As a G-20 and OPEC leader, Saudi Arabia boasts the world's largest oil reserves, anchoring a strong economy with a stable job market. This guide provides CEOs, employers, and startups with strategic insights into navigating Saudi Arabia's complex hiring landscape and stringent employment laws. 

It aims to equip businesses with the necessary tools to tap into the country's skilled workforce and economic vitality, enhancing growth and competitive advantage in the region. Through actionable insights and compliance strategies, this guide is your resource for effective integration and operational success in Saudi Arabia.

What you need to know before hiring employees in Saudi Arabia

Job market in Saudi Arabia

• Saudi Arabia holds about a quarter of the world’s oil reserves, significantly influencing its economy with oil-related activities contributing approximately 42% to the GDP and 87% of export revenues. This positions the country as a key player in global energy markets, providing a stable backdrop for business investments.
• Internet usage in Saudi Arabia is expected to grow, with projections indicating an increase of 2.5 million users by 2029, totaling 39.18 million users. This digital expansion supports the growth of sectors like IT, telecommunications, and e-commerce, enhancing opportunities for tech enterprises.
• The labor market is predominantly composed of expatriates, especially in the private sector where they make up about 90% of the workforce. This international labor pool is vast, with around 7.4 million legal foreign workers, offering businesses a rich source of global talent and expertise.
• Beyond its primary oil sector, Saudi Arabia is the world's largest producer of dates, a significant agricultural output. The mining sector is also on the rise, with the country leveraging its substantial mineral resources to broaden economic activities.
• The annual Hajj pilgrimage significantly impacts the local job market, generating approximately $2-3 billion in revenue each year. This event creates numerous temporary jobs in hospitality, retail, and transportation, providing an economic boost.
• Economic diversification efforts, part of the Vision 2030 plan, aim to reduce oil dependency and attract foreign investment, enhancing the overall business environment. This strategic shift is designed to open new avenues for startups and international corporations looking to enter or expand within the Saudi market.

Saudi Arabia hiring trends

In 2024, the hiring trends in Saudi Arabia are significantly influenced by Vision 2030, with a strong emphasis on Saudization to enhance the employment of Saudi nationals through comprehensive government incentives and rigorous skills training programs. These initiatives are pivotal in sectors such as healthcare, which is expanding into telemedicine, and technology, where there is a growing need for AI and cybersecurity expertise. 

Additionally, the rise of renewable energy and tourism presents new opportunities, fueled by substantial investments. The shift towards remote work and greater digital integration is transforming conventional work environments, increasing the demand for digital skills. 

Furthermore, Saudi Arabia’s vibrant startup ecosystem, supported by government-funded incubators and accelerators, is promoting a culture of innovation and entrepreneurship. Employers and startups must navigate these developments strategically to build a competent and innovative workforce that aligns with Saudi Arabia's broader economic diversification objectives.

How to hire employees from Saudi Arabia

1. Set up an entity in the country

Embarking on establishing a local entity in Saudi Arabia, such as a Limited Liability Company (LLC) in Saudi Arabia demonstrates a strong commitment to the market, granting full control over hiring and operational strategies. This option suits organizations with the resources and management expertise to support a significant employee base. The incorporation process, handled through the Ministry of Investment of Saudi Arabia (MISA) and the Ministry of Commerce (MOC), involves investing in local assets and setting up a multi-currency payment system, making it ideal for companies with a long-term vision and intent to deeply integrate into the Saudi market.

2. Hire independent contractors

For companies requiring flexibility and specialized expertise for targeted projects, engaging with independent contractors in Saudi Arabia is a highly effective strategy. This approach minimizes legal and compliance complexities, with contractors functioning as self-employed professionals under well-defined contract terms. Ideal for businesses that need to swiftly adapt to project demands and shifts in the Saudi market, this method delivers specialized capabilities without the burden of long-term commitments. Particularly advantageous for sectors where agility and expert knowledge are paramount, it’s a strategic choice for employers, CEOs, and startups looking to optimize their operational dynamics.

