Saudi Arabia Labor Law: Complete Guide to Employment Regulations

Saudi Arabia, the largest country in the Middle East, is not only known for its rich cultural heritage and vast deserts but also for its evolving labor market. Understanding labor laws is essential for both employers and employees in this nation. The Saudi Arabia Labor Law, established to protect the rights of workers and employers, serves as the foundation for employment relationships. In this article, we will delve into the key aspects of Saudi Arabia's labor law, helping you navigate the intricacies of the local job market.

Key Provisions of Saudi Arabia Labor Law:

The Labor Law in Saudi Arabia is designed to protect the rights of both employers and employees. It outlines the fundamental principles and regulations governing the employer-employee relationship. Here are some key points of the Labor Law in Saudi Arabia:

• Coverage:

  • The Labor Law applies to all expatriate workers in the general category (working in companies/establishments) in Saudi Arabia. However, it does not cover domestic service workers (such as housemaids and drivers), agriculture workers in firms with fewer than 10 workers, crew members on ships with a load of less than 500 tonnes, and workers on short-term work visas.

• Employment Contract:

  • A written employment contract is mandatory and should specify a fixed duration, usually two years.

  • The contract must be in Arabic, and in case of a dispute, the Arabic text prevails.

  • It should include details like employer and employee names, job title, location of work, duration, probation period, wage, provisions for food and accommodation, working hours, overtime, vacation, airfare, medical insurance, end-of-service benefits, and dispute resolution mechanisms.

• Probation Period:

  • The probation period, if provided in the employment contract, typically does not exceed 90 days and can be extended up to 180 days with written agreement.

  • During probation, either party can terminate the contract without compensation.

• Working Hours/Weekly Holiday/Overtime:

  • Regular working hours are 8 hours per day and 48 hours per week. During Ramadan, Muslim workers have reduced hours.

  • Overtime is compensated at 150% of the hourly wage.

  • Friday is the weekly rest day, although it can be replaced with another day.

  • Workers are entitled to a 30-minute rest period during the workday, and they should not work more than 5 hours continuously.

• Accommodation and Food:

  • Employers are responsible for providing residential accommodation or house rent allowances and food or food allowances as per the employment contract.

• Fees:

  • Employers are responsible for the recruitment, medical tests, residence permit (iqama) fees, and exit/re-entry visa fees.

  • Any fines resulting from delays in processing documentation are also the employer's responsibility.

• Medical/Health Insurance:

  • Employers must provide health insurance for expatriate workers.

  • Workers need to undergo a medical test at approved medical centers to obtain the required medical insurance for the iqama.

• Leave:

  • Annual leave entitlement starts at 21 days after one year of service and increases to 30 days after five years of continuous service.

  • Medical leave provides full wage for the first 30 days, 3/4th of the wage for the next 60 days, and no pay for the following 30 days in a single year.

  • Other types of leave include paternity, maternity, and public holidays.

• Cost of Air Ticket:

  • Employers are responsible for the cost of airfare for workers to travel from their home country to Saudi Arabia for work and for their return upon completion of the contract.

  • If the worker's contract is terminated during the probation period or due to medical issues, the cost of the air ticket is borne by the worker.

• Termination of Contract:

  • Employment contracts can be terminated under various conditions, including mutual consent, end of the contract's term, retirement, or for valid reasons defined by the labor law.

  • There are provisions for both employers and employees to terminate contracts based on specific circumstances.

• End of Service Benefits:

  • End of Service Benefits (ESB) are provided to workers who have completed two years of service with the same employer.

  • The amount is based on the length of service and increases over time.

• Labour Disputes:

  • Labor disputes are filed in Labor Offices located where the work is based.

  • Disputes are first handled by Labor Offices, and if not resolved, they are referred to the Commission for Settlement of Labor Disputes.

• Non-competition/Confidentiality Clauses:

  • If a worker's job allows them access to the employer's customers or business secrets, the contract may include non-competition and confidentiality clauses.

  • Such clauses can restrict the worker from competing with the employer for up to two years after the contract ends and from disclosing business secrets for up to 10 years.

The Labor Law in Saudi Arabia ensures that both employers and employees are aware of their rights and responsibilities, contributing to a fair and regulated labor market.

Employment Contract in saudi Arabia 

In Saudi Arabia, employment contracts play a crucial role in defining the terms and conditions of the employer-employee relationship. Here are the key points to understand about employment contracts in Saudi Arabia:

• Language of Contracts:

  • Employment contracts in Saudi Arabia must be written in Arabic. If the employee is a foreigner, a translated copy should be attached to the Arabic contract. In case of any dispute, the Arabic text takes precedence.

