If you are an employer or an employee in Saudi Arabia, you need to know the laws and practices that govern compensation and benefits. Before getting a work permit you need to know the employee benefits in Saudi Arabia.
In this guide, we will cover some of the main aspects of this topic.
Saudi Arabia Compensation Laws
Saudi Arabia has a minimum wage law that applies to both Saudi and foreign workers. Before thinking about your benefits remember you need a working visa Saudi Arabia.
The minimum wage is 3,000 riyals ($800) per month for Saudi workers and 2,500 riyals ($667) per month for foreign workers. However, some sectors and regions may have higher minimum wages.
Employers must also pay their employees overtime, yearly leave, end-of-service gratuity, and eventually with the Saudi labor law end of service benefits. Overtime is computed at 150% of the regular hourly rate during the week and 200% on weekends and holidays. Annual leave is 21 days for the first five years and 30 days beyond that. Social security contributions are 22% of the employee’s wage, with the company paying 10% and the employee paying 12%.
Guaranteed Benefits in Saudi Arabia
In addition to the above-mentioned compensation elements, employees in Saudi Arabia are entitled to some guaranteed benefits. Such as:
Health insurance
Employers must provide health insurance for their employees and their dependents, covering at least 70% of the medical expenses.
Maternity leave
Female employees have a right to 10 weeks of paid maternity leave, with an option to extend it for another four weeks without pay.
Paternity leave
The male employees have a right to three days of paid paternity leave.
Hajj leave
Muslim employees are entitled to 10 days of paid leave once in their lifetime to perform the Hajj pilgrimage.
Sick leave
Employees are entitled to 30 days of paid sick leave per year, with a medical certificate required after the fourth day.
Bereavement leave
Employees are entitled to five days of paid leave in case of death of a spouse, child, parent, or sibling.
Saudi Arabia Benefits Management
Managing benefits in Saudi Arabia can be challenging due to the complexity and diversity of the legal and cultural environment. It is needed to consider the expectations and preferences of their employees, who may have different backgrounds, religions, nationalities, and lifestyles.
After getting their labor visa in Saudi Arabia, workers need to be aware of the benefits in Saudi Arabia:
Conduct regular market surveys and benchmarking to ensure their compensation and benefits packages are competitive and aligned with their business objectives.
Communicate clearly and transparently with their employees about their compensation and benefits policies and procedures.
Provide flexible and customized benefits options that cater to the needs and preferences of their diverse workforce.
Leverage technology and automation to streamline and simplify their benefits administration processes.
Seek professional advice from experts who have experience and knowledge in the Saudi Arabian market.
Restrictions for Benefits and Compensation
While employers have some flexibility in designing their compensation and benefits packages, they also need to be aware of some restrictions that apply in Saudi Arabia, such as:
Foreign workers cannot exceed 10% of the total workforce in any sector or region, unless approved by the Ministry of Labor.
Foreign workers cannot receive higher salaries or benefits than Saudi workers in similar positions or qualifications.
Employers cannot discriminate against employees based on gender, age, disability, or any other protected characteristic in terms of compensation and benefits.
Employers cannot reduce or withhold an employee’s salary or benefits without a valid reason or a court order.
Employers cannot terminate an employee’s contract without a valid reason or a prior notice.
Saudi Arabia Competitive Benefits Planning
To attract and retain talent in Saudi Arabia, employers need to offer competitive employee benefits in Saudi Arabia. They must go beyond the minimum legal requirements. Some examples of such benefits are:
Performance-based bonuses or incentives that reward employees for achieving specific goals or targets.
Profit-sharing or stock options that give employees a share of the company’s profits or ownership.
Education or training allowances that support employees’ professional development and career growth.
Housing or transportation allowances that help employees cover their living expenses or commute costs.
Wellness or lifestyle benefits that promote employees’ health and well-being, such as gym memberships, spa vouchers, or travel discounts.
Saudi Arabia Employee Benefits Plans
Employee benefits plans are formal arrangements that provide employees with various types of benefits in addition to their salaries. These plans can be funded by the employer, the employee, or both. Some common types of plans when it comes to employee benefits in Saudi Arabia are:
Retirement plans: These are plans that provide employees with income or savings after they retire from work.
Health plans: These are plans that provide employees with medical coverage for themselves and their dependents.
Life and disability plans: These are plans that provide employees with financial protection in case of death or disability.
