Employment and Labor Law of Saudi Arabia
Every country in the world has a labor legislative framework and Saudi Arabia is no exception to the rule. Like any area of social life, the legislation of a country is dynamic. Therefore, the Labor Law of Saudi Arabia has made progress for the benefit of the working population.
In this article, you will learn about the most important points about labor law in Saudi Arabia.
- Work contract
- Workers representative
- Payroll and taxes
- Wages and working hours
- Restrictions and laws against discrimination
- Labor courts
- How can we help you learn more about the Labor Law in Saudi Arabia?
1. Work contract
To begin with, we will define what the employment contract is. The employment contract is an agreement between a company and a worker for the worker to provide certain services for the company in exchange for remuneration.
Another concept that can be given to a work contract is that it is an agreement between a worker and their employer where the former agrees to carry out certain tasks and to follow the instructions of the latter. This is in exchange for a certain remuneration.
Therefore, in an employment contract, there must be a relationship of subordination. This relationship of subordination is characteristic of employment contracts.
The employment contract is one of the fundamental legal tools for the good development of the relationship and the labor market. The rights and duties of the parties derive from the contract and it is a fundamental test when requesting the help of a judge in cases of non-compliance or disagreements.
We have to consider some elements of the Saudi Arabian Labor Law:
1.1 Should employment contracts be written?
Yes. Article 51 of the Saudi Arabian Labor Law provides that this contract must be in writing. One version will be delivered to the employee and the other will remain in the hands of the company. If this is not done in this way, the employee can prove the employment relationship with any means of proof.
However, each contract must specify the following: However, each contract must specify the following:
- Requirements for dismissal.
When this contract is drawn up in writing and according to the provisions of the Labor Law of Saudi Arabia, it is considered binding for the parties. Otherwise, if it violates this law, it will be null to the executive and judicial authorities.
Employers generally must adhere to strict layoff and severance rules when they want to part ways with an employee. Saudi labor law allows trial periods of up to ninety days, extendable for another ninety days if both parties agree. During this time, a company can quickly fire an employee if the relationship does not work out. After that, a limited contract notice period and indemnity requirements apply.
Employees with fixed-term contracts must receive thirty days of notice or additional compensation, and employees with unlimited contracts must receive sixty days of notice or additional compensation. All employees must receive fifteen days of severance pay for each of their first five years with the company and then one month of pay for each additional year of service.
Also, parties can also establish a limited contract termination. In this sense, it may be a termination of a limited contract by the employer. Likewise, both parties can establish the cause of termination.
1.2 Difference between a limited and unlimited contract
In terms of employment contracts, there is a difference between limited and unlimited contracts. The difference is that in limited-time contracts, the duration of the employment relationship is clearly established in the contractual document.
On the other hand, employment contracts for unlimited time are those that express a date for the culmination of the employment relationship. Therefore, the contract will end with the decision of one of the parties, either the employer through dismissal or the employee through resignation.
2. Workers’ representative
Union representation does not exist in Saudi Arabia, but the Labor Law is very protective of workers. This law created the labor courts, which provide their services independently, effectively, and electronically. So that workers who feel that their rights are violated can be compensated for such violations.
For their part, workers in Saudi Arabia can defend their rights through committees in the workplace, according to Article 73 of the Labor Law.
The first committee is the workers’ committee, which aims to analyze the fines imposed by employers, as provided in the Labor Law, and act accordingly if necessary.
The second committee is the behavioral infringement committee, which is in charge of controlling abuses in the work environment. Within its functions, it can investigate cases of labor abuses, examine the evidence, and recommend a disciplinary sanction.
The number of members of this committee will depend on the number of workers that the company has. If the company has more than ten workers, the committee will have four members, of which at least one must be a woman, If the company has women workers.
However, if the company has less than ten workers, only the employer or his representative will establish the workers’ council. In turn, the employee who has a complaint can report it to the competent government security agencies in the matter.
As you can see, there is no legal regulation that allows union representation in Saudi Arabia. However, there are other protection mechanisms such as the creation of committees that will defend the rights of workers.
3. Payroll and taxes
Regarding payroll and taxes, Saudi Arabia has social security programs for its citizens, and every company must contribute to them. Employers must pay Saudi Social Security Tax to the General Organization for Social Security. This contribution is generally equal to 10 percent of each employee’s total compensation, including base salary, allowances, and commissions.
Companies must pay additional contributions for the occupational hazards faced by their employees. This rate is generally about 2 percent of each employee’s salary.
4. Wages and working hours
The standard work week in Saudi Arabia varies from 40 to 48 hours, eight hours five or six days a week, and employees earn overtime at 150 percent of their regular wages for hours worked beyond 40. Working on a Friday or a holiday also qualifies for overtime pay. During the Islamic month of Ramadan, the working day is reduced from eight to six hours for Muslim employees.
