sboghossian Knowledge Pack — KSA Labor Law
Primary Sources
- Labor Law — Royal Decree M/51 dated 23/8/1426H (September 2005), as amended by Royal Decrees in 2015 and 2019.
- Ministerial decisions and HRSD circulars — Ministry of Human Resources and Social Development issues implementing guidance.
- GOSI (General Organization for Social Insurance) — social insurance contributions and regulations.
- Qiwa platform — electronic labor-relations system for contract registration, mobility, and grievances.
- Mudad — Wage Protection System (WPS) compliance platform.
All onshore employment relationships in KSA are governed exclusively by the KSA Labor Law. DIFC-style free-zone exemptions do not exist in KSA; all employers (including those in special economic zones) follow KSA Labor Law unless specifically exempted by a zone-specific decree.
Working Hours
| Category | Standard |
|---|---|
| General | 8 hours/day, 48 hours/week |
| Ramadan (Muslim workers) | 6 hours/day, 36 hours/week |
| Overtime premium | 50% of hourly wage (additional on base; must be agreed in advance) |
| Weekly rest | Friday as minimum rest day; employer may substitute another day |
Night work and hazardous work attract additional protections per HRSD regulations.
Probation
- Maximum 90 days (extendable to 180 days with mutual written consent before the 90-day period expires).
- Either party may terminate during probation without notice or end-of-service award.
- Probation time counts toward continuous service once passed.
Contract Types
| Type | Default Applicability |
|---|---|
| Definite term | Default for non-Saudi nationals (max initial term 5 years; renewable). 2023 reforms: auto-renews to same terms if both parties continue without new agreement |
| Indefinite | Default for Saudi nationals; non-Saudis eligible if specific conditions met |
- Employment contract must be in Arabic or bilingual (Arabic controls in dispute).
- Must be registered on Qiwa platform within 30 days.
Annual Leave (Art 109)
| Service Duration | Annual Leave Entitlement |
|---|---|
| Less than 5 years | 21 days paid leave |
| 5 years or more | 30 days paid leave |
- Employees are entitled to Eid Al-Fitr, Eid Al-Adha, and National Day public holidays in addition.
- Leave must be taken within the year or carried forward with employer consent; payment in lieu on termination.
Sick Leave
- Maximum 120 days per year:
- First 30 days: full pay
- Next 60 days: half pay
- Remaining 30 days: unpaid
Notice Periods (Art 76)
- Indefinite contracts paid monthly: minimum 60 days notice by either party.
- Other arrangements (e.g., weekly/daily workers): proportionate notice per Article.
- Employer may pay wages in lieu of notice.
- Notice period runs from service of written notice.
End-of-Service Award (Arts 84–85)
The end-of-service award is a mandatory entitlement based on years of service and the reason for departure:
Calculation
| Service Period | Accrual Rate |
|---|---|
| First 5 years | Half-month salary per year |
| After 5 years | Full month salary per year |
Salary base: last wage paid (basic salary + regular allowances; excludes non-regular items).
Entitlement by departure reason
| Reason | Award |
|---|---|
| Termination by employer (without just cause) | Full award |
| End of definite-term contract by employer | Full award |
| Resignation (< 2 years service) | Forfeited |
| Resignation (2–5 years service) | 1/3 of full award |
| Resignation (5–10 years service) | 2/3 of full award |
| Resignation (10+ years service) | Full award |
| Termination for cause (Art 80) | Employer may argue forfeiture; court decides on facts |
GOSI interaction
GOSI contributions may partially replace end-of-service costs for Saudi nationals — employers registered with GOSI pay monthly contributions; GOSI benefits supplement the statutory award on separation.
Termination for Cause Without Compensation (Art 80)
Employer may terminate without notice or end-of-service award if:
- Employee assumes a false identity or forged qualifications to obtain employment.
- Employee commits an error causing major financial loss to the employer (employer must notify HRSD within 3 days of discovery).
- Employee violates safety instructions after written warning.
- Employee assaults or threatens employer, supervisor, or co-workers.