3. Partner with an EOR in the country

Partnering with an Employer of Record in Saudi Arabia provides a direct conduit to the local talent pool, eliminating the need to establish a legal entity. An EOR serves as your legal representative in Saudi Arabia, handling the complexities of hiring, payroll, and compliance, allowing you to concentrate on the strategic management of your team's activities. This model is particularly beneficial for companies seeking swift market entry or expansion in Saudi Arabia, ensuring immediate compliance and operational efficiency, which is crucial in navigating the regulatory landscape of the Kingdom.

Compliance risk while hiring in Saudi Arabia

Hiring in Saudi Arabia involves navigating compliance risks such as Saudization quotas, stringent labor laws, and complex visa regulations. Employers must also adhere to cultural norms, utilize the Wage Protection System for payroll, and comply with evolving data protection regulations. Non-compliance can lead to penalties, legal disputes, and reputational damage, emphasizing the importance of careful adherence to local laws and customs.

Key Aspects of Saudi Arabia Labor Law

Employment Contract:

In Saudi Arabia, employment contracts must be written in accordance with the guidelines set by the Ministry of Human Resource and Social Development (HRSD). These contracts, essential for non-GCC nationals to obtain visas, should detail employer and employee information, job descriptions, workplace location, and the terms of employment. Both parties hold a copy, ensuring clarity and compliance.

Contracts also specify policies on leaves such as maternity and compassionate leave and outline termination rules. Additional terms may be added as long as they do not contradict existing labor laws. A probationary period up to 90 days, extendable to 180 with consent, can be stipulated.

For legal proceedings, contracts are typically bilingual in Arabic and English, but Arabic prevails in disputes. This ensures all parties understand their rights and obligations under Saudi law, which requires that official documents and proceedings be conducted in Arabic, with English translations used only for clarification when necessary.

Working Hours:

In Saudi Arabia, the standard workweek consists of 48 hours, with employees working 8 hours a day across 5 days. During Ramadan, the daily working hours are typically reduced to 6 hours.

Overtime: 

Any work that exceeds the typical weekly hours is considered overtime and should be compensated according to employment contracts or collective agreements. Workers cannot be required to work more than 11 hours per day. Overtime starting from the 8th hour should be paid at a rate of 150% of the standard salary. Employers must keep timesheets when overtime arrangements are made.

Certain exemptions exist for workers such as those in senior management or policy-making positions, who may not qualify for overtime compensation.

Minimum Wage: 

In Saudi Arabia, the minimum monthly wage is set at 4,000 SAR.

Payroll laws in Saudi Arabia

In Saudi Arabia, payroll can be processed either weekly or monthly. Employees paid on a weekly basis must receive their wages once every week, while those who are paid monthly should receive their wages at least once per month.

Employment benefits in Saudi Arabia

Leave Policies in Saudi Arabia

1. Paid Time Off:

Under Saudi Arabia's Labor Law (Article 109), the amount of annual leave an employee receives is based on their length of service:

• Employees with one to five years of service are entitled to 21 days of annual leave.
• Employees with over five years of service receive 30 days of annual leave.

Employees can transfer unused leave to the next leave year with written approval from their employer. Additionally, employees can request up to ten days of unpaid leave annually, which must be approved by the employer.

2. Public Holidays:

Saudi Arabia will observe 11 public holidays for the year 2024, including the tentative dates for Eid al-Adha.

3. Sick Days:

According to Article 117 of the Labor Law, employees in Saudi Arabia are eligible for up to 120 days of sick leave annually, which can be taken either continuously or intermittently. The compensation structure for sick leave is as follows:

• Full salary for the initial 30 days of illness.
• One-third of the salary for the subsequent 60 days.
• The remaining 30 days are unpaid.

Employers are responsible for paying for sick leave. Employees must submit a medical certificate to validate any sick leave taken.

