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  • James H

KSA: The Challenges of Employing Staff Directly in Saudi Arabia

Saudi Arabia is a lucrative market for many businesses that want to expand their global presence and tap into the opportunities offered by the country’s oil-rich economy, large population, and ambitious vision for the future. However, hiring and managing employees in Saudi Arabia can be a complex and challenging process, especially for foreign companies that are not familiar with the local laws, regulations, and culture. In this article, we will explore some of the main challenges of employing staff directly in Saudi Arabia and how using an employer of record (EOR) can help you overcome them.


What are the challenges of employing staff directly in Saudi Arabia?

Some of the challenges that you may face when you employ staff directly in Saudi Arabia are:

  • Saudization: Saudization is a government initiative that aims to increase the employment of Saudi nationals in the private sector and reduce the dependence on foreign workers. It requires companies to meet certain quotas of hiring and retaining Saudi employees, depending on their size and industry. Companies that fail to comply with Saudization may face penalties, such as being barred from obtaining new work visas, renewing existing visas, or transferring employees. Saudization can make it difficult for foreign companies to find and hire qualified and experienced talent, as well as to maintain a flexible and diverse workforce.

  • Work visas: To employ foreign workers in Saudi Arabia, you need to obtain work visas for them, which can be a lengthy and costly process. You need to have a legal entity in Saudi Arabia, sponsor the workers, and submit various documents and fees to the authorities. You also need to ensure that the workers have valid passports, medical certificates, and police clearance certificates from their home countries. The work visas are usually valid for one year and need to be renewed annually. The number and type of work visas that you can obtain are subject to the Saudization quotas and the availability of the labor market.

  • Employment contracts: Employment contracts in Saudi Arabia are governed by the Labor Law, which sets out the rights and obligations of both employers and employees. The employment contracts must be in Arabic and registered with the Ministry of Human Resources and Social Development. They must include the terms and conditions of employment, such as the job title, duties, salary, benefits, working hours, probation period, termination clauses, and dispute resolution mechanisms. The employment contracts must also comply with the minimum standards and requirements of the Labor Law, such as the minimum wage, overtime pay, annual leave, sick leave, maternity leave, and end-of-service benefits.

  • Payroll and taxes: Payroll and taxes in Saudi Arabia can be complicated and time-consuming, as you need to comply with the local laws and regulations, as well as the international tax treaties and conventions. You need to register with the General Authority of Zakat and Tax (GAZT) and the General Organization for Social Insurance (GOSI) and file periodic returns and payments. You also need to withhold and remit the income tax and social security contributions of your employees, as well as pay the employer’s share of the social security contributions. The income tax rate for foreign employees is 20%, while the social security contribution rate for Saudi employees is 22% (10% from the employee and 12% from the employer). The social security contribution rate for foreign employees is 2% (from the employer only) for occupational hazards insurance.


What is an employer of record and how can it help you?

An employer of record (EOR) is a third-party service provider that acts as the legal employer of your workers in Saudi Arabia, while you retain the control and direction of their work. An EOR can help you overcome the challenges of employing staff directly in Saudi Arabia by taking care of the following tasks:

  • Saudization: An EOR can help you comply with the Saudization quotas by hiring and retaining Saudi employees on your behalf, as well as by providing you with the necessary documentation and reports to prove your compliance. An EOR can also help you find and hire qualified and experienced Saudi talent, as well as provide them with training and development opportunities.

  • Work visas: An EOR can help you obtain work visas for your foreign workers by sponsoring them and handling the visa application and renewal process. An EOR can also help you manage the visa quotas and transfers, as well as provide you with the necessary documentation and reports to prove your compliance. An EOR can also help you find and hire qualified and experienced foreign talent, as well as provide them with relocation and immigration support.

  • Employment contracts: An EOR can help you draft and register employment contracts that are compliant with the Labor Law and the local customs and practices. An EOR can also help you manage the employment contracts and ensure that they are updated and amended as needed. An EOR can also help you handle any employment disputes or issues that may arise with your workers.

  • Payroll and taxes: An EOR can help you run payroll and taxes for your workers by registering with the GAZT and the GOSI and filing the periodic returns and payments. An EOR can also help you withhold and remit the income tax and social security contributions of your workers, as well as pay the employer’s share of the social security contributions. An EOR can also help you optimize your tax liabilities and benefits, as well as provide you with the necessary documentation and reports to prove your compliance.


What are the benefits of using an employer of record in Saudi Arabia?

Using an employer of record in Saudi Arabia can offer you many benefits, such as:

  • Speed: An EOR can help you hire and onboard your workers in Saudi Arabia in a matter of days or weeks, compared to the months or years it may take to set up a legal entity and comply with all the local regulations. This allows you to enter and exit the market faster and more flexibly, as well as to seize new opportunities and scale up or down as needed.

  • Cost: An EOR can help you save money on the initial and ongoing costs of setting up and maintaining a legal entity in Saudi Arabia, such as incorporation fees, accounting fees, legal fees, office rent, etc. You also avoid the risk of fines and penalties for non-compliance with the local laws and regulations. An EOR typically charges a fixed percentage of the worker’s salary, which is often lower than the total cost of employing them directly.

  • Compliance: An EOR can help you ensure that you are compliant with all the local employment laws and regulations in Saudi Arabia, such as Saudization, work visas, employment contracts, payroll, taxes, etc. An EOR has the local expertise and knowledge to handle all the administrative, legal, and compliance tasks on your behalf, and to keep up with any changes in the legislation. You also avoid the risk of misclassifying workers as contractors, which can lead to legal disputes and liabilities.

  • Talent: An EOR can help you access a wider pool of talent in Saudi Arabia, without being limited by the availability and quality of local candidates. You can hire the best people for the job, regardless of their nationality, and offer them competitive compensation and benefits packages. You also increase your employer brand and attractiveness, as you can offer your workers the opportunity to work for a global company with a diverse and inclusive culture.



Employing staff directly in Saudi Arabia can be a daunting task, especially for foreign companies that are not familiar with the local laws, regulations, and culture. Using an employer of record in Saudi Arabia can help you overcome these challenges and enjoy the benefits of hiring and managing your workers in Saudi Arabia with ease and confidence. If you are interested in learning more about how an EOR can help you, please contact us today.

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