Requirements for Employee Benefits in Saudi Arabia
As an employer in Saudi Arabia, you are legally obliged to provide certain benefits to your employees. Such as:
Social security contributions:
Health insurance
Annual leave
Sick leave
Maternity leave
Hajj leave
End-of-service gratuity
Half a month’s salary in Saudi Arabia for each of the first five years of service
One month’s salary for each year of service thereafter
The maximum gratuity cannot exceed two years’ salary
Average Cost of Benefits Per Employee
Labor legislation, local market norms, and general economic conditions vary by nation. Because the expenses of benefits programs can vary greatly, there is no genuine national average to strive towards. However, depending on how you design your program, you may modify your benefits distribution expenditures.
How to Calculate Employee Benefits
To calculate employee benefits in Saudi Arabia, you need to consider the following steps:
Determine the gross salary of your employee, which is the total amount before any deductions or taxes.
Calculate the social security contributions that you and your employee have to pay to GOSI.
Choose a health insurance plan that meets the minimum requirements set by CCHI and covers your employee and their dependents. Compare the prices and benefits offered by different health insurance providers.
Determine how much yearly leave you must provide and pay to your employees.
Calculate how much sick leave you must grant and pay your employee.
Pay the maternity leave entitlements for your female employee.
Calculate the end-of-service gratuity you must pay your employee after their job contract expires. Also calculate the cost of the end of service benefits Saudi Arabia.
Add up all of the benefits charges that you must pay for your employee and divide by the number of months in a year to get the average monthly benefit cost per employee.
How Are Employee Benefits Taxed in Saudi Arabia?
As an employer in Saudi Arabia, you do not have to withhold or pay any income tax on behalf of your employees. Saudi Arabia does not impose any personal income tax on its residents or citizens. However, you may have to pay some other taxes or fees related to employee benefits, such as:
Zakat: This is a religious obligation for Muslim individuals and businesses to pay a certain percentage of their wealth to charity. The zakat rate for businesses is 2.5% of their net worth or capital.
Value-added tax (VAT): This is a consumption tax that applies to most goods and services sold in Saudi Arabia. The VAT rate is 15%.
Stamp duty: This is a tax that applies to certain documents or transactions that involve property or rights. The stamp duty rate varies depending on the type and value of the transaction.
Employee Health Benefits Plans
One of the most important and costly employee benefits in Saudi Arabia that you have to provide as an employer is health insurance. Health insurance covers the medical expenses of your employees and their dependents in case of illness or injury. Health insurance can also include preventive care services, such as vaccinations or screenings.
As an employer in Saudi Arabia, you have to comply with the following rules and regulations regarding health insurance:
Regardless of nationality or status, you must provide health insurance to all of your employees and their dependents (spouse and children).
Under the health insurance plan, you must pay at least 70% of the medical expenditures incurred by your workers and their families.
Select a health insurance provider from a list of CCHI-approved providers.
Register your workers and their families with the health insurance provider and present them with health insurance cards.
You must renew the health insurance plan every year and notify the health insurance provider of any changes in your workers’ information or status.
Pay your health insurance premiums on time and keep accurate records of your payments and claims.
There are different types of health insurance plans that you can choose from as an employer in Saudi Arabia, such as:
Basic plan: This is the minimum level of coverage that you have to provide to your employees and their dependents according to CCHI standards. The basic plan covers essential medical services. Such as emergency care, hospitalization, surgery, laboratory tests, radiology, medications, dental care, optical care, and maternity care.
Enhanced plan: This is a higher level of coverage that you can provide to your employees and their dependents beyond the basic plan. The enhanced plan covers additional medical services, such as chronic diseases treatment, physiotherapy, home nursing, organ transplantation, psychiatric care, rehabilitation care, and alternative medicine.
Customized plan: This is a tailored plan that allows you to design your own benefits package according to your budget and needs. You can choose from different options and features, such as deductibles, co-payments, networks, and exclusions.
Compensation and benefits are important aspects of attracting and retaining talent in Saudi Arabia. As an employer, you need to comply with the labor law and provide the minimum benefits to your employees. Moreover, you can offer additional benefits, such as health insurance plans, to enhance your employee value proposition and gain a competitive edge in the market.
Sahiba Maini is the Finance Head in Connect Resources who specializes
in Managing finance functions involving determining financial objectives along with designing & implementing systems, policies & procedures, preparing financial reports to facilitate internal financial control. She is capable of Monitoring receivables through a team to ensure credit terms are properly authorized. She is in charge of overseeing the payroll department
Saudi Arabia Compensation & Benefits
If you are an employer or an employee in Saudi Arabia, you need to know the laws and practices that govern compensation and benefits. Before getting a work permit you need to know the employee benefits in Saudi Arabia.