4. Maternity Leave:

Female employees are granted 10 weeks of paid maternity leave, starting four weeks before their due date. Working during the first six weeks post-birth is prohibited.

The employer is responsible for the payment during maternity leave, which varies based on the employee’s length of service. Those with at least one year of service receive 50% of their salary, while those with three years or more receive their full salary.

Those who are paid in full during maternity leave cannot take paid annual leave in the same year. However, those receiving half pay are allowed to take half of their annual leave entitlement during the same year.

5. Paternity Leave:

Under Article 113 of the Labor Law, fathers or partners are entitled to three days of paid paternity leave following the birth of their child.

Public Health Insurance 

Saudi Arabia offers a mixed healthcare system with both public and private sectors, where around 60% of services are government-provided. The country spends about US$2.4 billion annually on healthcare, accounting for 4.7% of GDP. Access to public healthcare is free for Saudi citizens and includes a range of services. Expatriates must have mandatory health insurance provided by employers since 2005, with plans to extend coverage further. The Council for Cooperative Health Insurance mandates private sector coverage, though compliance varies. There are 26 health insurance companies in Saudi Arabia, with an average premium of SAR 1,759.

Filing tax in Saudi Arabia

Income Tax:

In Saudi Arabia, there is no individual income tax regime; earnings from employment are entirely exempt from income tax. This unique tax structure means that individuals retain their full income without any deductions for income tax, enhancing personal financial capacity. This policy reflects the country's approach to taxation, where public finances are largely supported by other means, primarily oil revenues. For further details on how this tax-free framework impacts employment and personal finances in Saudi Arabia, please refer to our comprehensive guide.

Other Tax and Social Security Contributions:

In Saudi Arabia, payroll contributions are carefully structured to support employee welfare. Employers contribute 9% to social insurance and 1% to unemployment insurance for incomes between 1,500 SAR and 45,000 SAR monthly, with an additional 2% for occupational hazards. Saudi employees also contribute 9% to social insurance and 1% to unemployment insurance, totaling 9.75% in payroll deductions. Foreign workers are exempt from these contributions. Please refer to the guide for more information. 

Business culture in Saudi Arabia

Understanding the business culture in Saudi Arabia is essential for international firms considering entering this strategic market. Key aspects of the Saudi business environment include:

• Saudi Arabia's business culture is deeply influenced by Islamic traditions, underpinning a society that values hierarchy and a clear organizational structure. Respect for authority and seniority is paramount in the business setting.
• Business relationships in Saudi Arabia are formal yet personal. Building trust and mutual respect through personal interactions is crucial, often requiring more time than in Western cultures.
• Decision-making processes tend to be centralized with top executives holding considerable authority, reflecting the hierarchical nature of Saudi businesses.
• Negotiations can be prolonged, as they often involve extensive discussions and can be influenced by non-verbal communication cues. Patience and respect during these negotiations are highly valued.
• While the business environment is traditionally male-dominated, recent reforms are gradually increasing women’s participation in the workforce.
• Social customs play a significant role in business, with hospitality and courtesy being key elements. Business meetings may extend to social gatherings, where relationships are fostered over coffee or meals.

Top sectors to hire from in Saudi Arabia

Saudi Arabia's dynamic economic transformation under Vision 2030 creates fertile ground for hiring across several key sectors:

Technology and Innovation: 

As Saudi Arabia strides toward becoming a global hub for technological innovation, the demand for professionals in AI, big data, and cybersecurity is surging. This sector offers expansive opportunities for tech experts ready to lead in a fast-evolving landscape.

Engineering and Construction: 

Bolstered by substantial investments in infrastructure, including smart cities and renewable energy projects, the engineering sector is vital for the nation’s future. There is a robust demand for civil, mechanical, and electrical engineers poised to shape the Kingdom’s infrastructure.

Healthcare: 

With both public health initiatives and a burgeoning private sector, the healthcare industry in Saudi Arabia is on an upward trajectory. Opportunities abound for medical professionals, healthcare administrators, and pioneers in digital health technologies, ready to drive forward healthcare modernization.

