Skip to main content
Saudi Arabia

Saudi Arabia Employment Contracts & Labor Law 2026

Mottalib Radif

Written by Mottalib Radif

MBA INSEAD ยท Personal Finance Enthusiast

Updated

Saudi Arabia's employment law is governed by the Saudi Labour Law (Royal Decree No. M/51, issued 23/08/1426 H), which has been amended multiple times, most recently under Vision 2030 reforms. The law governs all private sector employment relationships. With approximately 13 million expatriates and a rapidly growing Saudi workforce, understanding your contractual rights and obligations is essential. This guide covers contract types, GOSI social insurance, working hours, leave entitlements, Saudization requirements, termination rules, and end-of-service benefits for 2026.

Key legislation governing employment in Saudi Arabia:

  • Saudi Labour Law (Royal Decree No. M/51): The primary legislation for private sector employment.
  • GOSI Law (Royal Decree No. M/33): Governs social insurance contributions and benefits.
  • Nitaqat / Saudization regulations: MHRSD ministerial decisions on labor nationalization quotas.
  • Labor Reform Initiative (2021): MHRSD reforms on job mobility, exit/re-entry, and final exit visas.
  • Qiwa platform regulations: Digital contract registration and labor compliance.

Scope: The labor law covers all private sector workers, both Saudi and expatriate. Excluded categories include domestic workers (covered by separate regulations), family members employed in family businesses, sea workers, and agricultural workers in establishments with fewer than 10 employees.

Contract Types

Fixed-Term Contracts

Fixed-term contracts are the standard contract type in Saudi Arabia. Key features:

  • Duration: Any specified period. For expatriates, the duration is tied to the Iqama validity (typically 1-2 Hijri years).
  • Renewal: If both parties continue the employment relationship after expiry without a new written contract, the contract is renewed under the same terms. For Saudi employees, if a fixed-term contract is renewed 3 times, or if the total employment period exceeds 4 years, it is automatically converted to an indefinite contract.
  • Mandatory for expatriates: All expatriate employment contracts must be fixed-term, as their legal status is tied to the work permit and Iqama.
  • Early termination: If either party terminates before the contract end date without a lawful reason, the terminating party must compensate the other for the remaining period (or the amount specified in the contract, if greater).

Indefinite Contracts (Saudi Nationals Only)

Indefinite contracts are available only for Saudi nationals:

  • No end date: The contract continues until terminated by either party with proper notice.
  • Notice period: 60 days for monthly-paid employees; 30 days for others.
  • Automatic conversion: A fixed-term contract becomes indefinite if renewed 3 times or the total employment exceeds 4 years.

Contract Registration on Qiwa

All employment contracts must be registered on the Qiwa platform (qiwa.sa). The platform:

  • Validates the contract against labor law requirements
  • Checks Saudization compliance (profession not restricted, Nitaqat band allows hiring)
  • Creates a digital record accessible to both employer and employee
  • Enables contract amendments, renewals, and terminations electronically

Employees can view their contract details through the Qiwa app or the Absher platform. Any discrepancy between the Qiwa-registered contract and the physical contract can be raised with MHRSD.

GOSI Contributions (Social Insurance)

The General Organization for Social Insurance (GOSI) mandates social insurance contributions from both employers and employees. The rates differ significantly between Saudi and expatriate workers.

For Saudi Employees

Branch Employer Employee Total
Annuities (pension)9.75%9.75%19.5%
Occupational hazards2%0%2%
Total11.75%9.75%21.5%

Saudi employees also benefit from SANED (unemployment insurance), which provides income support during periods of unemployment. SANED contributions are included in the annuities rate above.

For Expatriate Employees

Branch Employer Employee Total
Occupational hazards2%0%2%
Total2%0%2%

Expatriate employees do not contribute to GOSI pension (they receive end-of-service gratuity instead) and are not eligible for SANED. The 2% occupational hazard contribution is paid entirely by the employer.

Calculation Base

  • GOSI contributions are calculated on the basic salary plus housing allowance.
  • Maximum contributable salary: SAR 45,000 per month (any amount above this is not subject to GOSI).
  • Minimum contributable salary: SAR 1,500 per month for Saudi employees.
  • Other allowances (transport, food, commission) are not included in the GOSI calculation.

Working Hours

Standard Working Hours

  • Normal: 8 hours per day or 48 hours per week.
  • Ramadan (Muslim employees): 6 hours per day or 36 hours per week.
  • Rest breaks: Workers should not work more than 5 consecutive hours without a break of at least 30 minutes. Total daily time at work (including breaks) should not exceed 11 hours.
  • Weekly rest: At least 24 consecutive hours, typically Friday (though the government and many companies have shifted to Saturday-Sunday weekends).

Overtime

  • Rate: 150% of the basic hourly rate (basic salary divided by actual working hours).
  • Annual cap: Maximum 720 hours of overtime per year.
  • Rest day work: If an employee works on their weekly rest day without a compensatory day off, they are entitled to 150% of the basic rate.
  • Not applicable to: Senior management, employees who can set their own hours, and some shift-work arrangements.

