Saudi Arabia has no personal income tax on employment income, which sounds simple until you factor in GOSI contributions, mandatory end-of-service accruals, and the Wage Protection System’s real-time compliance requirements. This guide covers everything foreign employers need to know to run payroll correctly in Saudi Arabia, from contribution rates and salary structure to leave entitlements and your options for setting up payroll without a local entity.
How payroll in saudi arabia works
Saudi payroll runs on a monthly cycle. Most employers pay on the 27th or 28th of each month, and all private sector employers are legally required to process wages through the Wage Protection System (WPS) via the Mudad platform. WPS verifies that employees are paid in full and on time. It is not optional.
There is no personal income tax on employment income, so there is no income tax withholding for employees. The main statutory obligations are:
- GOSI: Social insurance contributions for Saudi nationals (and a reduced occupational hazard contribution for expatriates)
- EOSB: End-of-service gratuity that accrues throughout employment and is paid on exit
- WPS compliance: Wages reported and processed through the Mudad platform each month
Foreign employers who want to hire in Saudi Arabia must either establish a Saudi legal entity or use an Employer of Record (EOR) to employ workers on their behalf.
Saudi labor laws that affect payroll
Employment contract requirements
All employees in Saudi Arabia must have a written employment contract in Arabic (or bilingual Arabic/English). The contract must specify the role, compensation, and benefits. Verbal agreements are not enforceable for foreign employers. Contracts for fixed-term positions must state the end date; contracts without a defined term are treated as indefinite.
The standard probation period is 90 days. By written agreement, this can be extended to a maximum of 180 days. During probation, either party can terminate without notice or compensation.
Working hours and overtime rules
The standard working week in Saudi Arabia runs Sunday through Thursday. Friday and Saturday are the weekend.
Standard hours are 8 hours per day and 48 hours per week. Overtime is compensated at the employee’s base hourly rate plus 50%.
Ramadan working hour adjustments
During Ramadan, working hours are reduced by law to 6 hours per day and 36 hours per week for all employees, regardless of religion. Payroll does not decrease for this reduction. Employers should adjust scheduling and overtime calculations accordingly during this period.
GOSI contributions and social insurance
GOSI (General Organization for Social Insurance) is Saudi Arabia’s social insurance body. Contribution rates and obligations differ significantly between Saudi nationals and expatriates.
Contribution rates for saudi nationals
Contributions are calculated on basic salary plus housing allowance, capped at SAR 45,000 per month. The total combined contribution rate is 22.5%, split across three programs:
| Program | Employer | Employee | Total |
|---|---|---|---|
| Annuities / pension | 9.00% | 9.00% | 18.00% |
| Occupational hazards | 2.00% | 0.00% | 2.00% |
| SANED (unemployment insurance) | 0.75% | 0.75% | 1.50% |
| Total | 11.75% | 9.75% | 21.50% |
Note: Rates increase by 0.5% annually until July 2028. As of 2026, the employer rate is 12.25% and the employee rate is 10.25%, for a combined total of 22.5%. Always check the current-year rate before processing payroll.
Contribution rates for expatriates
Expatriate employees are covered only for occupational hazards. The employer pays 2% of the contribution base; there is no employee deduction. Expatriates are not enrolled in the pension or SANED programs.
GOSI registration and payment deadlines
Employers must register each new employee with GOSI within 15 days of their start date. Monthly GOSI contributions are due by the 15th of the following month. Missing this deadline triggers penalties, and chronic late payment can affect the employer’s standing with the Ministry of Human Resources.
Salary structure and minimum wage
Basic salary vs total compensation
Saudi compensation packages are typically structured across three components:
- Basic salary: 65% of total compensation
- Housing allowance: 25% of total compensation
- Transport allowance: 10% of total compensation
This split matters for two reasons. First, GOSI contributions are calculated on basic salary plus housing allowance, not total compensation. Second, end-of-service benefits are calculated on basic salary only. Structuring packages with a low basic salary reduces EOSB exposure, but employers should ensure the split is commercially reasonable and documented in the employment contract.
Minimum wage requirements
Saudi Arabia’s minimum wage of SAR 4,000 per month applies to Saudi nationals only. There is no statutory minimum wage for expatriate employees. In practice, expatriate salaries are set by market rates and the terms of the employment contract.
Common allowances
Beyond housing and transport, Saudi employers commonly include allowances for mobile phones, meals, and annual flights (particularly for expatriates). Allowances are generally not included in GOSI or EOSB calculations, but the terms should be stated clearly in the contract.