Financial Services: 

The financial sector is undergoing a rapid transformation with the rise of fintech and digital banking solutions. This growth calls for skilled professionals in financial technology, investment banking, and regulatory compliance who can navigate the complexities of a dynamic financial landscape.

Tourism and Hospitality: 

In line with efforts to enhance the tourism sector, there is a significant need for professionals in hospitality management, travel services, and event management. These roles are crucial in elevating Saudi Arabia's status as a premier tourist destination.

Education and Training:

As the Kingdom invests in developing its human capital, there is a critical demand for educators and trainers, especially those specializing in STEM, to support sweeping educational reforms and workforce skill enhancement.

Top cities to hire from Saudi Arabia

Riyadh:

As the capital and economic center of Saudi Arabia, Riyadh is a key hub for finance, technology, and government sectors. The city's rapid development and numerous multinational corporations make it an excellent location for finding skilled professionals in a variety of fields.

Jeddah:

Known as the gateway to Mecca, Jeddah is a major urban center in western Saudi Arabia. It has a thriving commercial environment and is particularly strong in logistics, tourism, and retail sectors. The city's cosmopolitan nature and strategic port location also make it a top choice for international trade and hospitality industries.

Dammam:

Part of the Eastern Province and closely linked with the oil-rich cities of Dhahran and Khobar, Dammam is crucial for the petroleum industry. It’s also a growing center for shipping, commerce, and manufacturing, making it ideal for hiring in energy and industrial sectors.

Khobar:

Often seen in conjunction with Dammam and Dhahran as part of the Triplet Cities, Khobar has a vibrant business scene and is known for its entrepreneurial environment. It’s particularly suited for hiring in the IT, engineering, and customer service sectors.

Hire in Saudi Arabia compliantly with Gloroots

Hire in Saudi Arabia compliantly with Gloroots. Gloroots, serving as an Employer of Record (EOR) in Saudi Arabia, simplifies the process of candidate onboarding, facilitating swift initiation of operations while adhering to both local and international compliance standards. Designed to suit businesses of varying sizes, Gloroots offers an efficient solution for managing payroll, administering benefits, and overseeing tax obligations without the need for establishing a local entity. This service empowers companies to focus on effectively assembling a remote team within Saudi Arabia. For further information on how Gloroots can support your hiring needs in Saudi Arabia, please reach out to us.

Frequently Asked Questions 

1. What are the requirements for hiring foreign workers in Saudi Arabia?

Foreign workers must obtain a work visa to be employed in Saudi Arabia. The process involves securing a job offer from a Saudi employer who will then sponsor the visa application. Employers must also ensure compliance with Saudization quotas, which mandate a certain percentage of Saudi nationals in the workforce.

2. How do labor laws in Saudi Arabia affect employment contracts?

Saudi labor laws require that all employment contracts be written in Arabic (bilingual contracts are common) and specify terms such as salary, job description, duration, and termination conditions. Contracts must comply with local regulations, including work hours, overtime compensation, and leave entitlements.

3. What is the probationary period for new employees in Saudi Arabia?

The probationary period in Saudi Arabia can be up to 90 days, extendable to 180 days with the employee’s written consent. During this period, either party may terminate the contract without the need for severance or notice, unless otherwise stipulated in the contract.

4. Are there specific regulations regarding women in the workforce in Saudi Arabia?

Recent reforms under Vision 2030 have significantly liberalized policies affecting women, including allowing women to drive and travel without a male guardian's permission. However, employers should remain sensitive to cultural norms and legal requirements regarding gender roles and interactions in the workplace.

5. What is the end-of-service benefit in Saudi Arabia?

The end-of-service benefit (EOSB) is a mandatory payment to employees who have completed their contract or whose employment has been terminated. It amounts to half a month's salary for each of the first five years of service and a full month's salary for each subsequent year. This benefit is only payable at the end of the employment relationship.