Saudi Arabia is located at the crossroads of Europe, Asia, and Africa, making it a perfect location for businesses looking to expand into the Middle East and beyond. With a large and growing population, and a significant number of skilled professionals, the country presents an exciting pool of potential employees.
If you are considering expanding your business to Saudi Arabia, this article will cover some things you should be aware of before hiring people in the country.
Overview of Saudi Arabia
Saudi Arabia is located in the Middle East and is the largest country in the Arabian Peninsula, with a population of over 34 million people. The country is known for its vast deserts, oil reserves, and the holy Islamic cities of Mecca and Medina.
Saudi Arabia is an absolute monarchy, which means King Salman is the head of state. Religion also plays an important part in day-to-day life in the country. The official religion is Sunni Islam, and the country as a whole has a strict interpretation of the faith. For that reason, decisions are made following religious beliefs, and it is important – especially for women – to be respectful and mindful of the country’s laws and restrictions.
The Saudi economy is heavily dependent on oil, which accounts for over 90% of its exports and nearly 80% of its government revenue. The country is investing in other sectors, such as tourism, infrastructure, and technology, intending to diversify its economy. As a result, more companies are looking to expand their operations to Saudi Arabia, seeing their blooming economy as an opportunity to grow and find skilled professionals.
With an impressive history and fantastic scenery, Saudi Arabia is attracting more and more tourists. In addition to a dynamic economy and low taxes, the country is slowly becoming an attractive destination for companies of different sectors.
What do you need to know before hiring in Saudi Arabia
Before hiring professionals in Saudi Arabia, you need to be aware of their laws and regulations and requirements for companies looking to begin operations in the country.
Saudization / Nitaqat
Saudi Arabia employs nearly 10 million foreign workers, with people from Egypt, Bangladesh, Yemen, India, Pakistan and the Philippines frequently competing with Saudi workers for jobs.
In order to encourage companies to hire Saudi workers, the Saudi government created a national initiative known as Saudization or Nitaqat. Under this program, companies with six and more employees can’t hire other nationals for certain positions.
Nitaqat classifies companies according to sector, activities and number of employees, establishing that a number of employees must be Saudi nationals.
Therefore, getting a work visa for other nationals can be challenging. Furthermore, only licensed agencies can outsource employees.
Saudi labour law requires companies to have a work contract with each employee. Contracts can be for an undetermined amount of time or for a specific time frame, listing employees’ position at the company, salary, benefits and what could eventually result in the termination of the contract.
The experience period in Saudi Arabia is 90 days, which can be extended if both company and the employee agree. During this period, the company can fire an employee more easily. After the experience period is over, notice periods and severance pay must be observed. The notice period is 30 days for workers under an undetermined period contract and 60 days for workers under a specific time frame contract.
Payroll and taxes
Saudi Arabia has social security programs in place for its citizens, which means companies looking to hire people in the country must contribute to this benefit.
Employers must pay social security taxes to the General Organization for Social Insurance (GOSI), which usually amounts to 10% of the total salary of each employee, including commissions and other benefits.
Companies must also pay additional taxes for occupational risks employees might face, which usually amounts to 2% of the employee’s salary.
Salary and work hours
A standard work week in Saudi Arabia is 40 to 48 hours long, meaning 8 hours a day to five to six days a week. Overtime usually pays 150% of workers’ hourly rate.
During Ramadan, work hours slow down for Muslim workers, going from 8 to 6 hours a day.
Salaries in Saudi Arabia also include transport and housing costs, amounting to an average of 4,000 Riyals (SAR) per month. Employees that receive less than SAR 4,000 per month are considered half citizens in the Saudization system.
Leave period and vacation
The Saudi labour law requires employers to allow workers to take 21 days of paid vacation per year. If an employee has been in the company for over five years, this period increases to 30 days.
However, most companies offer an average of 30 days of paid leave to every employee, with managerial positions receiving 40 days.
After two years of employment, Muslim workers can also take ten days off to make a pilgrimage to Mecca. Employees can do the Hajj pilgrimage every five years.
Saudi Arabia’s labour law also allows for up to 4 months of paid medical leave upon medical documentation. As for maternity leave, new moms can take ten weeks of paid maternity leave, while new fathers can take only three days of paternity leave.
Anti-discrimination law and restrictions
Companies cannot discriminate against employees based on age, gender or disability.
The country has worked hard to increase employment rates among women, who are still largely excluded from the job market. In 2019, by allowing women to drive and acquire documents such as passports without the presence of a tutor, the government opened new possibilities for women.
Hiring practices in Saudi Arabia
Hiring and paying employees in Saudi Arabia requires a deep knowledge of local laws. Companies must also be licensed in the country. For that reason, working with a company that specialises in recruiting and hiring professionals abroad can be the best approach.
The best are those that work with complied partners that can assure your company will follow local regulations. Working with local companies can be crucial when finding the right talent. By working with an experienced partner knowledgeable about hiring practices in Saudi Arabia, you can target the right people and succeed in finding employees for your company.
If you decide to continue the process of hiring people in Saudi Arabia without a partner company, you might face challenges. First, you must register your company with the Ministry of Commerce, open a bank account, and receive a commercial license.
You must also be registered with the Labour Ministry and the General Social Insurance Organization. After that, you must get an official registration certificate from the Ministry of Commerce. This process can be lengthy and expensive when you do the process on your own.
Hiring abroad is always challenging. This is why working with companies specialising in foreign employment is often the best approach.
Saudi Arabia has been working to attract new companies and encourage employment in the country. However, their strict laws and regulations can still present obstacles to businesses seeking to expand there.
Before taking your business to Saudi Arabia, it is important that you understand the country's different regions, what their regulations are and what companies are expected to comply with when it comes to taxes, employment laws and benefits.
The Saudization process also means you will often deal with a large pool of Saudi candidates or complicated visa requirements for expats. Partnering with a company that understands and can comply with Nitaqat requirements can be crucial.
If you believe Saudi Arabia is the next step for your company, get in touch with us to find out how we can help.