Saudi Arabia has made significant strides in modernizing its employment laws, further solidifying its position as an attractive destination for foreign investors and talent. The Kingdom’s labor reforms, which came into effect in 2021, have empowered both employers and employees, promoting a more flexible and transparent labor market.
One of the key changes is the freedom granted to foreign employees to change jobs without the need for a “no-objection certificate” (NOC) from their current employer. This move is expected to increase labor market flexibility and reduce the risk of exploitation. Foreign employees can now apply for exit and re-entry visas online, without the need for their employer’s permission, simplifying the process and reducing the administrative burden on employers.
The new laws also introduce stricter penalties for employers who fail to pay their employees’ wages on time. Employers who violate this provision may face fines of up to SAR 100,000 (approximately USD 26,667) per violation. Furthermore, employers are now required to provide their employees with a detailed contract outlining their terms of employment, including salary, benefits, and working hours, promoting transparency and reducing the risk of disputes.
In addition to these changes, the Kingdom has also introduced reforms to improve the protection of employees. The standard workday is set at eight hours, and the standard workweek is 48 hours, except during Ramadan when work hours cannot exceed six hours a day or 36 hours per week. Employees are entitled to statutory benefits, including life insurance, short-term disability, long-term disability, unemployment insurance, paid leave, and old-age pensions.
The payroll cycle in Saudi Arabia is either monthly or weekly, depending on the work contract. Employers must pay daily workers once per week and salaried employees once per month before the 10th day of the following month. Employers can pay 13th-month salaries and other bonuses at their discretion.
Termination procedures in Saudi Arabia are also governed by specific rules. Employers can terminate fixed-term contracts with just cause, and both parties must agree on the notice period in the contract. If the work contract doesn’t specify the notice period, it is 60 days. The penalty for breaking an employment contract in Saudi Arabia depends on the employment contract terms. If the contract doesn’t specify the penalties, Article 77 of the KSA labor law applies.
In the event of termination, employees are entitled to a severance pay, known as the end-of-service award. The award is a token of appreciation for the employee’s service, amounting to 15 days of regular wages for each year of employment up to five years and a full month’s pay for each following year, calculated based on the employee’s last noted wage.
At ASR Law Group, we are committed to helping our clients navigate these changes and ensure compliance with the new regulations. If you have any questions or concerns about the implications of these changes, please do not hesitate to contact us.
