How to Hire Remote Employees In 

Saudi Arabia

The Basics

Currency
Employer Taxes
Payroll Frequency
Official Language

Employment in 

Saudi Arabia

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors
Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.
Disadvantages of Hiring Independent Contractors
Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.

Set up a subsidiary in 

Saudi Arabia

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Saudi Arabia can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in Saudi Arabia, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Saudi Arabia.

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Paying Remote Employees

Paying employees in Saudi Arabia is not the same as paying workers in your own country. Employees have to be paid using Saudi Arabia’s employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

Saudi Arabia

 Specific Information

Working Hours

The Saudi working week begins on Sunday and ends on Thursday.

Friday and Saturday are the official days of rest, but in certain cases Saturday might be considered as a working day.

Office hours vary, ranging from 7.30am -8am until noon, then from 3.30pm - 4pm until 7pm - 8pm.

Overtime

An employee's total working hours, including overtime, should not exceed 10hours a day or 60 hours in a six-day week.

Here is also an annual overtime cap of 481 hours.

According to Saudi labor law article 107,overtime in Saudi Arabia is 150% of the hourly wage.

Payroll Tax

Employer

Minimum Wage

Payroll

Pay Cycle

13th Salary

When an employment contract ends, an employee is entitled to an “end-of-service award” equal to one-half of one month’s wages for each of the first 5 years of employment and a full month’s wages for each year of employment thereafter, pro-rated for any partial year’s service.

Leave

Paid Time Off (PTO)

PTO is calculated by the:

Public Holidays

There are 5 public holidays.

Sick Days

The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:

  • Employees are generally allowed up to four months of sick leave, if they provide a medical certificate.
  • Sick leave is paid as follows:

             First 30 days: 100%

             31 to 90 days: 75%

             91 days to 120 days: unpaid

Maternity Leave

Female employees are generally entitled to 10 weeks of paid maternity leave, up to four weeks may be taken before the birth and at least six of the weeks must be taken after.

Paternity Leave

Fathers are eligible for three days of paid paternity leave.

Parental Leave

There are no provisions in the law regarding paternity leave.

Other Leave

None.

Marriage Leave

None.

Bereavement Leave

None.

Termination

Termination Process

Employees with unlimited contracts are entitled to receive 60 days’ notice.

Employees with other contracts are entitled to 30 days’ notice.

If proper notice is not given, the parties can agree to compensation instead.

During the notice period, employees may use 8 hours of work time per week to find alternate employment.

There is not notice period for definite contracts as it is rare to have a valid reason for ending a definite contract early.

When an employment contract ends, an employee is entitled to an “end-of-service award” equal to one-half of one month’s wages for each of the first 5 years of employment and a full month’s wages for each year of employment thereafter, pro- rated for any partial year’s service.

An employment contract may be terminated in the following situations:

  • by mutual consent of the employer and the employee;
  • upon expiry of the employment term specified in the contract, unless the contract has been explicitly, contractually or statutorily renewed. Statutory renewal relates to the situation where the employee commences employment under a fixed term contract and continues to work after the original contract term has expired. In such a case, the contract will convert into an indefinite term contract and will not require further renewal;
  • when the employee reaches the age of retirement;
  • upon the occurrence of a force majeure event;
  • where the business permanently closes (i.e. permitted redundancy);
  • where the employer terminates the entirety of the activity in which the employee is employed (i.e. permitted redundancy); for cause;

Notice Period

The notice period in Saudi Arabia is:

For termination of an employee in Saudi Arabia, 60 days’ notice is required on open ended contracts (with an indefinite term and paid monthly).

For fixed term contracts, the notice period is 30 days.

Severance Pay

When an employment contract ends, an employee is entitled to an “end-of-service award” equal to one-half of one month’s wages for each of the first 5 years of employment and a full month’s wages for each year of employment thereafter, pro-rated for any partial year’s service.

Probation Period

An employee can be subject to a probationary period of no more than 90 calendar days and during this period the contract can be terminated without notice.

Subject to the employee's consent, this period can be extended up to 180 calendar days (i.e. six months in total).