It’s vital to ensure you’re paying your team members the right amount and offering them the benefits required by Saudi Arabia law. Your company will have to hire an expert in Saudi Arabia compensation laws or train a current employee to make sure you’re compliant with local labor regulations. G-P can take the stress out of Saudi Arabia benefits management. We have the expertise and technology required for fast and easy expansion to Saudi Arabia, and we’ll help you establish a competitive and compliant compensation and benefits package.
Saudi Arabia compensation laws
Saudi Arabia does not have a minimum wage for the private sector, but public sector employees must make at least SAR 4,000 per month as of March 2023. Saudi Arabia compensation laws also dictate overtime payment of 100% of an employee’s normal hourly rate plus a 50% bonus. Work on a public holidays is considered overtime.
The country also has a generous severance pay, which is 15 days of wages for an employee’s first 5 years of work, then 1 full month of wages for every year after that. This severance package is different for locals, who have rights to certain severance pay per their employment contract.
Guaranteed benefits in Saudi Arabia
If you do not utilize Saudi Arabia benefits outsourcing services, you must at least provide the benefits outlined in the country’s employment laws. These statutory benefits include providing 21 days of paid vacation and time off for public holidays announced by the government each year, as well as reducing the workday by 2 hours for Muslim employees during Ramadan.
Although the statutory minimum for paid vacation starts at 21 days, it increases to 30 days when an employee has completed 5 years of service. Muslim employees are also entitled to leave for the Hajj after they’ve worked for your company for 2 years. The leave can only be taken once within 5 years of employment and can’t extend to more than 10 days.
Saudi Arabia benefits management
A strong Saudi Arabia benefits management plan must include additional benefits that will attract top talent to open positions. It’s customary for Saudi Arabia-based employers to provide employees with:
- Supplementary health insurance.
- Plane tickets to go home for vacation.
- Money for education expenses.
- Retirement plans.
- Mobile phones.
- Housing allowances.
- Transportation allowances.
It is common to budget an additional 25% on top of gross salary for these benefits. You should also outline any supplemental benefits you will provide in an employment contract.
Restrictions for benefits and compensation
One restriction to watch for a Saudi Arabia benefits management plan includes sick leave. While employees are typically allowed up to 4 months of sick leave, they will need a medical certificate to take that time. If they can produce a certificate, they will get 100% of their pay for the first 30 days, 75% for 31 to 90 days, then unpaid time off from 91 to 120 days.
Saudi Arabia competitive benefits planning
With a strategic employee benefits plan, you can set up your team in Saudi Arabia for success and optimize your company’s recruiting and hiring processes. A competitive, fully compliant benefits program will help you stand out among companies in the region and build an engaged international team.
Saudi Arabia employee benefits plans
Creating a benefits plan that offers practical value for your local team is fundamental to your business growth internationally. When you identify the unique needs of your in-country workers, you’ll be able to provide optimal support and resources for them.
Along with maintaining a competitive edge in the region, a strategic benefits program also supports employees throughout various life events. A benefits plan can help set employees up for success and ensure they feel appreciated at work. To complement mandatory benefits, it is also common to provide fringe benefits to support employees’ quality of life. Some options include:
- Business travel reimbursements.
- Mental health support.
- Stipends for childcare and education
- Fitness and wellness events
- Relocation assistance.
- Performance awards and bonuses.
Requirements for employee benefits in Saudi Arabia
National labor regulations have established these provisions as mandatory benefits for your team:
- Reduced workdays for Muslim employees during Ramadan
- Public holiday leave
- Vacation leave
- Leave for Hajj after 2 years of service
- Sick leave
- Parental leave
- Marriage leave
- Leave for the death of a family member
Designing Saudi Arabia employee benefits plans
Companies can expect benefits requirements to look different in any country where they establish a company, but some fundamental principles can set them up for effective benefits planning anywhere.
1. Establish budget and goals.
Understanding where you want to take your benefits program is your first step in the planning process. As you begin, take time to set your budget and determine the program scope you can sustain while remaining competitive in your industry and business region.
Consult with stakeholders, evaluate financial resources, and look at big-picture company goals in the region. What are your priorities for business growth? Are you planning to support a large team from day one, or will you start by investing in a smaller team that will grow over time? Identifying your program goals will help you set an appropriate scope for your benefits plan.
2. Conduct a needs assessment.
Your next priority is identifying employee needs. Conduct a comprehensive needs assessment, researching local companies’ offerings and employee expectations.
To better understand your team’s requirements, hold group or individual interviews with local employees. You can also mail questionnaires or post surveys asking respondents about their benefits needs and critical concerns in the economy. Take time to truly understand your team’s situations and learn about what offerings matter to them most.
3. Develop your benefits plan.
After doing in-depth local research, you can use what you’ve learned to shape your company’s benefits program. Incorporate your data into an optimized benefits plan that addresses key needs for your team. When determining program expenses, ensure you factor in employee contributions, outsourcing needs, cost containment features, and administration expenses.
Average cost of benefits per employee.
Each country’s labor regulations, local market standards, and overall economic conditions are different. Benefits program expenses can vary significantly, so there’s no true national average to aim for. However, you can shape your benefits distribution expenses based on how you build your program. Ensure you’re considering your budget and allowing room for growth as you prioritize employee offerings.
How to calculate employee benefits
You can consult Saudi Arabia’s labor laws for specific rates to calculate maternity and parental leave, annual leave, sick leave, and other mandatory benefits payments.
Any supplemental benefits you provide for your team can be based on local market conditions and competitive rates for your industry and region.
How are employee benefits taxed in Saudi Arabia?
Employees do not have to pay any income taxes within the country, so benefits are not technically taxable. However, non-national or non-Gulf Cooperation Council (GCC) residents are subject to a flat tax of 20% for income, so it may be required to calculate withholding taxes for non-national employees.
Employee health benefits plans
In Saudi Arabia, all citizens receive free public healthcare. Companies may choose to provide private healthcare options for non-national employees or as supplemental coverage for nationals in the country.
Partner with G-P to build your everywhere workforce.
As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.
Learn more about our platform and request a proposal today.