Employer Of Record in Saudi Arabia

Saudi Arabia Country Facts

The Kingdom of Saudi Arabia makes up a majority of the Arabian Peninsula in land mass and is the fourth- largest country in all of Asia, and the largest in the western part of the continent, it’s also the second-largest country in the Arab world. It has a prime location for imports and exports, as it is the only country that has a coastline on both the Persian Gulf and the Red Sea.

While the country is mostly arid desert, the discovery of oil in the 1930s literally fuels the country’s economy. It’s a rather modern country, as it’s a World Bank high-income economy with a very high Human Development Index. It’s also the only Arab country that’s part of the G20 major economies.

The Economy

Saudi Arabia is home to the largest economy in all the Middle East and ranks as the 18th largest in the entire world. Most of this is due to the fact that it’s home to the second-most reserves of proven petroleum in the world.

As of 2016, the country was estimated to have a natural resource value of $34.4 trillion, which was the second- highest mark of all countries. Much of the economy is based on exports in the oil industry, with 63% of its annual budget coming from petroleum exports. Overall, the oil industry comprises roughly 45% of the country’s nominal GDP.

The Importance of Small and Medium-sized Companies

Small and medium-sized companies (SMEs) contribute only roughly 20% to Saudi Arabia’s GDP. That’s on the extreme low end compared to 70% for many advanced economies in the world. The Kingdom recognizes that and has been working to spur change in that regard. In 2015, they created the SME Authority to support small businesses in the country.

Population Characteristics

Saudi Arabia is home to roughly 34.2 million people, which ranks 40th in terms of population count, in the world. That includes upward of 10 million immigrants who are non-nationalized. The Saudi population has increased significantly since 1950, when estimates pegged the total population around 3 million. Its population growth rate of roughly 3% per year is one of the highest in the world.

The official language of the country is Arabic, and 90% of its people are Arab, with 10% being Afro-Arab.

Economic Opportunities

Thanks to business reforms undertaken a few years ago, Saudi Arabia has made improvements in its ease of doing business. In fact, the World Bank Group’s Doing Business 2020 report named the Kingdom among the top 10 global business climate improvers. The country has an overall score of 71.6 on a scale of 100 for the ease of doing business, which ranks them 62nd in the world.

One of the biggest benefits of doing business in Saudi Arabia is the low startup costs. It only costs approximately 5.4% of income per capita to start a business there, compared to the average of 16.7% for the region of North Africa and the Middle East.

Key Sectors of the National Economy

In addition to oil, the Saudi Arabian government has been working hard to launch what they call “economic cities” over the last few decades. This is an effort to diversify the country’s economy while providing new jobs.

The country is also home to a large mining sector for gold and other minerals. Their agriculture is based on fruits, livestock, vegetables and dates. And because of their location on two major bodies of water, Saudi Arabia is working to improve its ports to serve as stop-overs before Asia and Europe.

Human Talent
Women account for nearly 57% of undergraduates in colleges in Saudi Arabia. They are also churning out more graduates in the STEM (science, technology, engineering, and mathematics) fields. This is a trend that is continuing to rise in the country.

Neom, a “futuristic mega-city”

Saudi Arabia is planning to build a new city from scratch. When completed (projected for 2025), it will be 33 times bigger than New York City. There will be 16 boroughs in the city, which will be located along the coast of the Red Sea.

The planned city is an aim by the government to reduce its dependence on the oil sector, and transform the country into a technology hub. There are some truly innovative technologies coming to the city, including new approaches to education as well as artificial clouds that will help produce more rainfall than is possible naturally in the environment.

Technological Ecosystem

Increased government initiatives and foreign investment have helped to push the startup ecosystem in Saudi Arabia to new heights in recent years. New innovations are happening in the sectors of online education, FinTech, delivery and logistics, and e-Commerce.

In the first part of 2020 alone, despite the onset of the COVID-19 pandemic, startup investment in the country totaled $95 million. That was among 45 venture funding deals. The impressive part is that’s twice the amount of funding that happened in the same time period just the year before.

Facilities for Foreign Investment

There are many exciting opportunities for investment in Saudi Arabia in the years ahead. The young population that is highly educated is also rather young. They also have positive ways in which investors can pump money into the country in the private sector, without much red tape to get through.

Business Culture in Saudi Arabia

Saudis place a high value on personal interaction. They want to establish solid relationships with all of their counterparts way in advance of actually negotiating with them. Be prepared that all meetings will involve a lot of small talk and will be interrupted frequently. This is different for a lot of Westerners, who may view negotiations as being off topic a lot and slow.

Actual business typically doesn’t happen until after a few meetings that serve as introductions. Then, be prepared for the fact that Saudis often hide “bad news” in terms that mean “no”. It’s also not out of the ordinary for Saudis to make a decision and then change their mind.

Saudi Arabia Gastronomy: regional and traditional cuisines

Much of the cuisine in Saudi Arabia is influenced by the Islamic dietary laws. They forbid people to eat pork or drink alcoholic beverages. Animals that are eaten have to be butchered in a halal way and have to be blessed before they are eaten.

The cuisine in the country is heavily based on chicken, lamb, potatoes, seafood, dates, potatoes, rice and wheat.

General Highlights

What you need to know about employing personal in Saudi Arabia:

Laws and Agencies that regulate labor relationships

Key Tax and Labor Authorities

Labor Contracts

Basic Requirements

Labor law dictates contracts must contain:

• Job title
• Duration of contract and renewal
• Period of probation (if applicable)
• Days and hours for work
• Wages and any potential bonuses
• Healthcare benefits and annual leave
• Contributions to social insurance
• Costs of residency permits and recruitment for non-Saudi employees
• Maternity leave
• Non-disclosure clause
• Guidelines and policies of the employer
• Termination clauses
• Compensation for early termination (if applicable)
• End of service benefits

Payroll

Employees who are paid on a daily basis have to be paid at least once every week, according to Saudi Labour Law. Those who are paid on a monthly basis have to be paid at least once per month. Wages have to be paid through accredited banks within the country.

Legal Benefits in Saudi Arabia

• Supplementary health insurance
• Travel tickets
• Education expenses
• Mobile phones
• Housing allowances
• Transportation allowances
• Retirement plans

Employers Contribution or Labor Cost
Employers are subject to taxes and other costs for having employees. Employers cannot recover these costs.

Annual Taxable Income
Employees are not subject to personal income taxes in Saudi Arabia.

Corporate Tax Rates

Types of Disabilities

Saudi Arabia provides disability benefits to workers in the country who cannot work due to a number of ail- ments before the retirement age of 58. The rates of pay, and who qualifies, depend on a number of factors.

Maternity Leave
Generally speaking female employees are entitled to receive 10 weeks of maternity leave, which is paid. Up to four weeks can be taken before the birth, and at least six of the weeks have to be taken after the birth.

If the female has been employed at a company for at least one year, she’ll be paid at half her rate during her time off. She’ll receive full pay if she’s been employed at least three years from the start of her leave. She’ll receive only half pay or no pay at all, though, if she took her annual vacation the same year as the mater-
nity leave. All medical expenses related to the delivery and pregnancy are paid by the employer.

Fathers can take up to three days of paternity leave, which is paid.

Public Holidays

The Labor Code provides for public holidays that are observed in Saudi Arabia:

Termination

The Labor Code outlines rules for termination of an employment contract: