Employer of record in Saudi Arabia: costs, rules and how to hire

A Saudi employment contract has to be in Arabic and documented through Qiwa, and since April it also has to be documented electronically before the worker counts in Nitaqat.

Agree and document the employment terms

The employment contract must be written, retained by each party and documented under the applicable rules. Include the parties, nationality and identity details, workplace, role, start date, wage and allowances, duration and basic rights and duties. An unwritten contract can still be legally recognised, with the worker able to prove it and the resulting rights, so missing documentation does not erase the employment relationship.

Arabic is required for employment contracts and statutory employment records, and where another language is also used the Arabic text prevails. The Labour Law uses the Hijri calendar for its periods and dates unless the employment contract or work regulations say otherwise. Make the agreed calendar, pay period and date calculations clear, and apply separate statutory rules where another system requires them.

Use Qiwa to document the employment contract and obtain the employee's agreement to its terms. The enforceable-contract initiative requires the applicable contract template and a Ministry of Justice execution number. From 15 April 2026, electronically documented Saudi employment contracts are also a condition for counting workers in Nitaqat Saudization ratios. A signed service agreement with an EOR does not replace these employee-contract steps.

Choose the contract duration and probation

A non-Saudi employee's contract must be written and fixed-term, and if no duration is stated it is treated as one year from the actual start, renewable for the same period if work continues. For eligible Saudi fixed-term contracts, continued work after three consecutive renewals or four years across the original term and renewals, whichever comes first, converts the contract to indefinite duration. The non-Saudi rule remains separate.

A probationary period must be expressly agreed in the employment contract with a clear duration, and cannot exceed 180 days. Either party can end employment during valid probation. There is no end-of-service award or termination compensation for that probation period, but earned wages and other applicable rights still need to be settled, and repeat probation with the same employer is restricted to the permitted written exceptions.

Record workplace responsibilities

The employer must take precautions against workplace hazards, explain job risks before work begins, and provide and explain the use of required protective equipment. These safety costs cannot be charged to workers. Employment decisions must also respect the law's equal-treatment and anti-discrimination duties. Agree how the provider and your business will handle safety, incidents and complaints at the employee's actual workplace.

Give the employee a copy they can understand. The provider's service agreement with your company and the employee's employment contract have different purposes, and both should describe the arrangement accurately.

Misclassification risk, and the supervision test

Saudi law puts the test in terms of management and supervision, which for most arrangements is easy to answer. Saudi employment law describes work performed under an employer's management or supervision in exchange for wages, and a contractor label does not settle the status of a role that works that way. Source: the approved Saudi contractor guidance, Ministry of Human Resources and Social Development, checked 18 September 2026.

There is a second layer here that does not exist in most countries, and our own guidance flags it: business and work-permission requirements have to be checked separately. A person can fail the classification question and the immigration question independently, and the immigration one is the more immediate risk for a foreign national engaged as a contractor. Source: the approved Saudi contractor guidance, checked 18 September 2026.

What a hirer does about it: assess the person's independence and the actual service before using a contractor arrangement, and check separately that whatever permission they hold allows the work they will actually do for you. I have not found a Saudi government source in our registry setting out the penalties, so I am not quoting a figure.

The third row below is the one that misleads most often, because SAR 4,000 gets quoted as a minimum wage and it is not one.

Resolve these points before making an offer

Ask the provider to answer each of these against the actual role and candidate.

Recruitment, employment-placement and labour-supply activities require the applicable HRSD licence. Ask the provider to show the licence held by the company employing the worker and explain how its permitted activity covers your arrangement. Work for another business must follow the prescribed rules and procedures, so assess any required assignment or Ajeer permit for the actual service.

Record who pays salary, registers insurance, manages leave, supplies equipment, handles safety and responds to employee complaints. Saudi rules can also require workers on outsourced original business tasks to receive the rights and benefits given to the original employer's own workers. An EOR agreement should explain the duties of both businesses and how failures are corrected.

Keep the responsibility split understandable to the employee. They should know who pays them, approves leave, handles complaints and supports them when something goes wrong.

There is no personal income tax on employment earnings, so the entire employer cost question is which GOSI cohort the employee belongs to.

