An overview of Minimum wage and average salary acc to Saudi Labour Law in Saudi Arabia
The local government established the minimum wage in Saudi Arabia to encourage the entry of Saudi workers into the labor market. In addition, this minimum wage is only for workers in the public sector since this figure does not exist in the private sector. Therefore, an employer needs to be aware of salary updates as well as the workers.
In this article, you will learn about every aspect related to the minimum wage and payroll in Saudi Arabia. You will also know what to do if you are not paid under Saudi labor law. Let us see:
- What is the Saudi Arabia minimum wage?
- Payroll Guidelines under Saudi Labor Law
- Payroll process in Saudi Arabia
- Low and high salaries for expats in Saudi Arabia
- What should you do if you are not being paid the minimum wage in Saudi Arabia?
- The average salary in Saudi Arabia
- Salaries and wages of expatriates in Saudi Arabia
- What should you do if your salary is too low?
- We can help you learn about the minimum wage in Saudi Arabia
1. What is the Saudi Arabia minimum wage?
The Saudi Arabian government has been improving its laws so that expats and locals are paid a fair wage. However, in the country, there have been various changes related to the minimum wage in Saudi Arabia during previous years. This implies that companies must be aware of the changes to make adequate payments to their employees.
In 2021, the Ministry of Human Resources set a salary of SAR 4,000 for Saudi employees. However, this Saudi labor law salary increment did not specify a change in the salary of expatriates. However, any citizen who wants a salary higher than the minimum must negotiate with the employer in this regard.
In Saudi Arabia, the minimum wage is approximately USD 1,064. This figure places it as the 25th country in terms of world minimum wage. However, the average salary Saudi Arabia is SAR 10,238, which is equivalent to USD 2,724. This places the country at number 13 in terms of the average salary of the countries in the world.
2. Payroll Guidelines under Saudi Labor Law
Saudi labour law establishes the various rules that govern how companies process their payroll. Next, we offer you each of the details related to this process.
Regarding contributions, these are divided into those that must be made by the employer and those that contemplate the employee.
The employer must make the contributions as follows:
The social security tax for non-Saudis is 1.50%, which includes occupational risk. For Saudi workers, the contribution must be 12% and includes occupational risks, pension, and unemployment. Additionally, the General Organization for Social Security (GOSI) established that this contribution must be calculated daily and not monthly.
In this case, non-Saudi employees must contribute 10% of their salary to social insurance, which covers occupational risks. On the other hand, there is no individual income tax, so the salary is not subject to this contribution.
2.2 Payroll cycle
In Saudi Arabia, the payment of wages can be made by the company on a weekly or monthly basis. That is, employees will receive their salary once a week or once a month. In the case of the 13th Salary, this is not a mandatory payment but companies can pay bonuses to their employees according to their considerations.
2.3 Working hours
In general, working hours in Saudi Arabia consist of 8 hours a day, 6 days a week for a total of 48 hours. However, during Ramadan, these hours decrease to 6 hours per day. Additionally, rest days are Fridays, that is, work is from Saturday to Thursday.
On the other hand, overtime consists of hours worked outside of standard hours. In addition, the sum of regular and overtime hours must not exceed 11 hours per day. Consequently, over time that exceeds the 48 regular weekly working hours; the company must pay them as extra compensation.
There are various permits in the country that companies must grant to their employees under Saudi labour law. These include the following:
2.4.1 Free time
According to the Labor Law, the right to paid annual vacations depends on the seniority of the employee. Thus, this is done as follows:
- If the employee has between 1 and 5 years of service, he is entitled to 21 days of vacation per year.
- If the employee has been with the company for more than 5 years, they must receive 30 days of annual vacation.
In addition, workers can carry over unused time off to their next annual leave. However, there must be a prior agreement with the employer for these circumstances.
2.4.2 Public holidays
In Saudi Arabia, there are 9 public holidays. However, employees are entitled to the following fully paid holidays:
- Eid al -Fitr
- Eid al -Adha
- Saudi national day
Therefore, if employees must work any of those days, the employer is required to pay them as overtime.
2.4.3 Sick days
Article 117 of the Labor Law establishes that workers have the right to 120 days of sick leave. However, the employee must present a medical certificate evidencing the illness. In addition, this time is divided as follows:
- The first 30 days, full salary.
- The following 60 days, 1/3 of the salary.
- Finally, the following 30 days, without pay.