- Employee fails in essential duties and fails to rectify after written notice and investigation.
- Employee reveals trade secrets or engages in competing business.
- Employee absent 30 days per year or 15 consecutive days without justification (written warnings required first).
- Employee convicted of an honor crime or dishonesty offense.
Procedural requirement: employer should conduct investigation and provide opportunity to respond before dismissing under Art 80.
Saudization (Nitaqat)
The Nitaqat program requires private-sector employers to maintain a minimum percentage of Saudi national employees, varying by:
- Industry category (construction has lower targets; services/professional sectors higher)
- Employer size tier (small / medium / large / giant)
| Compliance tier | Color | Consequence |
|---|---|---|
| Excellent/Platinum | Green+ | Access to all government services + visa quota bonuses |
| Satisfactory | Green | Normal services |
| Medium | Yellow | Restricted visa services |
| Non-compliant | Red | Suspended visa quotas + loss of government services |
Employers must monitor Saudization ratio through Qiwa and HRSD portals. Sector-specific Vision 2030 targets are being raised annually.
Sponsorship and Worker Mobility (2021+ Reforms)
- The traditional kafala (sponsorship) system has been partially reformed:
- Workers under Qiwa can change jobs without employer consent after 1 year of service (subject to conditions and not applicable to all categories).
- Exit and re-entry permits no longer require employer approval for most workers.
- Exit without return no longer requires employer approval.
- Employer remains the visa sponsor for GDRFA/Iqama purposes.
- Transfer of Iqama to new employer processed via Qiwa platform.
- Domestic workers and certain categories excluded from reformed mobility rules.
Non-Compete (Art 83)
- Enforceable for up to 2 years post-termination.
- Scope must be reasonable in geography, duration, and type of work.
- Employee must have had access to trade secrets, clients, or confidential information.
- Courts apply the proportionality test; excessively broad clauses may be reduced to reasonable scope.
Social Insurance: GOSI
| Contribution | Saudi Nationals | Non-Saudis |
|---|---|---|
| Occupational Hazards | 2% (employer) | 2% (employer) |
| Annuities | 9% (employer) + 9% (employee) | Not applicable |
| Unemployment (SANED) | 1% (employer) + 1% (employee) | Not applicable |
- Registration with GOSI mandatory within first month of employment.
- Failure to register attracts penalties and back-contributions.
Compliance Platforms
| Platform | Function |
|---|---|
| Qiwa | Contract registration; labor mobility; dispute filing; Nitaqat tracking |
| Mudad (WPS) | Wage Protection System — mandatory payroll via approved banks |
| GOSI portal | Social insurance registration + monthly contribution payment |
| HRSD | Ministry portal — employer registration, permits, grievances |
Wage Protection System (WPS / Mudad)
- All private-sector employers must pay wages electronically through Mudad-registered banks.
- Payment must be made within the first of every month (or contractual date, if earlier).
- Delays of more than 30 days trigger HRSD penalties including suspension of visa issuance and labor permits.
Practical Drafting Notes
- Employment contracts must be in Arabic (or bilingual with Arabic controlling).
- Non-compete and confidentiality clauses: add separately as appendices; courts are more willing to enforce well-scoped written covenants.
- Severance calculations: always compute on gross last wage, being careful to include regular allowances.
- Domestic workers are covered by a separate domestic worker law — different rules apply.
- Female employees: protected from dismissal during maternity leave (90-day paid maternity leave under Labor Law as amended).
Caveats & Currency
KSA Labor Law amendments continue under Vision 2030 labor-market reforms. Saudization percentages and Qiwa platform procedures are updated regularly by HRSD. The 2021 worker mobility reforms are implemented progressively; verify current scope of reform categories with latest HRSD circulars. GOSI contribution rates are subject to periodic adjustment.
Related Skills
- [[kb-employment-law-uae]]
- [[kb-employment-law-lb]]
- [[kb-data-privacy-ksa-pdpl]]
- [[kb-fintech-licensing-cma-ksa]]
- [[draft-employment-contract]]