Match GOSI to the employee's record

Three ordinary cases cover most hires.

These percentages use the applicable insured wage, and special coverage and individual circumstances need separate checks.

For an ordinary Saudi employee in the legacy system, employer contributions are 9% pension, 0.75% SANED unemployment insurance and 2% occupational hazards, so 11.75% of the applicable insured wage. For an employee covered by the new system, the pension share rose to 10% on 1 July 2026, giving a current employer total of 12.75%. Check the person's GOSI classification before budgeting.

Ordinary legacy-system Saudi employees contribute 9% to pensions and 0.75% to SANED, totalling 9.75% of the applicable insured wage, while new-system employees contribute 10% pension plus 0.75% SANED from 1 July 2026, totalling 10.75%. These are employee deductions within gross pay, and the 2% occupational-hazards contribution is paid by the employer.

The new GOSI system applies to entrants without contribution periods in the civil-retirement or social-insurance systems before 3 July 2024, so a new job with your provider does not, by itself, make an experienced insured worker a new-system entrant. For the new cohort, each party's pension share rises by half a percentage point annually from July 2025, reaching 11% in July 2028. GOSI's employee record and detailed invoice identify the applicable classification.

For an ordinary non-Saudi employee outside any applicable GCC insurance-extension arrangement, the employer pays the 2% occupational-hazards contribution, and Saudi pension and SANED contributions do not ordinarily apply. Do not budget a generic 9% expatriate payroll contribution, and check nationality, any special coverage and the actual GOSI registration before calculating payroll.

GOSI contributions use the applicable insured earnings, including basic salary and housing under the scheme's valuation rules. The new-system guidance also addresses commissions and percentage-based pay and values qualifying housing in kind at two months of basic salary annually. The monthly contribution ceiling is SAR 45,000. Check the recorded base rather than applying a percentage indiscriminately to every payment on the payslip.

Income tax and the provider's invoice

Saudi Arabia does not ordinarily charge personal income tax on an employee's employment earnings. That does not remove social-insurance deductions or settle the person's tax obligations in another country, and business activities and corporate income have their own rules. Ask for a payroll calculation using the employee's nationality, insurance history and individual circumstances.

The standard Saudi VAT rate is 15%, with the actual treatment depending on the transaction, while corporate income tax and Zakat require a separate assessment of the employing or invoicing business. These are not a flat employee salary deduction. Ask the provider to show its fee, any reimbursed employment costs and applicable invoice tax separately.

OECD and other international datasets remain useful for country comparisons. Calculate an actual Saudi payroll from current rules and the employee's own position.

Health cover, housing, transport and pension

HRSD's current employment-rights guidance includes health insurance for the employee and family under the applicable insurance law. Confirm eligibility, the covered family members, start date, approved policy, benefits and provider network before the hire starts. Budget the employer's required coverage and show any additional voluntary benefits separately, because occupational-hazards contributions do not replace health insurance.

The employer must provide suitable housing and transport between the residence and workplace, or appropriate cash allowances instead. Record whether these are included within the quoted salary or added separately. Health coverage and applicable insurance registration are part of the required package, while additional leave, bonuses and other benefits can be agreed. Avoid counting the same allowance twice in the budget.

The new GOSI system sets a normal retirement age of sixty-five Gregorian years for its covered entrants, with early retirement subject to contribution and age conditions, while existing insured workers can fall under different or transitional rules. Check the employee's GOSI record instead of applying one historical retirement-age pair to everyone, and keep end-of-service pay separate from pension insurance.

The right to take leave and eligibility for an insurance payment are separate checks. Confirm the person's circumstances and the required documents before promising a benefit amount.

Saudization, work permission and immigration costs

Developed Nitaqat uses the employing entity's economic activity and workforce to determine its band, and the current guide sets values for 2026, 2027 and 2028. The band affects access to services such as new visas, occupation changes and permit renewals, while profession-specific localization and wage-counting requirements need separate checks. Ask the provider to show that its current position permits your proposed hire rather than relying on a generic quota percentage.