2.4.4 Maternity leave
Female employees are entitled to receive 2.5 months of paid maternity leave one month before the due date. The payment will depend on the seniority of the employee as follows:
- For one year of service, the payment will be 50% of the salary.
- For more than 3 years the compensation will be 100% of the salary.
However, in the first case, the employee will be able to take annual leave but not in the second case.
2.4.5 Paternity leave
In the case of the father, he will be entitled to 3 days of paid leave after the birth of his child.
The termination process varies according to the circumstances of the contract, the type, and the reason for the dismissal. In the event of an employee resignation, the company shall provide a final settlement KSA to the employee.
2.5.1 Previous notice
This period will depend on the nature of the current contract with the employee. Thus, a worker with a monthly contract must receive prior notice within 30 days. However, employees with other types of contracts will receive 15 days’ notice.
2.5.2 Severance pay
Article 84 of Saudi labor law establishes the amount that an employee must receive as severance pay. Said amount will be 15 days of salary for each of the first 5 years of service in the company. However, you must receive the salary of a full month for each year beyond the first 5.
In addition, in case of resignation, workers with more than two years of work and less than 5 will receive 1/3 of the payment. However, they will receive 2/3 of the payment if they have worked between 2 and 9 years. They will also receive full payment for service of 10 or more years.
3. Payroll process in Saudi Arabia
The payroll process includes all the aspects mentioned in the previous section, as well as the minimum wage in Saudi Arabia. Furthermore, this process can be divided into three stages:
- The payroll process itself.
The first stage includes preparation to meet the requirements of Saudi labor law. These include employee leave, legal components of payroll, attendance policies, and average salary in Saudi Arabia, among others. In addition, you must gather all the information of your employees.
Also, in the second stage, you must make the appropriate calculations to determine the salary and benefits of each employee. Finally, in the final stage of the process, you must pay the salary of each of your workers through the most appropriate method. Additionally, you must keep up-to-date records of payments made to facilitate the next payroll cycle.
In addition, at the end of the year, you must prepare to file the taxes for the fiscal year.
4. Low and high salaries for expats in Saudi Arabia
The minimum wage in Saudi Arabia has allowed private-sector companies to hire more Saudi citizens. However, for expatriates, there are both low wages as well as high wages.
In the case of low-income expatriates, they represented 87% of private sector employees in 2014. In addition, in Saudi Arabia, the government negotiates with other countries to establish salary standards for foreign employees.
On the other hand, there are high-income expatriates, mainly from Europe and North America. These obtain greater benefits than expatriates from other regions, even more attractive than in their countries of origin. However, many workers can get more generous compensation packages.
5. What should you do if you are not being paid the minimum wage in Saudi Arabia?
The first thing to do before taking any legal action in the country is to review your employment contract. Therefore, if the contract establishes the payment of the Saudi Arabia minimum wage, your employer must make the respective payment. Hence, if you are not receiving the payment contemplated in the law, you can file a complaint.
In the case of these complaints, you must present them at the Labor Office of the Ministry of Labor and Social Development. As a consequence, there may be an agreement between both parties, or the case may go to the labor court in Saudi Arabia.
6. Average salary in Saudi Arabia
Salaries range from the minimum wage in Saudi Arabia to the most substantial salaries. Of course, this depends on the experience, training, skills, and even the nationality of the worker. The average salary is often difficult to calculate for various reasons but it is currently around SAR 10,238.
In addition, it should be added that the future employee can negotiate with a company to receive higher salary benefits.
7. Salaries and wages of expatriates in Saudi Arabia
Expatriates in the Kingdom of Saudi Arabia make up 76% of the workforce. This has been happening in the country for several years due to the guarantees and facilities to work there. However, the authorities have made continuous efforts to allow more Saudis into the various business sectors.
However, the most affected have been low-income expatriate workers in contrast to high-income ones. Logically, this is because the latter brings greater experience and skills to the companies.
8. What should you do if your salary is too low?
In the case of employees who have signed a contract for a salary less than the minimum wage in Saudi Arabia, they cannot do much. However, you can try to negotiate with the employer to try to change the terms of the contract. Therefore, expats and local workers should know the minimum wage in the nation before signing a contract.
9. Connect Legal offers Legal Advice to advice seekers through Lawyers online.
Regardless of the salary vs wage difference, the Saudi Arabian government set a minimum wage for workers. However, there are different scales according to the educational level, experience, and place of origin of the expatriate worker. In addition, the average salary throughout the country is high because the scale varies from the minimum wage to large salaries.
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