The Kingdom of Saudi Arabia is the largest country within the Middle East.
Here, the official language is Arabic. Saudi Arabia has one of the largest economies in the middle east as it’s the largest exporter of oil and possesses the world’s second largest oil reserves. This kingdom is the only Arab country that is part of the G20 major economies. However, recent strides have taken place to diversify its income streams to shift oil and gas towards tourism. Nevertheless, due to its rich culture and hospitality, approximately 10.7m expats reside here.
Employment contracts should be written in Arabic. If the contract is in another language, an Arabic translation of the employment contract should be provided to both the employer and employee. If the employee is unable to understand the contract or is illiterate, then a certificate is required from the Ministry of Labour.
The salaries paid are supposed to be in SAR and should be paid according to the contract.
Since Saudi Arabia relies on the Hijri (Islamic) calendar in its dating system, all contracts must be dated according to the Hijri calendar.
The following information needs to be provided to the labour office:
Name and address of both the parties, contact information, nature and center of the business, nationality of the employee, date of hiring (hijri date), contract details (type, duration etc.), job description, salary breakdown and its payment method and frequency,), non-compete and non-disclosure clauses, adherence to guidelines and policies, end of service benefits, compensation of early termination.
In addition to this, the employer must provide the number of employees, copy of the commercial license to conduct business with the registration number, permit to engage in business and any other document the ministry of labour requires.
There are 3 types of contracts in Saudi Arabia:
This contract expires upon completion of work or when the contract ends. It can be renewed for the same period only 3 times after which it automatically becomes an indefinite contract.
This contract doesn’t have a definite term and therefore no expiration date. It can be terminated by either one of the parties.
Such contracts are limited to a specific number of hours per day or specific number of days per week and should not exceed 90 days.
Employers are required to have at least 75% of their labor force made up of Saudi nationals.
For non-Saudi nationals, the employment contracts are bound to be definite. If the employment contract does not specify its duration, it is equivalent to that of employees’ residency visa and work permit.
The working hours in Saudi Arabia is 8 hours per day and a maximum of 48 hours per week.
There should be a minimum of 30 minutes break and employees aren’t allowed to work for more than 5 hours consecutively. Furthermore, employees are entitled to lunch and prayer breaks which are additional to the 30 minutes allocated. During Ramadan, the working hours for Muslim employees are reduced to 6 hours per day at a maximum of 36 hours per week.
Nevertheless, overtime is capped at 11 hours per day. Overtime rate is 150% of the basic rate.
There are several types of leaves an employee can claim in KSA.
Employees are entitled to 30 days of paid sick leaves per year. Sick leave pay decreases based on a percentage overtime.
- Eid al Fitr
- Eid al Adha
- National Day
- Arafat Day
- Milad Un Nabi
Employees receive 21 days of paid annual leave during the first 5 years after which the employee receives 30 days of paid annual leave. Muslim employees are given an additional paid religious leave to conduct a pilgrimage to Makkah (Hajj & Umrah) after 2 years of service which must be arranged with the employer at the beginning of the year. Furthermore, employees receive an additional of 15 days paid educational leave that starts 15 days before the examination and lasts until the end of the examination period. Personal leaves are granted under certain circumstances such as:
1 day for paternity leave, 3 days when getting married, 3 days for death of family member, and 15 paid days for a female employee whose husband passed away.
The annual leave must be paid in advance to the employee. Moreover, the employee is also entitled to unpaid leaves of no more than 20 days after which the employment contract is on hold.
Female workers receive 10 weeks of paid maternity leave after 1 year of service. The leave can start around 4 weeks before the due date with the remaining 6 weeks taken after delivery. If the female employee uses up all the maternity leave during the year, then she is not entitled to be paid for the annual leave during the same year. However, if she received half pay during her maternity leave, then the employee is entitled to the other half pay during her annual leave during the same year. However, incase of any complications the female staff are given extra days and cannot exceed a total of 180 days. After the employee returns to work, she is entitled to an additional hour break to nurse the child. The male employee is granted 1 day paid paternity leave.
Even though a minimum wage system is formed, no minimum wage is implemented. Instead, individual agreements between both the parties fix wages. Daily laborers and work completion employees should be paid weekly. Whereas regular employees should be paid monthly. Employees in Saudi Arabia also receive bonuses annually based on their performance. Nevertheless, the State provides free healthcare to Saudi nationals, while companies provide private healthcare insurance to non-Saudi employees.
Employment, Termination and EOSB
Either party may start the termination process in writing. The party that initiates the termination process must provide a 30-day written notice for regular employees who are paid monthly. Whereas a 15-day written notice is needed for employees who are paid on a daily or weekly basis. The termination notice period during probation is 7 days. The party that doesn’t comply with these rules are required to pay a compensation amount equal to the salary of the notice period. In certain circumstances the employer is allowed to terminate the contract without any compensation/ severance pay or notice period if:
- The employee physically assaults anyone at the workplace
- Continues to breach the contract rules and regulations after being warned in writing.
- Performs unethical behavior
However, before terminating an employee, the employer must go through a following number of steps:
- Written warnings
- Not rewarding employees with bonus or promotion
- Suspension without pay if it does not exceed 5 months
- Termination according to the labour laws
An employee can terminate the contract without losing gratuity pay or providing any notice if:
- The employer doesn’t comply with the employment contract
- If the employer conducts in fraud and misleads the employee regarding the work conditions, payment frequency etc… during negotiations of the contract
- Gives the employee different work that was agreed upon.
After the termination of the contract, the employer is required to provide the employee with a certificate that states the start and end dates of the employment, the job description and salary. The employer must pay the gratuity after the termination of employment. However, severance and compensation is not paid for employees who were unable to complete the probation period. Female staff are entitled to terminate the employment contract without losing gratuity pay if it happens within 3 months after giving birth or 6 months after getting married.
The gratuity amount is calculated based on the following:
- If the service period is below five years at half month salary per year.
- If the service period is more than five years and above at full month salary per year.