Saudi Labor Law – Basic Points

The Saudi Labor Law governs the relationship between employers and employees in the Kingdom, ensuring that workers receive the rights guaranteed by the law.

In this article, we will outline some key points of the Saudi Labor Law. For more details, you can refer to the text of the labor law.

Key Points of the Saudi Labor Law

We will explain the most important points of the Saudi Labor Law, which are as follows:

The Saudi Labor Law governs the relationship between employers and employees in the Kingdom, and it entitles workers to the rights guaranteed by the Saudi Labor Law. For the full text of the labor law, please visit the website of the Saudi Ministry of Human Resources and Social Development (https://www.hrsd.gov.sa/).

According to the Saudi Labor Law, all expatriate workers in the general category (working in companies/institutions) are covered by its provisions. However, domestic workers (maids, house drivers, gardeners, etc.), agricultural workers in companies employing fewer than 10 workers, crew members on ships with a capacity of less than 500 tons, workers on short-term work visas, etc., are not covered by the Saudi Labor Law.

Employment Contract:

1. The Saudi Labor Law states that a written employment contract signed by both the employer and the foreign employee is mandatory, specifying a fixed duration, usually two years.
2. The contract must be in Arabic. If it is in another language alongside Arabic, the Arabic text will prevail in case of a dispute.
3. The contract must include the name and address of the employer and employee, job title, workplace, contract duration, probation period, agreed salary, provision of free food or food allowance, accommodation, working hours, overtime, allowances, leave, airfare, medical insurance, end-of-service benefits, provisions for repatriation in the event of death, dispute resolution methods, etc.

Probation Period:

1. The probation period, if specified in the contract, typically does not exceed 90 days. However, it can be extended up to 180 days with written consent from both parties.
2. During the probation period, either party may terminate the agreement without compensation or end-of-service benefits, although the cost of the return flight will be borne by the worker.

Working Hours / Weekly Leave / Overtime Allowance:

1. The Saudi Labor Law stipulates that working hours are 8 hours daily and 48 hours weekly. During Ramadan, working hours are reduced to six hours daily and 36 hours weekly for Muslim workers.
2. The overtime rate is 150% of the hourly wage.
3. Friday is the weekly rest day but can be substituted with any other day of the week.
4. A 30-minute break is provided during the workday, and no worker should work more than 5 continuous hours. Total working hours should not exceed 12 hours per day.

Accommodation:

 The Saudi Labor Law mandates that employers provide accommodation or a housing allowance as specified in the employment contract.

Food or Food Allowance:

 Employers are responsible for providing food or a food allowance as per the employment contract.

Recruitment and Residency Fees, Exit/Re-Entry Visa Fees, etc.:

 Employers bear the costs related to recruitment, medical examinations, residency fees and renewals, fines for any delays, and fees related to exit and re-entry visas.

Medical/Health Insurance:

The Saudi Labor Law requires employers to provide health insurance for foreign workers, which is essential for obtaining medical treatment.

Shortly after arrival, and to obtain medical insurance, a prerequisite for issuing residency, workers must undergo a medical examination at approved medical centers.

Leaves:

1. Annual Leave: 21 days if the worker has completed one year of service; 30 days after five years of continuous service with the same employer.
2. Medical Leave: The first 30 days of sick leave are fully paid; the next 60 days are paid at ¾ of the wage; and the following 30 days are unpaid within one year.
3. Paternity Leave: Three days' leave for the birth of a child.
4. Maternity Leave: 10 weeks—four weeks before the expected delivery date and six weeks after delivery, extendable by one month without pay. The maternity leave pay is half the salary if the service with the employer is one year, and full salary if the service is three years or more.
5. Other Types of Leave: Five days of leave for the death of a spouse or children; female employees are entitled to leave ranging from 15 to 130 days depending on their religion in case of the husband's death. Pilgrimage leave ranges from 10 to 15 days once during service for an employee who has not previously performed Hajj, provided they have completed two years in service.
6. Official Holidays: National Day, Eid Al-Fitr, and Eid Al-Adha are fully paid holidays. If employees are required to work, they are entitled to overtime pay.

Renewal of Employment Contract:

 According to the Saudi Labor Law, a fixed-term contract ends upon the expiration of its term, and the employer must repatriate the worker.

1. If both parties continue to execute the contract, it is considered renewed for an indefinite period, provided that a non-Saudi contract without a fixed term shall be valid for the duration of the work permit.
2. If the fixed-term contract includes a clause for renewal for a similar or specified period, the contract must be renewed for the agreed duration.
3. If a fixed-term contract is renewed twice consecutively, or if the original contract and the renewal period are three years, whichever is less, and both parties continue to execute it, the contract becomes an indefinite-term contract.
4. If the worker wishes to return home upon the expiration of the current contract, they may give notice of their intention to leave 30 days (for fixed-term contracts) or 60 days (for indefinite-term contracts) before the contract expires.

End-of-Service Benefits (ESB):

1. ESB will be granted after two years of service with the same employer, at a rate of half a month's wage for each of the first five years, and one month's wage for each subsequent year of service after the first five years.
2. If the worker resigns, the entitlement to ESB is at one-third of the service reward for 2 to 5 years of service; two-thirds of the reward for 5 to 10 years of service, and the full reward for more than 10 years of service.
3. The worker is entitled to the full reward if they leave due to a force majeure beyond their control. A female worker is entitled to the full reward if she terminates her contract within six months of marriage or three months of childbirth.
4. Upon termination of service, the employer must pay the worker and settle their entitlements within one week of the contract termination. If the worker terminates the contract, the employer must settle all entitlements within two weeks.

Labor Disputes:

1. In case of labor disputes, claims are filed at the labor offices within the work area.
2. The labor office must take necessary steps to amicably resolve disputes; otherwise, the matter will be referred to the Labor Dispute Settlement Commission.

Non-Competition/Confidentiality Clauses:

1. If the worker's assigned job allows them to become acquainted with the employer’s clients or access business secrets, the employer may include a non-competition or confidentiality clause in the contract. This clause can prevent the worker from working for a competing company, changing sponsorship, or disclosing business secrets for up to 10 years, for up to two years if specified in the contract. The employer can report a violation within one year of notification and claim penalties, including deportation.
2. For those planning to change sponsors/jobs, it is advisable to obtain a letter from the employer explicitly stating their non-objection to working in the specified field.

The DocSuite HR system plays a crucial role in implementing the Saudi Labor Law in companies, helping to manage human resources comprehensively, including employee management, payroll, attendance, and departures. It provides necessary reports to comply with labor laws, such as work and rest reports, and offers essential data and documents to meet legal requirements and regulate relationships between the company and employees in accordance with Saudi regulations.