Leave Entitlements

Annual Leave

  • First 5 years: 21 calendar days per year, fully paid.
  • After 5 years: 30 calendar days per year, fully paid.
  • Employees cannot waive their annual leave or receive compensation in lieu while still employed.
  • Employer determines timing with 30 days' advance notice.
  • Unused leave can be carried forward to the next year.
  • Upon termination, accrued unused leave is paid as cash based on the last salary.

Sick Leave

After completing probation, employees are entitled to:

  • First 30 days: Full pay
  • Next 60 days: 75% pay
  • Total: Up to 90 days of sick leave per year
  • Sick leave requires a medical certificate from a licensed facility.
  • If the employee remains unable to work after 90 days, the employer may terminate the contract (with full gratuity payment).

Maternity and Other Leave

  • Maternity leave: 10 weeks total, beginning 4 weeks before the expected delivery date and 6 weeks after. Fully paid for employees with 1+ year of service, half-paid otherwise.
  • Iddah leave: A Muslim woman whose husband dies is entitled to a fully paid leave of at least 4 months and 10 days (Iddah period). A non-Muslim woman is entitled to 15 days of fully paid leave.
  • Marriage leave: 5 days of paid leave.
  • Bereavement leave: 5 days for the death of a spouse, and 3 days for parent, child, grandparent, or sibling.
  • Child birth (father): 3 days of paid paternity leave.
  • Hajj leave: 10-15 days of paid leave for employees who have completed 2 years of service and have not previously performed Hajj. This is a one-time entitlement.
  • Exam leave: Paid leave for Saudi employees sitting for exams at an educational institution, per the exam schedule.
  • Public holidays: Saudi National Day (September 23), Eid al-Fitr (approximately 4 days), and Eid al-Adha (approximately 4 days). Founding Day (February 22) was added in 2022.

Saudization (Nitaqat) and Employment Contracts

Saudization has a direct impact on employment contracts:

  • Profession restrictions: The contract must specify a profession that is permitted for the employee's nationality. If the profession is Saudized (reserved for Saudi nationals), the Qiwa platform will reject the contract registration.
  • Nitaqat band compliance: The employer's Nitaqat color band determines whether they can register new expatriate contracts. Yellow and Red band companies face restrictions.
  • Contract duration for expatriates: Tied to the Iqama duration (1-2 years). Renewal requires the company to maintain its Nitaqat compliance.
  • Saudization percentage in the contract: Some sectors require a minimum percentage of Saudi employees in specific roles. The employer must demonstrate compliance before new contracts are approved.

For detailed information on how Saudization affects your visa and hiring, see our Saudi visa guide.

Termination and End of Service

Notice Periods

  • Indefinite contracts (Saudi employees): 60 days for monthly-paid employees; 30 days for others.
  • Fixed-term contracts: As specified in the contract. If not specified, the terminating party must provide reasonable notice.
  • During the notice period, the employee is entitled to 1 day off per week (or 8 hours) to search for new employment, with full pay.

Summary Dismissal (Without Notice)

An employer can dismiss without notice or compensation under Article 80 of the Labour Law if:

  • The employee assaulted the employer, manager, or a coworker during work
  • The employee failed to perform essential duties or disobeyed legitimate orders (after written warning)
  • The employee committed misconduct or dishonorable conduct
  • The employee was deliberately negligent, causing material loss (employer must report within 24 hours)
  • The employee committed forgery to obtain employment
  • The employee was absent for 30 consecutive days or 15 non-consecutive days without valid reason (after written warning at 20/10 days respectively)
  • The employee illegally disclosed trade secrets
  • The employee was found working during probation period

End-of-Service Gratuity

Expatriate employees in Saudi Arabia receive end-of-service gratuity instead of GOSI pension benefits:

  • First 5 years: Half a month's salary for each year of service.
  • After 5 years: One month's salary for each additional year.
  • Calculation base: Last basic salary plus all fixed allowances (housing, transport, etc.).
  • Resignation: If the employee resigns with less than 2 years of service, no gratuity. If 2-5 years, one-third of the gratuity. If 5-10 years, two-thirds. If 10+ years, full gratuity.
  • Employer termination or contract expiry: Full gratuity regardless of service length.

Calculate your exact entitlement with our Saudi Gratuity Calculator.

Frequently Asked Questions

What types of contracts are used in Saudi Arabia?

Fixed-term contracts (standard for all workers) and indefinite contracts (Saudi nationals only). Expatriate contracts are always fixed-term, tied to the Iqama validity.

What are GOSI contributions?

For Saudis: employer 11.75% + employee 9.75% = 21.5%. For expatriates: employer 2% only (occupational hazards). Calculated on basic salary plus housing allowance, capped at SAR 45,000/month.

What are the working hours?

8 hours/day, 48 hours/week. During Ramadan: 6 hours/day for Muslim employees. Overtime at 150% with a cap of 720 hours/year.

How much annual leave do employees get?

21 days for the first 5 years, 30 days after 5 years. Leave cannot be waived or compensated while employed.

What is the probation period?

Maximum 90 days, extendable to 180 days with written consent. During probation, either party can terminate without notice or compensation.

How does Saudization affect contracts?

The contract must specify a non-restricted profession. The employer's Nitaqat band must allow new expatriate hires. The Qiwa platform verifies compliance before contract registration.

Sources