Understanding the mandatory employee benefits in Saudi Arabia is crucial for any company operating in the Kingdom. These benefits are not only required by law but also help ensure employee welfare and foster a positive work environment. This guide outlines the key employee benefits that employers must provide in Saudi Arabia to remain compliant with local labor laws and support the well-being of their workforce.
1. Social Security Contributions: Pension and Insurance
Overview:
In Saudi Arabia, social security contributions are aimed at providing retirement and social insurance benefits for employees. The system is governed by the Saudi Arabian General Organization for Social Insurance (GOSI) and applies to both Saudi nationals and certain foreign workers. Employers are required to contribute to GOSI to ensure that employees are covered for retirement, disability, and other benefits.
| Contribution Type | Employer Contribution | Employee Contribution | Coverage |
|---|---|---|---|
| Pension Fund | 9% | 9% | Retirement benefits for Saudi nationals |
| Disability & Death Benefits | 2% | 1% | Disability and survivor benefits |
| Expatriates | Exempt | Exempt | Expatriates are generally exempt but may be subject to health insurance requirements |
Details:
Employers must deduct social security contributions from employee wages and submit them to GOSI. Saudi nationals are entitled to full coverage, including retirement, disability, and survivor benefits, while expatriates are exempt from the pension and disability benefits but may still need to contribute to health insurance.
Outcome:
These contributions ensure financial security for Saudi nationals and help employers comply with local regulations, minimizing legal risks.
2. Paid Annual Leave
Overview:
In Saudi Arabia, employees are entitled to paid annual leave as a part of their employment benefits. This leave promotes work-life balance and supports employee welfare.
Details:
- Leave Entitlement: Employees are entitled to 21 days of paid annual leave after completing one year of service.
- Increased Leave: After five years of continuous service with the same employer, the leave entitlement increases to 30 days per year.
- Carry Over: Unused leave can be carried over to the next year, although companies may limit the number of carry-over days.
Outcome:
Annual leave provides employees with necessary time off to rest and recharge, improving overall productivity and reducing burnout. It also helps to demonstrate an employer’s commitment to employee well-being.
3. Maternity and Paternity Leave
Overview:
Saudi labor laws provide provisions for maternity and paternity leave to support employees during important family milestones.
| Leave Type | Duration | Payment |
|---|---|---|
| Maternity Leave | 10 weeks | Full salary for the duration |
| Paternity Leave | 3 days | Full salary during the leave period |
Details:
- Maternity Leave: Female employees are entitled to 10 weeks of maternity leave, paid in full by the employer.
- Paternity Leave: Male employees are entitled to 3 days of paternity leave, which is fully paid.
Outcome:
These leave policies support employees in managing family responsibilities without the loss of income, contributing to a family-friendly workplace culture and higher employee satisfaction.
4. Sick Leave
Overview:
Sick leave is a crucial benefit that allows employees to take time off when they are ill or injured without suffering a financial loss. Saudi labor law provides employees with the right to sick leave with varying compensation based on the length of absence.
Details:
- Employees are entitled to 30 days of sick leave per year.
- For the first 30 days, employees are entitled to full salary.
- After 30 days, employees are entitled to 75% of their salary for the next 60 days.
- After 90 days of sick leave, the employee is entitled to 50% of their salary for the next 30 days.
Outcome:
Sick leave ensures that employees can focus on recovery without worrying about their financial stability, promoting a healthy workforce.
5. End of Service Benefits (Gratuity)
Overview:
End-of-service benefits, also known as severance pay or gratuity, are mandatory for employees who leave their employer after completing a minimum of one year of service. This benefit provides financial support to employees after their employment ends.
| Employment Duration | Severance Pay Entitlement |
|---|---|
| 1-5 years | 1/3 of monthly salary per year of service |
| 5+ years | 1/2 of monthly salary per year of service |
Details:
Gratuity is calculated based on the employee’s final monthly salary and the length of their service with the employer. Employers must ensure gratuity is paid to employees upon resignation, termination, or retirement.
Outcome:
Gratuity payments provide a financial cushion for employees transitioning out of the company, which helps ensure compliance with Saudi labor laws.
6. Public Holidays
Overview:
Saudi Arabia observes several public holidays each year, during which employees are entitled to paid leave. If an employee works on a public holiday, they are typically entitled to premium pay.
| Public Holiday | Date (2025) |
|---|---|
| New Year’s Day | January 1 |
| Labor Day | May 1 |
| Saudi National Day | September 23 |
| Eid al-Fitr | Based on Islamic lunar calendar |
| Eid al-Adha | Based on Islamic lunar calendar |
| Mawlid al-Nabi | October 29 |
Details:
Employees are entitled to time off on official public holidays, and if required to work on these days, they must receive compensation, usually at double their regular hourly rate.
Outcome:
Public holidays offer employees opportunities for rest and cultural observance. Premium pay for working during holidays ensures that companies remain compliant while incentivizing employees to work on these days.
7. Health Insurance
Overview:
Employers in Saudi Arabia are required to provide health insurance coverage for their employees. The health insurance must meet the minimum coverage requirements set by the Saudi government.
Details:
- All employees, including expatriates, are entitled to basic health insurance, which covers medical treatment, hospitalization, and other health-related services.
- Employers are responsible for the cost of the health insurance for both Saudi nationals and expatriates.
Outcome:
Health insurance ensures that employees have access to essential medical care, supporting their well-being and reducing absenteeism due to health issues.
8. Additional (Extra-Legal) Benefits
Overview:
In addition to mandatory benefits, many employers in Saudi Arabia offer extra benefits to enhance employee satisfaction and attract top talent.
Details:
- Transportation Allowances: Employers may provide transportation allowances or company vehicles to support commuting.
- Performance Bonuses: Some companies offer bonuses based on employee performance or company profitability.
- Housing Allowances: It is common for companies to offer housing allowances to employees, especially expatriates.
Outcome:
Extra benefits improve employee engagement, retention, and overall satisfaction, giving companies a competitive edge in the labor market.
Streamlining Compliance with EOR/PEO Services
Partnering with an Employer of Record (EOR) or Professional Employer Organization (PEO) can help businesses streamline compliance with Saudi Arabia’s mandatory benefits laws. GlobainePEO ensures that companies remain compliant with local regulations while managing payroll, benefits administration, and employee welfare. By leveraging EOR/PEO services, businesses can focus on their core operations while leaving the complexities of employee benefits and compliance to the experts.
Final Thoughts
Incorporating Saudi Arabia’s mandatory benefits into your company’s HR policies is vital for maintaining a compliant and employee-friendly work environment. Understanding these benefits and leveraging EOR/PEO services will help companies ensure compliance, enhance employee satisfaction, and foster a positive corporate culture. This approach not only ensures legal compliance but also supports the long-term growth and success of your business in Saudi Arabia.
GlobainePEO – Your Trusted Partner
At GlobainePEO, we simplify employee benefits management in Saudi Arabia, ensuring compliance with local labor laws. We handle key benefits such as social security contributions, paid leave, maternity/paternity leave, and end-of-service benefits, allowing you to focus on business growth while we safeguard your workforce’s welfare.