Everything you need to know about the minimum wage in Saudi Arabia

The minimum wage in Saudi Arabia is a highly important topic for employers as they need to know how to remain compliant with the law. However, the different pay standards in KSA are unclear. For this reason, it is important to have a partner that can support you, allowing you to offer compliant salaries and process your payroll without problems.

In this article, you are going to learn more about the minimum wage in Saudi Arabia. Moreover, you are going to understand more about which benefits employees get in the Kingdom. Let us observe:

  1. What is the minimum wage in Saudi Arabia?
  2. What are the payroll guidelines in Saudi Arabia?
  3. How is the payroll process done in Saudi Arabia?
  4. What can an employee do if they get paid less than minimum wage?
  5. How can Connect Resources assist you with payroll and payments?

1. What is the minimum wage in Saudi Arabia?

KSA is a place that previously offered generous salaries, but mostly to Saudi nationals. Now, the local government has implemented many laws to ensure expats and local workers receive fair payment. Nevertheless, there have been many modifications to the minimum wage in Saudi Arabia. For this reason, it may be difficult to follow the continuous updates, and also to determine how to carry out the payments for the workforce.

These are the changes to the minimum wage in Saudi Arabia:

  • In 2014, expats had a Saudi minimum wage of SAR 2,500 and Saudi nationals had to be paid a minimum of SAR 3,000
  • In 2021, the Ministry of Human Resources announced that the minimum wage in Saudi Arabia for Saudi employees in the private sector had to be SAR 4,000, but it was not specified a minimum wage for expats.

It is important to mention that the basic salary in Saudi Arabia was introduced as a way to encourage Saudis to participate in the job market. Also, it was an action taken to make employers hire more Saudi nationals for private sector jobs. Nevertheless, employees have to negotiate with employers when it comes to salary if they want to earn a higher income.

1.1 What is the average income for expats in Saudi Arabia?

In this sense, there are two types of expats in the KSA:

  • Low-income expats: they receive a set salary that was previously negotiated with the particular country where the employee comes from. Therefore, they are classified into three different levels: unskilled, semi-skilled, and skilled.
  • High-income expats: these are the workers that come from other regions like North America or Europe, and they tend to receive a very attractive compensation package. This is because companies want to mirror the salaries offered to them in their home countries.

2. What are the payroll guidelines in Saudi Arabia?

The minimum wage in Saudi Arabia is part of the Saudi labor law salary increment, but there are also many factors that an employer has to consider when planning to offer a contract to an employee. In this regard, it is essential to consider the benefits in Saudi Arabia so they can be properly included in the payroll.

These are the most important aspects of the labour laws in Saudi Arabia:

2.1 Contributions

Employers should contribute 12% to 13.50% depending on whether it is a Saudi employee or non-national. When it comes to employee payroll contributions, according to the Saudi labor law, it should be 10% for non-Saudi employees.

2.2 Payment cycle

Whether the employee earns the minimum wage in Saudi Arabia or more, the payment cycle may vary. Generally, employers make payments weekly or monthly as per the Saudi labour law. This is very important because if the employer decides to make payments weekly and they fail to pay in time, this will count as a late payment according to the labor law of Saudi Arabia.

2.3 Working hours

The working hours in Saudi Arabia are also highly important for an employer to stay in compliance. You cannot force your employees to work more than they should. Generally, the working week is 48 hours in total. The work schedule is from Saturday to Thursday, and Saudi Arabia working hours are 8 per day. However, employees that work overtime should get compensation according to the contract agreement. But, the working hours cannot exceed 11 hours.

2.4 Leave

When it comes to leave in Saudi Arabia, there are several to consider:

  • Paid time off: it is the Saudi labor law vacation leave 2022. It refers to the annual leave, and the employer should know how to carry out the vacation pay calculation in Saudi Arabia. Employees with 1-5 years of service receive 21 days, while employees with more than 5 years receive 30 days.
  • Public holidays: employers should be aware of the 9 public holidays in the country.
  • Sick leave: the sick leave in Saudi Arabia goes as per Article 117 of the Labour Law. The first 30 days are fully paid, the next 60 days, workers will receive 1/3 of the pay and the last 30 days are unpaid.
  • Maternity leave: employees are entitled to a 10-week maternity leave. The payment will depend on seniority since employees with more than three years of service will receive more compensation.
  • Paternity leave: fathers are entitled to 3 days of paternity leave as per Article 113 of the Labor Law.
  • Parental leave: the law does not state any provision regarding parental leave.
  • Other leaves: depending on the contract, the employee may get bereavement leave, marriage leave or Hajj leave.

