saudi nationals must be treated equally, according to Article 3. Foreign labourers have not had the same protections. |
| Confidentiality of Personal Information | Employers are not required to follow any specific protocols under Saudi law when sending employee data outside of the country. |
There are no provisions in the Saudi labor code that differentiate employees based on their class. On the other hand, some benefits are exclusive to individuals based on their country.
In Saudi Arabia, fixed-term contracts are common and end after the agreed period of time is up. Freelancing and self-employment are uncommon in most places, however part-time contractors are more popular in the agriculture sector. Anyone who want to operate for oneself must get a trade license, just as in any other business establishment in the country.
Depending on the size of the organisation, potential employees can be sourced through various methods such as referrals or open applications. Online job websites are also a viable option, and in Saudi Arabia, some of the most effective sites for finding employees are Bayt.,expatriates ,and gulftalent
Saudi Arabia’s labor laws, specifically Articles 53 and 54, play a crucial role in regulating the probationary period for new hires. To ensure transparency and clarity, any agreement related to the probationary period must be explicitly stated in the employment contract. During this probationary period, which can extend up to 90 days with the possibility of a 180-day extension, both the employer and the employee retain the right to mutually terminate the contract. It’s important to note that holidays such as Eid ul-Fitr and Eid ul-Adha, as well as paid sick leave, are not considered part of this period. Notably, Saudi Arabian educators are subject to specific probationary requirements, and their probationary period can last up to two years.
As outlined in Article 54 of the labor code, once the initial trial period concludes, the employee cannot be subjected to another probationary term unless all parties agree to expand the employee’s responsibilities. Unless specified otherwise in the contract, either the employer or the employee may terminate the employment relationship during the trial period. However, if the contract is terminated during this phase, neither the employer nor the employee is obligated to provide notice or compensation. Additionally, in cases where foreign national employees resign or are dismissed for unsuitability during the probationary period, they are responsible for covering the costs associated with their return to their home countries.
For domestic employees, the probationary period is subject to specific regulations, and it cannot exceed 90 days. If, during this time, the employer finds the employee to be inadequate, they have the authority to terminate the employment without incurring any obligations.
Termination
| termination of a contract without notice by either party | A contract may be cancelled without notice for a number of reasons or situations. These consist of consent from all parties concerned, failing a medical exam, and reaching retirement age. While the retirement age for women is 55, it is 60 for men. However, if both parties agree, the parties may decide not to retire or terminate the contract. The contract’s expiration is yet another circumstance that might result in contract termination. In certain circumstances, the contract expires automatically after the predetermined amount of time. It is crucial to remember that the terms and conditions of the contract, as well as any applicable laws and regulations, must be followed in order to terminate a relationship without notice. |
| Dismissal of the employee by the employer without notice | The contract may, under certain conditions, be terminated by the employer without notice. These situations include those in which an employee falsified paperwork to get a job, disobeyed work-related instructions, attacked management and revealed trade secrets. |
| Termination of the contract without notice by the employee | An employee’s agreement with the employer may be terminated under specific conditions. These circumstances may occur for a number of reasons, such as the employer not honouring the benefits, remedies, or rights that were given to the employee in a contract or by law. Contract termination may also be justified if the employer gives the employee work that deviates from the initial arrangement. Additionally, the employee has the option to end their contract if the employer violates workplace safety and health regulations or misrepresents work conditions or circumstances. The employee has the right to end their contract if the employer assaults them or a member of their family. It’s crucial to remember that the grounds for contract termination must adhere to the clauses set forth in the contract as well as any applicable laws and regulations. |
By choosing an Employer of Record (EOR) solution like Marzuna for Saudi Arabia, company development into the country may be streamlined and hastened. Without the need to form a corporation, businesses may guarantee effective and legal payroll processing and fulfilment of other employment obligations with an EOR. Our services may help you manage important chores for your Saudi Arabian employees, such as monthly payroll, contracts, work licences, and taxation. To find out more about how we can support the growth of your company in the area, schedule a demo now.