In this guide, we will cover some of the main aspects of this topic.
Saudi Arabia Compensation Laws
Saudi Arabia has a minimum wage law that applies to both Saudi and foreign workers. Before thinking about your benefits remember you need a working visa Saudi Arabia.
The minimum wage is 3,000 riyals ($800) per month for Saudi workers and 2,500 riyals ($667) per month for foreign workers. However, some sectors and regions may have higher minimum wages.
Employers must also pay their employees overtime, yearly leave, end-of-service gratuity, and eventually with the Saudi labor law end of service benefits. Overtime is computed at 150% of the regular hourly rate during the week and 200% on weekends and holidays. Annual leave is 21 days for the first five years and 30 days beyond that. Social security contributions are 22% of the employee’s wage, with the company paying 10% and the employee paying 12%.
Guaranteed Benefits in Saudi Arabia
In addition to the above-mentioned compensation elements, employees in Saudi Arabia are entitled to some guaranteed benefits. Such as:
Employers must provide health insurance for their employees and their dependents, covering at least 70% of the medical expenses.
Female employees have a right to 10 weeks of paid maternity leave, with an option to extend it for another four weeks without pay.
The male employees have a right to three days of paid paternity leave.
Muslim employees are entitled to 10 days of paid leave once in their lifetime to perform the Hajj pilgrimage.
Employees are entitled to 30 days of paid sick leave per year, with a medical certificate required after the fourth day.
Employees are entitled to five days of paid leave in case of death of a spouse, child, parent, or sibling.
Saudi Arabia Benefits Management
Managing benefits in Saudi Arabia can be challenging due to the complexity and diversity of the legal and cultural environment. It is needed to consider the expectations and preferences of their employees, who may have different backgrounds, religions, nationalities, and lifestyles.
After getting their labor visa in Saudi Arabia, workers need to be aware of the benefits in Saudi Arabia:
Restrictions for Benefits and Compensation
While employers have some flexibility in designing their compensation and benefits packages, they also need to be aware of some restrictions that apply in Saudi Arabia, such as:
Saudi Arabia Competitive Benefits Planning
To attract and retain talent in Saudi Arabia, employers need to offer competitive employee benefits in Saudi Arabia. They must go beyond the minimum legal requirements. Some examples of such benefits are:
Saudi Arabia Employee Benefits Plans
Employee benefits plans are formal arrangements that provide employees with various types of benefits in addition to their salaries. These plans can be funded by the employer, the employee, or both. Some common types of plans when it comes to employee benefits in Saudi Arabia are:
Requirements for Employee Benefits in Saudi Arabia
As an employer in Saudi Arabia, you are legally obliged to provide certain benefits to your employees. Such as:
Average Cost of Benefits Per Employee
Labor legislation, local market norms, and general economic conditions vary by nation. Because the expenses of benefits programs can vary greatly, there is no genuine national average to strive towards. However, depending on how you design your program, you may modify your benefits distribution expenditures.
How to Calculate Employee Benefits
To calculate employee benefits in Saudi Arabia, you need to consider the following steps:
How Are Employee Benefits Taxed in Saudi Arabia?
As an employer in Saudi Arabia, you do not have to withhold or pay any income tax on behalf of your employees. Saudi Arabia does not impose any personal income tax on its residents or citizens. However, you may have to pay some other taxes or fees related to employee benefits, such as:
Employee Health Benefits Plans
One of the most important and costly employee benefits in Saudi Arabia that you have to provide as an employer is health insurance. Health insurance covers the medical expenses of your employees and their dependents in case of illness or injury. Health insurance can also include preventive care services, such as vaccinations or screenings.
As an employer in Saudi Arabia, you have to comply with the following rules and regulations regarding health insurance:
There are different types of health insurance plans that you can choose from as an employer in Saudi Arabia, such as:
Compensation and benefits are important aspects of attracting and retaining talent in Saudi Arabia. As an employer, you need to comply with the labor law and provide the minimum benefits to your employees. Moreover, you can offer additional benefits, such as health insurance plans, to enhance your employee value proposition and gain a competitive edge in the market.
Sahiba
Sahiba Maini is the Finance Head in Connect Resources who specializes in Managing finance functions involving determining financial objectives along with designing & implementing systems, policies & procedures, preparing financial reports to facilitate internal financial control. She is capable of Monitoring receivables through a team to ensure credit terms are properly authorized. She is in charge of overseeing the payroll department
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