Pillar guide · Updated 27 June 2026
Saudi Labour Law sits at the intersection of statutory text (Royal Decree M/51 of 1426H and its amendments), Ministerial Resolutions from the Ministry of Human Resources and Social Development (MHRSD), and operational rules embedded in the Qiwa, Mudad, GOSI, and Musaned platforms. This is the practitioner's guide Tamra uses when drafting contracts, designing policies, and managing termination risk for Saudi-licensed employers.
The primary source is Royal Decree M/51 of 23/8/1426H (the Labour Law), as amended in 2015, 2019, 2021, and most recently in February 2024. Around that core, MHRSD ministerial decisions add operational rules on working hours, end-of-service, occupational safety, and Saudization. Decisions of the Labour Courts (the Commercial Courts division handling labour disputes) interpret the statute.
Operational reality is largely run through three government platforms: Qiwa (employment relationship registry), Mudad (payroll and Wage Protection System), and GOSI (social insurance). A contract that complies with the Labour Law text but is not registered on Qiwa is functionally unenforceable — Qiwa registration is the gating compliance event.
Saudi Arabia has historically been a fixed-term contract jurisdiction. The 2024 reforms reshape this: contracts for Saudi nationals can be indefinite or fixed-term; contracts for expatriates remain fixed-term in practice (tied to the Iqama validity, typically 1–2 years, renewable).
A fixed-term contract renewed twice converts into a contract of indefinite duration for Saudis under the post-2024 framework. For expatriates, renewal is the operational norm and does not trigger the same conversion because the Iqama anchors the term.
All employment contracts must be in writing, in Arabic (an English translation is permitted alongside but the Arabic governs in dispute), and registered on Qiwa within seven days of commencement. The contract must state job title, wage components, location, hours, leave entitlement, and notice period.
The statutory work week is 48 hours (8 hours/day × 6 days) for most sectors and 40 hours/week for retail (post-2021 reform). Ramadan working hours are reduced to 6 hours/day for Muslim employees. Overtime is paid at 150% of the hourly wage; Friday and public-holiday work attracts a 150% premium on top of the day's wage.
Annual leave: 21 calendar days per year, rising to 30 after 5 years of service. Sick leave: full pay for the first 30 days, 75% pay for the next 60 days, unpaid thereafter, with a maximum of 120 days per year (medically certified). Marriage leave: 5 days paid. Bereavement leave: 5 days paid (death of spouse, parent, child, sibling). Maternity leave: 10 weeks paid (Saudi reform 2019). Paternity leave: 3 days paid.
One return air ticket per year for expatriates is statutory in most contracts — the entitlement is to a ticket to country of origin or its cash equivalent.
Termination of an indefinite contract requires 60 days' notice (30 days for monthly-paid employees with under 5 years tenure was the old standard; the post-2024 reform consolidates to 60 days). Termination of a fixed-term contract before expiry triggers compensation equal to the remaining contract value, unless dismissal is for cause under Article 80.
Article 80 lists the eight grounds for summary dismissal without notice or severance: assault on employer, repeated breach of essential obligations, dishonesty, forgery, gross negligence resulting in damage, false identity, absent more than 30 days/year or 15 consecutive days without valid reason, and disclosure of trade secrets. The grounds are construed strictly by Labour Courts — employers carry the evidentiary burden.
Article 77 governs without-cause termination by either party for indefinite contracts: the terminating party pays a 15-day-per-year compensation indemnity (in addition to end-of-service) unless the contract specifies a higher figure. This is the rule that catches employers out most often.
Article 84: end-of-service award equals half a month's wage per year of service for the first 5 years and one month per year thereafter, calculated on the last drawn wage including housing and transport allowance. Partial years are pro-rated.
Trigger events: contract expiry, employee resignation after a tenure threshold (Article 85 — full EOSB after 10 years, two-thirds between 5 and 10, one-third between 2 and 5, none under 2 years), employee death, and force-majeure or business closure.
Operationally, EOSB is paid within seven working days of the contract end date. Late payment triggers Labour Court interest and damages claims. Smart employers fund EOSB monthly as an accrual rather than treating it as a termination shock — see the Cost of Hiring guide.
Nitaqat assigns every licensed entity to a band (Platinum, Green, Yellow, Red) based on Saudi-national employment ratio relative to sector and size. The band determines critical operational rights: new visa issuance, Iqama renewal speed, ability to bid on government tenders, eligibility for HRDF subsidies, and ability to change worker professions.
Sector-specific Saudization quotas overlay the general Nitaqat banding — e.g. accounting (30%+), HR (100%), legal (90%), retail (15%–25% by city tier). The MHRSD publishes sector quotas periodically; failing the sector quota triggers entity-level visa freezes regardless of Nitaqat banding.