When your business decides to grow in Saudi Arabia, you must also choose the expansion strategy you’ll utilise, i.e., whether you’ll create an internal team or hire an EOR service to run the operation. On your behalf, our team of knowledgeable experts will manage the challenging work of handling worldwide payroll, compliance, and taxation.
An employment visa must be obtained in order to work in Saudi Arabia, and the procedure starts with the employer’s application. There are several steps involved:
Foreign nationals who wish to work in Saudi Arabia must be sponsored by a Saudi national or a foreign business. Since only with the sponsor’s permission can an expatriate work and leave the country, the sponsor is crucial in facilitating the expatriate’s work and exit from the country. A work permit from the Ministry of Labor is necessary in order to receive an Iqama. Work permits for overseas employees can be sponsored by our local partner in Saudi Arabia, simplifying the employment procedure. We are able to assume the obligations and demands of work as an EOR in Saudi Arabia. While entrusting us with employment-related tasks, the client company can continue to monitor its employees’ day-to-day activities and business operations.
| Work Permit Terms | Details |
|---|---|
| Processing Time | Depending on the embassy, processing takes typically one to three weeks. After receiving the Work/Employment Visa from the embassy, the person can depart for Saudi Arabia. The stay period covered by the Work/Employment Visa ranges from 14 to 90 days. |
| Work permit process | The section on employment visas has already described the permission procedure. |
| Passport Submission | The original passport must be submitted as part of the application procedure.. |
| Work Permit Validity | The stay period covered by the Work/Employment Visa ranges from 14 to 90 days. |
| Work Permit Process for Different Countries | With a few variations, the general procedure is the same for all nations. |
| Change of Sponsor Within Saudi Arabia | If the former sponsor and the employee are in agreement, the sponsorship may be changed. The Qiwa System must be used to effect such a modification. |
| When Can an Employee Travel to Saudi Arabia? | Once the employment visa has been approved, the employee can depart. |
| What’s the Cost of Iqama? | The rate varies depending on the hiring split between Saudi Arabians and foreigners. rate is different. |
| Duration of Business Visa Processing | Processing takes one to three weeks once at the embassy. |
| Can Spouses Work on Dependent Visas? | No |
| Termination of Work Permit | Depending on the reasons for the termination, the permit may be revoked with a variety of notification requirements. |
| Special Requirements for Work Permit Cancellation | Usually, the permission is revoked by the employer. |
Saudi Arabia has a distinct corporate culture, and contracts play a major role in the employment system there. Compliance is crucial since non-compliance can have serious repercussions. It is essential to completely understand these procedures in order for a foreign company operating in this country to be successful. Two common approaches to do this are hiring a local expert to ensure compliance with local regulations or establishing an internal department to manage wages. Foreign citizens are not subject to any special regulations, although Saudi companies are required to pay 12% of their Saudi native employees’ earnings into social insurance.
Residents of Saudi Arabia are not subject to personal income taxes. On their tax-adjusted profits, non-Saudi citizens and anyone outside the Gulf Cooperation Council (GCC) are liable for a flat tax of 20%. These people could also be compelled to pay withholding tax on any income they receive from Saudi Arabia. Whether Saudi Arabia and the foreign national’s country of origin have an international tax agreement will determine whether other taxes are applicable.
Annual bonuses are commonplace, and the state usually awards a bonus that is equal to one month’s worth of pay. Performance-based bonuses are also typical.
The choice of the most suitable business entity in Saudi Arabia is influenced by the company’s size. Among the available options, the limited liability corporation (LLC) is the most commonly utilized.
It’s worth noting that the Saudi Arabian Ministry of Investment has set a minimum capital requirement of SR 500,000 for establishing an LLC, even though no legal basis supports it. Additionally, an LLC should have between 2 and 50 shareholders, and at least one manager must be appointed.
While it’s not mandatory, shareholders can establish a board of directors through the memorandum of association. In cases where the corporation has more than 20 shareholders, it’s necessary to have a “board of controllers” that assumes similar responsibilities to a board of directors.
Saudi Arabia’s thriving economy presents numerous business opportunities, making it an attractive destination for companies looking to expand. Nevertheless, it is imperative to have a comprehensive understanding of the diverse laws and regulations related to the process of incorporation.