2.5 Termination

Termination is also a much-discussed topic, even if the employee earns minimum wage. These are the provisions regarding termination:

  • The termination process will vary depending on the type of contract and the reason for termination.
  • If the employer dismisses an employee should provide a valid reason, otherwise the employee shall be compensated
  • If the employee resigns, the employer must pay the final wages as soon as possible.

As per the notice period, it depends on the type of contract. Employees that are under a monthly employment contract should comply with a notice period of 30 days. Whereas employees under another type of contract should comply with 15 days of notice.

2.6 Severance pay

Our end of service calculator in Riyadh is useful for employers who want to decrease the likelihood of errors when doing these calculations.

An employee is entitled to an end-of-service pay according to Article 84 of the Saudi labor law. These are the provisions regarding the Saudi labor law end of service:

  • Employees should receive a half-month wage for each of the five years of employment, and a one-month wage for the following years.
  • 1/3 of payment if the employee has served for 2-5 years
  • 2/3 of payment if the employee has served for 5-10 years
  • Full payment if the employee has served for more than 10 years

2.7 Probation period

The probation period in Saudi Arabia varies according to the contract or agreement. However, employees usually have to fulfill a probationary period of 90 days. But, the employer may extend it as long as it has received written consent from the employee. 

3. How is the payroll process done in Saudi Arabia?

Once the employer has learned all the Saudi benefits that should be included, in addition to the minimum wage, it is time to set up the payroll in place. Paying employees is not an easy task, for this reason, it is better to divide it into three stages:

3.1 Pre-payroll stage

The company should ensure everything complies with the labor law before starting to make payments. To achieve this it is important to do the following:

  • Establish clear corporation policies
  • Have a duly registered business in the KSA
  • Establish a leave policy that complies with the labor law
  • Establish an attendance policy since this is crucial for making the calculations
  • Understand statutory components of your Saudi payroll to stay in compliance
  • Learn how to address minimum wage and social insurance
  • Set your pay schedule
  • Gather all the employee information

3.2 Payroll stage

This is the most complicated process since you will make all the calculations and determine employees’ total earnings. In this stage, you will use everything you have set up before, such as your attendance policy and good management of your payroll data.

3.3 Post-payroll stage

After carrying out the payroll calculation, there are some additional tasks you have to do to avoid making errors.

First, use software that has a direct deposit or instruct your bank to disburse the payments.

After that, ensure that you keep all the records of the payments to your employees. This is important since you will carry out the payroll accounting, so make sure to manage your books and accounts properly.

Lastly, you must report the payroll data and consider all the tasks you have to complete when it comes to taxes and near the end of the fiscal year.

If processing payroll and understanding the minimum wage in Saudi Arabia feels like an overwhelming task, it is time to contact experts that can help you with payroll outsourcing to ensure you make no mistakes.

4. What can an employee do if they get paid less than minimum wage?

When it comes to legal actions related to the minimum wage in Saudi Arabia, the first thing to do is to review the contract.

For example, if the employee has signed a contract where both parties have agreed on a salary contemplated in the labor law in Saudi Arabia, like the minimum wage, the employer has the obligation to provide the full pay.

In case the employee has irregularity with the wages, such as not receiving the full payment or delays, he or she can take a complaint to the Labor Office, located in the Ministry of Labor and Social Development. Here, the employee will receive instructions about how to proceed.

Usually, the authority will try to reach a settlement between both parties. But, if the issue does not resolve in a friendly manner, the case will go to the Labor Courts. Unfortunately, these cases are very common in Saudi Arabia.

4.1 What if the salary is too low?

If an employee has signed a contract with an employer where the salary stated is less than the minimum wage in Saudi Arabia, unfortunately, there is nothing they can do.

The only thing a worker can do is to try to change the terms by negotiating with the employer. That is the only way to change the salary.

For this reason, both local and foreign employees have to research salaries before starting a negotiation with an employer. Learning about the Saudi Arabia labor law is a good way to start.

5. How can Connect Resources assist you with payroll and payments?

At Connect Resources, we understand how difficult it may be to comply with the labor law in Saudi Arabia, particularly if you are a foreign employer. For this reason, we offer our solutions to businesses, helping them streamline operations and remain compliant at all times.

We have a comprehensive range of services for your business regardless of your location in the Middle East. These are:

Do you need our support with the Saudi labor law and payroll? In our agency, we have a team of experienced professionals well-versed in this law and all the regulations you need to comply with to decrease risks. Contact us at +971 43 316 688 or send us an email at contact@connectresources.ae to get in touch.

On the other hand, if you have been wondering how to get a job in the Middle East, you should check out thetalentpoint.com. On The Talent Point, you can find the best open positions to get your dream job. Send your CV to contact@thetalentpoint.com and allow an expert recruiting team to assist you.

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