How to calculate gross pay and deductions
Gross-to-net for expatriate employees
Expatriate employees have no mandatory salary deductions beyond any amounts the employee has voluntarily agreed to (such as salary advances). There is no income tax withholding and no employee-side GOSI contribution. The employer’s only statutory obligation is the 2% occupational hazard GOSI contribution, which does not affect the employee’s net pay.
Gross pay = net pay (for expatriates, absent voluntary deductions).
Gross-to-net for saudi national employees
Saudi national employees have 10.25% deducted from the GOSI contribution base (basic salary + housing allowance).
Example:
- Total monthly salary: SAR 15,000
- Basic salary (65%): SAR 9,750
- Housing allowance (25%): SAR 3,750
- Transport allowance (10%): SAR 1,500
- GOSI contribution base: SAR 9,750 + SAR 3,750 = SAR 13,500
- Employee GOSI deduction (10.25%): SAR 1,383.75
- Net pay: SAR 15,000 – SAR 1,383.75 = SAR 13,616.25
The employer also pays 12.25% on the same SAR 13,500 base: SAR 1,653.75 per month.
Total deductions from any source cannot exceed 50% of the employee’s monthly salary.
End-of-service benefits and gratuity
End-of-service benefits (EOSB), also called gratuity, are a statutory entitlement for employees who complete two or more years of continuous service. EOSB is calculated on the employee’s final basic salary only, not total compensation.
EOSB calculation formula
- First 5 years of service: half a month’s basic salary for each year completed
- After 5 years: one full month’s basic salary for each year completed
- Maximum EOSB: two years’ total wages
Example:
An employee with 7 years of service and a final basic salary of SAR 10,000:
- Years 1-5: 5 years x SAR 5,000 (half month) = SAR 25,000
- Years 6-7: 2 years x SAR 10,000 (full month) = SAR 20,000
- Total EOSB: SAR 45,000
EOSB for resignation vs termination
The amount paid depends on how employment ends and how long the employee has served:
| Scenario | Entitlement |
|---|---|
| Employer-initiated termination (any tenure) | Full EOSB |
| Resignation, less than 2 years | None |
| Resignation, 2-5 years | One-third of full EOSB |
| Resignation, 5-10 years | Two-thirds of full EOSB |
| Resignation, 10+ years | Full EOSB |
Final settlement must be paid within 7 days of employer-initiated termination, or within 14 days of an employee resignation.
The wage protection system (WPS)
How WPS works in saudi arabia
The Wage Protection System is a government-operated system that requires all private sector employers to report and process wages electronically. The purpose is to verify that employees receive their full wages on time. WPS covers all employees, both Saudi nationals and expatriates.
WPS registration and mudad platform
WPS is operated through the Mudad platform, which is the Ministry of Human Resources’ digital wage management system. Employers must register on Mudad and use it to submit their payroll data each month. Registration requires a valid commercial registration and a linked bank account.
Sif file submission and deadlines
Each month, employers upload a Standard Information File (SIF) to Mudad that records wages paid. The SIF must be uploaded within 30 days of the wage due date. Best practice is to submit between the 1st and 5th of each month to avoid any government red flags or automated alerts that can trigger labor inspections.
Consequences of WPS non-compliance
If wages go unpaid for 30 days or more, employees can file for direct enforcement through the Qiwa or Najiz portal. This initiates a government enforcement process that operates without requiring the employee to pursue a court claim first. Employers who repeatedly miss WPS deadlines or fail to pay wages face escalating penalties and restrictions on hiring new employees.
Leave entitlements and payroll impact
Annual leave
Employees earn 21 calendar days of paid annual leave per year for the first five years of service. After five years, this increases to 30 calendar days per year. Leave pay is based on the employee’s full salary, not basic salary only.
Sick leave
The annual sick leave entitlement is 120 days, structured in three tiers:
- First 30 days: full pay
- Next 60 days: 75% pay
- Final 30 days: unpaid
Sick leave pay reductions must be reflected accurately in the payroll run for the relevant period.
Maternity and paternity leave
Maternity leave is 12 weeks fully paid. Up to 4 weeks can be taken before the expected delivery date, and at least 6 weeks must be taken after delivery. Paternity leave is 3 days paid, to be taken immediately following the birth.
Public holidays
Saudi Arabia observes approximately 9 to 11 public holidays per year. The main holidays are:
- Eid al-Fitr: approximately 3 days
- Eid al-Adha: approximately 5 days
- Saudi National Day: September 23
Exact dates shift each year with the Islamic calendar. Employees required to work on public holidays are entitled to compensation under Saudi labor law.