• Types of Employment Contracts:

  • There are three primary types of employment contracts in Saudi Arabia: definite term, temporary, and indefinite term.

• Definite Term Contract:

  • A definite term contract has a fixed duration, which can be specified in the contract.

  • This type of contract expires either on the specified expiration date or upon the completion of the work for which the employee was hired.

  • The contract can be renewed for the same period up to three times. After the third renewal or if the employee continues to work beyond the third renewal without a new contract, it automatically becomes an indefinite-term contract.

• Temporary Contracts:

  • Temporary contracts are designed for specific hours per day or specific days per week.

  • These contracts should not exceed 90 days in duration.

• Indefinite Term Contract:

  • An indefinite term contract does not have a specified expiration date.

  • This type of contract can be terminated by either the employer or the employee.

• Fixed-Term Contracts for Non-Saudi Nationals:

  • Employment contracts for non-Saudi nationals are typically considered fixed term.

  • If the contract does not specify its duration, it is deemed to be equal to the validity of the employee's residency visa and work permit.

Understanding these contract types is essential for both employers and employees in Saudi Arabia, as they define the legal framework and expectations of the employment relationship. It's advisable for parties entering into employment contracts to fully understand the terms and conditions to avoid disputes and ensure a smooth working relationship.

Working Hours in Saudi Arabia 

Working hours in Saudi Arabia are regulated by labor laws to ensure fair and safe working conditions for employees. Here are the key points regarding working hours in the Kingdom of Saudi Arabia:

• Regular Working Hours:

  • The standard working hours in Saudi Arabia are 8 hours per day and 48 hours per week. This applies to most businesses and industries.

  • During the month of Ramadan, when Muslims fast, working hours are typically reduced to 6 hours per day and 36 hours per week for Muslim employees.

• Overtime:

  • Overtime work, which is work beyond the regular working hours, is compensated at a rate of 150% of the employee's hourly wage.

• Weekly Rest Day:

  • Friday is the designated weekly rest day in Saudi Arabia. However, this day can be replaced with any other day of the week by mutual agreement between the employer and the employee.

• Rest Periods:

  • Employees are entitled to a rest period of at least 30 minutes during the workday, and they should not be required to work continuously for more than 5 hours.

  • In no case should the total working hours exceed 12 hours per day.

• Special Conditions:

  • Some industries and professions, such as healthcare, transportation, and essential services, may have different working hour regulations based on the nature of the work.

Annual leave in Saudi Arabia 

Annual leave in Saudi Arabia is an essential labor right designed to provide employees with a break from work to rest and spend time with their families. Here are the key points regarding annual leave in Saudi Arabia:

• Duration of Annual Leave:

  • Employees who have completed at least one year of continuous service with the same employer are entitled to a minimum of 21 days of annual leave.

  • After completing five years of continuous service with the same employer, the annual leave entitlement increases to 30 days.

• Sick Leave:

  • Employees are entitled to sick leave with full pay for the first 30 days of illness.

  • After the initial 30 days, employees receive 3/4th of their wages for the next 60 days.

  • Following this, if an employee requires additional sick leave, it will be without pay.

• Paternity Leave:

  • Male employees are entitled to three days of paternity leave upon the birth of their child.

• Maternity Leave:

  • Female employees are entitled to maternity leave, which includes four weeks of leave before the expected date of delivery and six weeks after the delivery. This leave can be extended by one month without pay.

  • During maternity leave, female employees are entitled to half their regular salary if they have completed at least one year of service with the employer. If the service duration is three years or more, the employee receives their full salary.

• Other Types of Leave:

  • In case of the death of a spouse or child, employees are entitled to five days of leave.

  • Female employees who lose their husbands are entitled to 15 to 130 days of leave, depending on their religion.

  • Employees who have not previously performed Hajj (pilgrimage to Mecca) can take 10 to 15 days of paid leave to perform Hajj after completing two years of service.

• Public Holidays:

  • Certain public holidays, such as Saudi National Day, Eid al-Fitr, and Eid al-Adha, are fully paid holidays. If an employee is required to work on these holidays, they are entitled to overtime pay.

Termination of employment in Saudi Arabia

Termination of employment in Saudi Arabia is governed by labor laws, and it's important to understand the regulations surrounding employment termination and severance. Below are key points related to employment termination and severance in Saudi Arabia:

• Termination by Employer:

  • Employers in Saudi Arabia have the right to terminate employees, but this must be done in compliance with labor laws.

  • Common grounds for termination include:

    • Non-performance or poor performance.

    • Violation of company policies.

    • Financial or economic reasons.

    • Completion of a specific project or task for which the employee was hired.