An ordinary non-Saudi hire needs lawful entry and the required work permit, a contract with the responsible employer and any necessary professional approval. The job must match the permitted occupation, and some professions are restricted to Saudis. A work permit does not replace a separate professional licence or the required immigration and residence documents, so confirm the person's route and any exemption before committing to a start date.

Non-Saudi work permits are classified as high-skilled, skilled or basic. The assessment uses the occupation and applicable qualifications, experience, skills, wage and age criteria, with the result shown through Qiwa, and the system began for existing workers in July 2025 and incoming workers in August 2025. Check the current criteria for the proposed occupation, because a job title or EOR contract alone does not establish eligibility.

The employer bears applicable recruitment, residence and work-permit fees and renewals, profession-change fees, exit and re-entry fees and the worker's return ticket at the end of the relationship, subject to the statutory exceptions, while the receiving employer pays the service-transfer cost. Ask for the actual government fees and any provider administration charge separately, because there is no single fee or guaranteed processing time for every hire.

Saudi Arabia has no universal statutory minimum wage for every employee, which is why the SAR 4,000 Nitaqat threshold gets mistaken for one.

Set pay using the right comparison

For the ordinary Nitaqat wage-counting rule, a Saudi employee earning at least SAR 4,000 monthly counts as one worker. Pay from SAR 3,000 to below SAR 4,000 counts as half, and below SAR 3,000 does not count. This is a Saudization counting rule rather than a universal statutory minimum wage for every Saudi and non-Saudi employee. Check occupation-specific localization rules and the agreed salary before setting an offer.

Data Saudi reports an average monthly wage of approximately SAR 5,800 per paid employee in their main job for the first quarter of 2026, across the total population, displayed rounded to SAR 5.8 thousand. This national mean is context for pay discussions rather than a recommended salary or a legal pay floor, so assess the role, location, experience and nationality coverage of any comparison.

A national average gives context. The offer still needs to fit the occupation's rules and the person's experience, location, responsibilities and working pattern.

Agree the payday and keep the records consistent

Employees on monthly wages must be paid once a month in Saudi riyals, while daily-rated employees must be paid at least weekly and separate weekly and completion rules apply to piece-rate work. Wages normally go to the employee's account at an accredited Saudi bank. Agree the payday and payroll deadlines in the employment documents and allow time for the provider to correct errors.

The employing provider should keep the documented contract, salary components, payroll calculation and wage-protection records consistent. HRSD's enforceable-contract guidance uses Qiwa for contracts, Mudad wage-protection information to check payments and Najiz for qualifying enforcement requests. Agree who submits records, checks payments and corrects discrepancies each payroll period.

Working time, overtime and rest

Six working-time rules set the frame, and the overtime formula is the one payroll gets wrong.

The ordinary limit is eight actual working hours a day under a daily standard, or forty-eight a week under a weekly standard. During Ramadan, Muslim employees' limits fall to six hours daily or thirty-six weekly. Particular jobs and approved working arrangements have exceptions, so set the work schedule around the standard that applies to the role.

Ordinary overtime pay is the employee's actual hourly wage plus 50% of their basic hourly wage. Where allowances form part of actual pay, that is not the same as multiplying all hourly compensation by 150%. Hours worked on official holidays are treated as overtime. Keep hours and pay components clear and check any higher agreed entitlement.

With the employee's consent, overtime can be compensated with paid leave. HRSD's guidance requires at least one and a half hours of leave for each overtime hour, normally used within sixty days unless the parties agree otherwise, with no more than thirty compensatory leave days in a year. Record the agreement and the hours earned and taken.

Ordinarily, an employee must not work more than five consecutive hours without at least a thirty-minute break for rest, prayer and meals, or remain at the workplace for more than twelve hours in a day. Breaks are generally outside actual working time. Weekly rest is at least twenty-four consecutive paid hours, normally Friday, and a lawful alternative day and particular exceptions must be handled under the applicable rules.

Official holidays overlapping weekly rest are compensated with time off before or after, overlapping annual leave extends that leave, and overlapping sick leave receives full pay for the holiday days. National Day or Founding Day overlapping an Eid holiday does not produce an extra replacement day under HRSD's guidance. Work on official holidays counts as overtime, and there is no universal 200% holiday-pay rule.

Annual leave starts at twenty-one paid days and rises to thirty after five consecutive years with the same employer, and the leave pay is due in advance rather than on the normal payday.

Annual leave and public holidays

Employees receive at least twenty-one paid days of annual leave per year, increasing to at least thirty after five consecutive years with the same employer. Leave pay is due in advance. The employer schedules leave for work needs and must give at least thirty days of notice of the leave date. Check any more generous contractual entitlement and record the counting method.

An employee may postpone annual leave to the next year with employer approval. For work needs, the employer may postpone it for up to ninety days after the entitlement year, while a longer delay needs the employee's written consent and cannot go beyond the end of the following year. Annual leave cannot be exchanged for cash during employment, but accrued unused entitlement is payable when employment ends.

Private-sector holiday entitlements include four days for Eid al-Fitr starting after Ramadan 29, four for Eid al-Adha starting on Arafat Day, National Day on 23 September and Founding Day on 22 February. Use the applicable official calendar and announcements for the Eid dates, and keep these separate from annual leave.

Sickness and family leave

Saudi Arabia has one of the longer lists of statutory paid absences, and each has its own evidence requirement.

An employee who proves illness is entitled to thirty days at full pay, the next sixty at three-quarters pay and the next thirty unpaid. The entitlement is measured over a year starting on the first sick-leave date, with continuous and intermittent absences counted together. The employer cannot terminate employment for illness before this entitlement is exhausted, and work injuries and pregnancy-related illness have separate provisions.

A working woman is entitled to twelve weeks of fully paid maternity leave, including six mandatory weeks after childbirth, with the remaining six arranged around the birth and starting no earlier than four weeks before the expected date. The law addresses unpaid extension where a late birth leaves insufficient post-birth leave and allows an additional unpaid month. A sick or disabled child needing continuous care can qualify for another paid month followed by an unpaid month.

GOSI pays qualifying maternity compensation on the employer's behalf for Saudi and non-Saudi women covered by occupational-hazards insurance. Eligibility includes at least twelve contribution months in the thirty-six months before birth, counted from the new law's July 2024 commencement, and being in covered employment at birth. The benefit is 100% of average insured monthly earnings over the prior twelve months for three months, with an additional month for a qualifying sick or disabled child. Salary and this benefit cannot be drawn together, so confirm how it meets the employer's leave-pay obligation.

The employer must provide medical care during pregnancy and childbirth. On return from maternity leave, the employee is entitled to up to one paid hour a day for breastfeeding, in addition to ordinary breaks. Dismissal and dismissal notice are prohibited during pregnancy and maternity leave, including medically certified related illness within the statutory 180-day annual limit.

An employee is entitled to three fully paid days after the birth of their child, to be taken within seven days of the birth, and the employer may request supporting documents. This entitlement is separate from the mother's maternity leave and benefit.

Employees receive five fully paid days for their marriage or the death of a spouse, ascendant or descendant, and three fully paid days for a sibling's death. These periods run from the event, and supporting documents may be required. A woman whose husband dies has the separate widowhood entitlement.

A Muslim employee whose husband dies is entitled to at least four months and ten days of fully paid widowhood leave. Pregnancy can justify an unpaid extension until birth, with the law's restrictions on any remaining leave after delivery. A non-Muslim employee whose husband dies receives fifteen fully paid days, and supporting documents may be requested.

An employee who has completed two consecutive years with the employer and has not performed Hajj before may receive ten to fifteen paid days, including the Eid al-Adha holiday, to perform it once during service. The employer can determine how many workers take the leave each year for work needs. This is not a fresh entitlement after every change of employer.

Where the employer approved enrollment or continued study, examinations for a non-repeated academic year qualify for paid leave for the actual exam days, while repeated-year exams are unpaid. Without study approval, exam days come from available annual leave or are unpaid if none remains. The request must be made at least fifteen days in advance, and the employer may require evidence.

Unpaid leave requires employer agreement on its duration. Unless the parties agree otherwise, the employment contract is suspended for the portion exceeding twenty days. Record the agreed dates and how payroll, insurance, work permission and service calculations will be handled before the leave begins.