Payroll options for foreign employers
Foreign employers have three main options for handling Saudi payroll. The right choice depends on how much operational infrastructure you want to build in-country.
| Option | Setup complexity | Compliance burden | Best for |
|---|---|---|---|
| Internal management (Saudi entity required) | High | Managed internally | Large teams with long-term Saudi operations |
| Local payroll provider | Medium | Shared | Employers with an entity who want payroll support |
| Employer of Record (EOR) | Low | Managed by EOR | Employers without a Saudi entity, or fast-moving hires |
Running payroll with a saudi entity
To run payroll directly, you need a legally registered Saudi entity, a commercial registration, a bank account, Mudad registration for WPS, GOSI enrollment, and a designated HR or payroll function that understands Saudi labor law. This is the right path for employers building a permanent, substantial presence in the country.
Using an Employer of Record
An Employer of Record employs workers in Saudi Arabia on your behalf, handling all payroll processing, GOSI enrollment, WPS compliance, contract drafting, and EOSB accruals. You direct the work; the EOR manages the legal employment relationship and statutory obligations.
This is the most practical option for foreign employers who want to hire Saudi-based talent without registering a local entity first. RemotePass offers EOR services across Saudi Arabia and the broader MENA region, with full WPS and GOSI compliance built in.
If you are working with independent workers rather than employees, RemotePass also supports compliant engagement of contractors.
Common saudi payroll mistakes to avoid
- Calculating EOSB on total compensation instead of basic salary. EOSB is based on final basic salary only. Including housing or transport allowances in the calculation will overstate the liability.
- Missing GOSI deadlines. The 15th-of-the-following-month deadline is firm. Late registration (beyond 15 days from hire date) and late payments both trigger penalties.
- Submitting incorrect WPS SIF files. Errors in the SIF file, such as mismatched employee IDs or incorrect payment amounts, can cause the system to flag wages as unpaid even when they have been processed. Build a verification step into your payroll cycle before submission.
- Applying standard hours during Ramadan. The reduced Ramadan schedule (6 hours/day, 36 hours/week) is mandatory. Overtime calculated against standard hours during this period will be incorrect.
- Misapplying EOSB resignation tiers. The one-third/two-thirds/full EOSB structure for resignations is commonly miscalculated. Track tenure precisely from the hire date, and apply the correct tier based on completed years of service.
- Failing to localize employment contracts. Contracts must be in Arabic to be enforceable. An English-only contract may not hold up if there is a dispute.
Simplify saudi payroll with RemotePass
RemotePass is built for employers who want to hire in Saudi Arabia and across MENA without the overhead of building local entities from scratch. The platform handles payroll processing, GOSI contributions, WPS compliance, EOSB calculations, and employment contracts in a single workflow.
You get visibility into what is being paid, when, and why, without needing an in-house team to manage Saudi labor law. Whether you are hiring one employee or scaling a team, RemotePass keeps the compliance side handled so you can focus on the work.
Book a RemotePass demo to see how it works.
FAQs about payroll in saudi arabia
How are monthly working days calculated for Saudi payroll?
Saudi payroll uses a 30-day month for calculating daily rates, regardless of the actual number of days in the month. To find the daily rate, divide the monthly salary by 30. This applies for partial-month calculations, such as when an employee joins or leaves mid-month.
Do employers need to withhold income tax from Saudi salaries?
No. Saudi Arabia does not impose personal income tax on employment income, so there is no withholding requirement. This applies to both Saudi nationals and expatriates. The employer’s tax-related obligations are on the corporate side, not the payroll side.
Can wages be paid in cash?
No. WPS requires wages to be paid electronically through a registered bank account. Cash payments do not meet WPS requirements and will show up as unpaid wages in the system, regardless of what the employee received.
What is the timeline for paying final settlement?
If the employer initiates termination, the full final settlement (including any outstanding salary, unused leave pay, and EOSB) must be paid within 7 days of the termination date. If the employee resigns, the deadline extends to 14 days from the resignation date. Missing these deadlines gives the employee grounds for enforcement through the Qiwa or Najiz portal.
Do special economic zones or free zones in Saudi Arabia have different payroll rules?
Saudi Arabia has designated special economic zones, including NEOM and the King Salman Energy Park. Some zones offer different regulatory frameworks, particularly around foreign ownership and business licensing. However, employment and payroll obligations under Saudi labor law generally apply unless a specific exemption is documented. Employers operating in these zones should confirm the applicable labor framework before hiring.
Are there any mandatory deductions for expatriate employees?
No mandatory deductions apply to expatriate employees in Saudi Arabia. There is no income tax and no employee-side GOSI contribution. The only payroll obligation is the employer-paid 2% occupational hazard GOSI contribution, which does not reduce the employee’s take-home pay.