Compliance is not optional. Yellow band entities cannot recruit new expatriates. Red band entities cannot renew existing Iqamas. The path back to Green requires hiring Saudi nationals or restructuring expat headcount — Tamra runs Nitaqat remediation engagements where this becomes acute.
All Saudi-licensed employers with three or more employees must post payroll through the Mudad-mediated WPS into Saudi bank accounts denominated in SAR. Payroll must be posted by the 5th of each month (or contracted pay date, whichever is earlier).
Non-compliance — late posting, partial posting, off-WPS cash payment — triggers Qiwa downgrades that block new visa issuance within 60 days. Repeat violations escalate to entity-level visa freezes and director liability under Article 230.
WPS-compliant payroll is the operational reality of being a legal employer in KSA. Tamra's EOR and payroll services run all clients through Mudad with weekly reconciliation against GOSI submissions.
Disciplinary actions must follow the entity's published Work Organisation Regulation (إلائحة تنظيم العمل) approved by MHRSD. The Regulation must list offences, penalties, and the right of appeal. Without an approved Regulation, the employer cannot impose disciplinary sanctions beyond verbal warning.
Penalties escalate: verbal warning → written warning → wage deduction (max 5 days/month) → suspension without pay (max 5 days at a time) → dismissal (Article 80 grounds only without severance, Article 77 otherwise).
Employees have a 15-day window to contest a disciplinary action through Qiwa's internal grievance channel. Unresolved grievances escalate to the Labour Office for mediation, then to the Labour Court.
The February 2024 Labour Law amendment introduced 38 changes. Major ones: indefinite contracts for Saudis on the third renewal; 60-day standardised notice; expanded maternity leave to 12 weeks (gradual rollout); paternity leave extended to 5 days; explicit prohibition on contracts that cap or reduce statutory entitlements; tighter rules on probation (90 days max, one extension permitted).
The GOSI reform announced in 2025 raises contribution rates 0.5% per year for four years, bringing the Saudi employer rate from 11.75% to 13.75% by 2029. The Wage Protection System has tightened on cash payment exceptions — by mid-2026, even sub-3-employee entities will be required to post via WPS.
Watch for the upcoming Domestic Workers Law refresh (expected 2026) and the announced Freelance Work regulation, which will create a third compliance tier between full employment and contractor relationships.
| Item | Saudi national | Expatriate |
|---|---|---|
| GOSI employer contribution | 11.75% (rising to 13.75% by 2029) | 2% Occupational Hazards |
| GOSI employee deduction | 9.75% | — |
| End-of-service accrual (year 1–5) | ~4.16% of monthly wage | ~4.16% of monthly wage |
| End-of-service accrual (year 6+) | ~8.33% of monthly wage | ~8.33% of monthly wage |
| Overtime rate | 150% of hourly | 150% of hourly |
| Friday / public holiday rate | 150% premium on day's wage | 150% premium on day's wage |
No. Termination requires either cause under Article 80 (eight specific grounds) or notice plus severance under Article 77 (15 days of wage per year of service in addition to end-of-service). Without-cause dismissal without notice triggers Labour Court compensation orders.
60 days for indefinite contracts following the 2024 reform. Fixed-term contracts run to expiry; early termination by the employer triggers compensation equal to the remaining contract value unless Article 80 grounds are met.
90 days, extendable once for another 90 days by written agreement, with a 180-day overall cap. During probation either party may terminate without notice and without severance.
Yes, with limits: maximum two years, geographically and sector-specifically defined, and the employee must have had access to client lists or trade secrets. Courts narrow over-broad clauses to the minimum reasonable scope.
Overtime is paid at 150% of the hourly wage (basic salary divided by working hours). Friday and public-holiday work attracts a 150% premium on top of the day's full wage.
Only for statutory deductions (GOSI, court-ordered amounts) or for disciplinary deductions under an MHRSD-approved Work Organisation Regulation, capped at 5 days' wage per month. Unauthorised deductions are reversible and trigger Labour Court damages.
There is no statutory minimum wage for the private sector. There is a SAR 4,000/month minimum for Saudi nationals to count fully towards Nitaqat; below this threshold the employee counts only partially. This effectively sets a floor for Saudi-national hires.
Yes — all employees regardless of nationality enjoy the same statutory protections (contracts, wages, leave, end-of-service, termination procedure). The Iqama is the residence permission; the Labour Law is what governs the employment relationship inside KSA.
Qiwa is the operational backbone of the Labour Law in practice: contract registration, Nitaqat banding, profession changes, end-of-service certificates, and Saudization reporting all run through it. A contract that is not on Qiwa is functionally unenforceable.
The reform applies to contracts entered into or renewed from February 2024 onward. Existing contracts grandfather until their next renewal. Many of the reform's protections (paternity leave, 60-day notice, longer maternity) apply prospectively from the renewal date.
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