Compensation in Saudi Arabia must have two components: the base salary and additional allowances for transportation and housing.
However, making an analogy, the UAE labor law establishes that the responsibility for repatriation will be borne by the employer. This means that expenses such as the repatriation ticket in the UAE Labor Law fall directly on the employer.
The Labor Law requires companies to offer their employees a minimum of 21 days of paid vacation. Employees who have worked for a company for more than five years must receive a minimum of 30 days of paid vacation. In practice, however, many companies give their employers 30 days of paid annual leave from the start of their employment, and employees in management roles typically receive as many as 40 days of paid leave.
For their part, after two years of employment in a company, Muslim employees can also take additional Hajj leave of up to 10 days to make their pilgrimages to Mecca. Employees can only take this leave once every five years with the same employer.
In addition, employees in Saudi Arabia receive up to four months of annual sick leave, provided they present an official medical certificate confirming the need for the leave. Sick leave pay typically breaks down as follows:
- First 30 days of illness: Employees receive 100 percent of their regular salary.
- Next 31 to 90 sick days: Employees receive 75 percent of their regular salary.
- Beyond 91 to 120 sick days: Employees must take these days without pay.
Likewise, pregnant employees in Saudi Arabia can also take 10 weeks of maternity leave for each child. A male employee who has been with the company between one and two years will receive half pay during his leave, and an employee who has been with the company for two years or more will receive 100 percent of his regular salary. Fathers who are employees will have three days of paternity leave.
5.1 Holiday days off
The main days off for public holidays in Saudi Arabia include:
- Eid al-Fitr: This holiday marks the end of the fast from dawn to dusk that occurs during the month of Ramadan. For its part, Eid al-Fitr is officially three days long, but it is generally a ten-day holiday.
- Eid al-Adha: This religious holiday celebrating the Prophet Ibrahim lasts for four days and is also usually a ten-day public holiday. It takes place in the month of Dhu al-Hijjah in the Islamic calendar, usually from the fifth day to the 15th day.
- Kingdom Unification Day: This holiday celebrates the day of the kingdom’s unification under the House of Saud in 1932. It always happens on September 22 of each year.
6. Restrictions and laws against discrimination
The Saudi Arabian Law prohibits discrimination in the workplace on the basis of age, gender, and disability. In 2019, new legislation allowed Saudi women to drive, apply for passports, and obtain official documents without the permission of a male guardian, removing some additional barriers to employment.
Article 151 of the Saudi Labor Law establishes certain considerations in the exercise of this right:
A female employee is entitled to a maternity leave of 10 weeks, which can be distributed as the employee wishes. This right will be exercised no later than 4 weeks before the probable day of the birth of the employee’s child. The probable day of birth must be certified by a doctor from a health institution.
Likewise, the female worker has the right to extend this maternity leave for up to one more month, but without the right to payment.
8. Labor courts
The Labor Law of Saudi Arabia provides for the creation of labor courts which, in addition, provides an electronic procedure, effective and expeditious, in search of speeding up the obtaining of the injured rights of the worker.
These courts are made up of a judge and two assistants, who will administer justice in the first instance. In addition, there is a court of appeals, which is the instance that will hear the appeals made by any of the parties.
In the event of any complaint, the affected party, through a claim before the labor court, after examination by the workers’ committee for the resolution of the conflict through conciliation, may go to this first jurisdictional instance to obtain the right that they believe injured. Likewise, the presentation of the lawsuit according to the legislation of Saudi Arabia is free.
This procedure is characterized by being a fast procedure, and in a matter of weeks, the plaintiff obtains a decision, either positive or negative, given the statement made before the court.
An appeal can be heard from this sentence in a higher instance, as long as no more than 30 days have elapsed after the publication of the sentence, and that the amount of the appeal is not less than 50,000 Saudi riyals, which is equivalent to about 13,333 USD.
9. How can we help you learn more about the Labor Law in Saudi Arabia?
The employee recruitment process in Saudi Arabia can take weeks, even months, and consume a substantial portion of your budget. An attractive alternative is to work with EOR Middle East. Relying on us will speed up this process, allowing you to start hiring immediately and get your business operations up and running in Saudi Arabia in a matter of days in compliance with Saudi Law in 2022.
Your company will be able to onboard new employees quickly and easily, all while complying with Saudi Arabian legal requirements.
When expanding your company to Saudi Arabia, EOR Middle East is here to drive the success of your new business and help you overcome compliance barriers, and streamline your recruitment processes according to the Labor Law in 2022. You will save time and effort, and you will be able to focus on your main business goals.
Request a proposal today, or get in touch to learn more about our services. You can communicate with us via email at [email protected]. We have agents who are ready to answer your questions satisfactorily. Start now, do not hesitate any longer, and contact us!