    • Breach of trust, such as dishonesty or unethical behavior.

    • Significant absenteeism.

• Notice Period:

  • Employers are typically required to provide written notice to the employee before termination. The length of the notice period may vary depending on the circumstances and the employment contract but often ranges from 30 to 60 days.

• Severance Pay:

  • Severance pay, also known as an end-of-service benefit, is provided to employees upon termination. The amount of severance pay depends on the length of service:

    • Half a month's wage for each of the first five years.

    • One month's wage for each year of service beyond the first five years.

  • For employees who resign, the calculation is different:

    • 1/3 of the severance pay for service between 2 and 5 years.

    • 2/3 of the severance pay for service between 5 and 10 years.

    • Full severance pay for service of 10 years or more.

• Resignation by Employee:

  • When an employee decides to resign, they are typically required to provide written notice to the employer, often 30 to 60 days in advance.

• Retirement:

  • Retirement age in Saudi Arabia is typically 60 years for male employees and 55 years for female employees.

  • Upon reaching retirement age, an employee is entitled to full end-of-service benefits.

• Notice for Immediate Termination:

  • Employers can terminate an employee immediately without notice in cases of gross misconduct or a serious violation of labor laws.

• Complaints and Labor Disputes:

  • If an employee believes they have been unfairly terminated, they can file a complaint with the labor authorities. Disputes related to termination are often resolved through the Commission for Settlement of Labor Disputes.

Conclusion:

Saudi Arabia Labor Law serves as a crucial framework for regulating employment relationships within the country. Staying informed about these laws is vital for both employers and employees to ensure compliance, avoid legal issues, and create a fair and secure work environment. As Saudi Arabia continues to modernize its labor market, understanding and adhering to labor laws are paramount for anyone seeking to work in this dynamic nation.

FAQS : Saudi Labour Law

Certainly! Here are some frequently asked questions (FAQ) about Saudi Arabia's labor law:

1. What is Saudi Arabia's labor law, and who does it apply to?

   - Saudi Arabia's labor law governs the employment relationship between employers and employees in the Kingdom. It applies to all expatriate workers in the general category, which includes those working for companies and establishments. Domestic service workers, agricultural workers in firms with fewer than 10 employees, and some other specific categories are exempt from certain provisions of the labor law.

2. Are written employment contracts mandatory in Saudi Arabia?

   - Yes, written employment contracts are compulsory in Saudi Arabia. These contracts specify the terms of employment, including job details, working hours, wages, benefits, and other important terms.

3. What are the different types of employment contracts in Saudi Arabia?

   - Employment contracts in Saudi Arabia can be of three types: definite term, temporary, and indefinite term. The type of contract depends on factors such as the duration of employment and the nature of the work.

4. How does the probation period work in Saudi Arabia?

   - Probation periods typically last up to 90 days and can be extended up to 180 days with mutual agreement. During the probation period, either the employer or employee can terminate the agreement without compensation.

5. What are the standard working hours in Saudi Arabia?

   - The standard working hours are 8 hours per day and 48 hours per week. During Ramadan, working hours are reduced to 6 hours per day and 36 hours per week for Muslim workers.

6. How does annual leave work in Saudi Arabia?

   - Employees are entitled to annual leave, with the duration based on their years of service. It typically starts at 21 days after one year of service and increases to 30 days after five years.

7. What are the rules regarding medical leave?

   - Employees are entitled to sick leave with full pay for the first 30 days of illness, followed by reduced pay for the next 60 days. After that, no pay is provided.

8. How does the termination of employment contracts work?

   - Employment contracts can be terminated by either party, with or without notice, depending on the circumstances. The employer must follow specific rules for dismissal.

9. What are the End of Service Benefits (ESB)?

   - ESB are financial benefits paid to employees upon the termination of their employment. The amount is based on the duration of service and other factors.

10. How are labor disputes resolved in Saudi Arabia?

    - Labor disputes should initially be filed with the Labor Office. If they cannot be resolved amicably, they may be referred to the Commission for Settlement of Labor Disputes.

11. Are there non-competition and confidentiality clauses in employment contracts?

    - Yes, employment contracts may include non-competition and confidentiality clauses, especially if the work allows the employee access to business secrets. These clauses can restrict competition and the disclosure of confidential information for a specified period.

12. What are the legal consequences of contract violation?

    - Violating an employment contract can lead to legal consequences, including penalties and deportation.

These are general answers to common questions about labor law in Saudi Arabia. It's essential for both employers and employees to be aware of their rights and responsibilities under the labor law. For specific legal advice or clarifications, consulting with legal professionals or HR experts with knowledge of Saudi Arabian labor laws is recommended.