Understanding Saudi Arabia employment laws is crucial for any business operating or hiring in the Kingdom. In 2025, Saudi Arabia continues its rapid transformation under Vision 2030, and employers must stay updated with the latest changes to remain compliant. Whether you’re running a small company or a large enterprise, following Saudi labor laws ensures smooth operations, protects your business, and helps you maintain a legally sound relationship with your workforce.
This detailed guide explains everything you need to know—from contracts, wages, Saudization quotas, benefits, and termination policies, to recent 2025 labor law updates.
The Legal Framework Behind Saudi Arabia Employment Laws
Saudi labor laws are governed by the Ministry of Human Resources and Social Development (MHRSD). These laws apply to all employers—whether local or foreign—who hire one or more employees. They are applicable to both Saudi nationals and expatriate workers.
All employment relationships in Saudi Arabia must follow the labor law’s detailed provisions, and non-compliance can lead to fines, business suspension, or even criminal penalties.
Applicability
These laws apply to all private-sector businesses, including companies in:
- Mainland Saudi Arabia
- Free zones
- Industrial cities
- Construction and service sectors
Domestic workers and civil servants follow different legal frameworks, but most businesses in the private sector must strictly follow the Saudi labor laws.
Types of Employment Contracts in Saudi Arabia
Every employer must provide a written employment contract, ideally in Arabic. The contract is the cornerstone of the employment relationship and must be registered with the MHRSD.
Fixed-Term Contracts
- Common for expatriate employees
- Valid until the expiration date or the work permit
- Must clearly state duration and renewal terms
Indefinite Contracts
- Usually for Saudi nationals
- No specific end date
- Can be terminated by either party with proper notice
Mandatory Elements in Contracts
Your Saudi employment contract must include:
- Job title and description
- Location of work
- Basic and total salary
- Working hours and rest days
- Leave entitlements
- Overtime policy
- Termination clauses
- Probation period (up to 90 days)
Failing to document any of these may lead to disputes and fines.
Working Hours, Breaks, and Overtime Rules
Saudi labor laws regulate the number of hours employees can work to ensure fair treatment and work-life balance.
Standard Working Hours
- Maximum 8 hours per day or 48 hours per week
- During Ramadan, Muslim workers may only work 6 hours per day
- Employers must ensure breaks and rest periods are provided
Breaks and Rest Days
- Employees must receive a 30-minute break every 5 hours of continuous work
- They are entitled to at least one day off per week, usually Friday
Overtime Rules
- Any work beyond the standard hours is considered overtime
- Employers must pay 150% of the hourly wage for overtime
- All overtime must be tracked and documented
Wages, Payroll, and Deductions
Ensuring accurate and timely salary payments is mandatory under Saudi Arabia employment laws.
Minimum Wage
- The minimum wage for Saudi nationals is SAR 4,000/month
- There is no legal minimum for expatriates, but fair compensation is expected
Wage Payment System (WPS)
- All employers must register with the Wage Protection System (WPS)
- Salaries must be paid monthly via bank transfers
- The MHRSD monitors payment consistency
Legal Deductions
Only specific deductions are permitted, such as:
- Social insurance (GOSI) contributions for Saudi nationals
- Loans with written employee consent
- Fines or damages (must be justified and legally documented)
- Advance salary payments
Employee Benefits and Leave Entitlements
Providing legally guaranteed benefits is not optional—it’s a duty. Here are the standard benefits employers must offer under Saudi labor laws:
Annual Leave
- 21 days of paid leave per year
- Increases to 30 days after 5 years of continuous service
- Leave must be granted within the year it’s earned
Sick Leave
Employees are entitled to:
- 30 days of paid sick leave
- Followed by 60 days of half-paid or unpaid leave depending on severity
A medical certificate must support extended sick leave.
Maternity and Paternity Leave
- Female employees are granted 10 weeks of paid maternity leave
- Male employees are entitled to 3 days of paternity leave
Public Holidays
The following public holidays are fully paid:
- Eid Al-Fitr: 4 days
- Eid Al-Adha: 4 days
- Saudi National Day: 1 day
End-of-Service Benefits (EOSB)
EOSB is a lump sum payment made to employees when they resign or are terminated.
How EOSB is Calculated
- Half-month’s wage for each of the first five years
- One full month’s wage for each additional year
- Partial years are calculated proportionately
Employees who resign after 2–5 years may receive reduced benefits unless otherwise agreed.
Saudization and Nitaqat Requirements
Saudization, officially known as Nitaqat, is a national policy that mandates companies to employ a minimum percentage of Saudi nationals.
Saudization Targets in 2025
Each company falls into a category (Red, Yellow, Green, Platinum) based on:
- Number of employees
- Sector of operation
- Ratio of Saudi nationals
Higher Saudization = Better company rating = More government privileges
Penalties for Non-Compliance
- Suspension of visa services
- Government contract bans
- Financial penalties
- Inability to renew employee permits
Companies that meet or exceed targets receive fast-track approvals and other incentives.
Termination Policies and Employee Rights
Terminating a worker—whether Saudi or foreign—requires legal compliance.
Termination with Cause
Employers can terminate employees immediately for:
- Theft or dishonesty
- Absenteeism without valid reason
- Disclosure of company secrets
- Assaulting coworkers or managers
Documentation and prior warnings are essential.
Termination without Cause
- Requires 60-day notice (or payment in lieu)
- Full End-of-Service Benefits must be paid
- Final settlement should be made within 2 weeks
Resignation by Employee
Employees can resign at any time with proper notice. EOSB entitlement may be reduced depending on their length of service.
Equal Opportunities and Women’s Employment
Saudi Arabia is actively promoting women’s participation in the workforce.
Equal Pay Law
From 2021 onward, women must receive equal pay for equal work. Discrimination based on gender is prohibited.
Safe Workplace Mandates
Employers must ensure:
- Harassment-free environments
- Childcare rooms in companies with more than 50 female staff
- Safe transportation (when applicable)
Labor Disputes and Resolution Process
Disputes are common but resolvable under the Saudi labor system.
Filing a Complaint
Employees can file grievances with the MHRSD or via online portals. Employers are encouraged to resolve issues internally first.
Labor Courts
Unresolved disputes proceed to specialized Labor Courts, where both parties present evidence. Court rulings are binding and enforceable.
New Labor Law Updates in 2025
Here are some of the important changes to Saudi labor laws in 2025:
Remote Work Regulations
Employers must now:
- Define working hours for remote employees
- Provide digital tools for work
- Ensure productivity is not compromised
Saudization for Freelancers
Freelancer visas and licenses are now available to Saudi citizens, contributing to Nitaqat targets for certain sectors.
Employer Grievance Mechanism
Companies with over 50 employees must set up:
- A formal grievance policy
- An internal complaints committee
Failure to do so may result in administrative penalties.
Employer Obligations Checklist
To stay compliant with Saudi Arabia employment laws, every employer should:
- Register all contracts with the MHRSD
- Use WPS for salary payments
- Maintain accurate attendance and payroll records
- Provide leave and benefits on time
- Meet Saudization quotas
- Respond to employee complaints professionally
- Renew iqamas, licenses, and insurances timely
- Display labor law posters in the workplace
Conclusion
Hiring and managing employees in Saudi Arabia involves more than just recruitment—it requires strict compliance with Saudi Arabia employment laws. These regulations are designed to protect both employer interests and employee rights, contributing to a productive and ethical workforce.
Whether you’re running a new startup or managing a large workforce, you must follow the law in every detail—from contracts and wages to termination and Saudization. Keeping up with updates and maintaining documentation will keep you compliant and protect your business in the long run.
To ensure a smooth and fully compliant operation, consider working with experts who understand the local legal and business environment. We offer complete Business Setup Services in Saudi Arabia to guide you through labor laws, licensing, and company formation.
FAQs
What is the legal working hour limit in Saudi Arabia?
Employees can work a maximum of 8 hours per day or 48 hours per week, reduced to 6 hours per day during Ramadan for Muslim workers.
Do employers have to provide annual leave?
Yes, at least 21 days of paid leave per year, increasing to 30 days after five years of service.
Are there penalties for not paying salaries on time?
Yes. Employers must use the Wage Protection System to pay salaries on time. Delays or underpayments can lead to serious fines and service suspensions.
What are End-of-Service Benefits (EOSB)?
EOSB is a mandatory payment given to employees upon termination or resignation, calculated based on years of service and final salary.
How does Saudization affect businesses?
It affects visa quotas, government approvals, and compliance ratings. Meeting Saudization targets can improve your company’s status and access to services.
