Traditionally, companies looking to grow in Saudi Arabia must establish payroll, hire employees, establish a benefits plan, and manage compensation. This work is all on top of establishing a subsidiary to operate in the country legally. G-P can help mitigate the risk of noncompliance as you begin business operations and the hiring process according to Saudi Arabia’s regulations.
Taxation rules in Saudi Arabia
As an employer, companies have to pay certain taxes on behalf of their employees and ensure those employees are registered to pay taxes themselves. Employers are required to pay Saudi Arabia social insurance tax (GOSI) for every employee based on their basic salary. Companies should typically budget about 10% of the employee’s salary for this expense. They’ll also have to make a 2% contribution to occupational hazards insurance for all employees.
Employer burden percentages include:
- Social insurance for non-Saudi employees: 2% of (basic and housing) salary to be contributed by the employer only each month.
- Social insurance for Saudi employees: 11.75% of (basic and housing) salary to be contributed by the employer each month.
- 9.75% of Saudi employees’ (basic and housing) salary to be contributed by the employee each month.
Saudi Arabia payroll options for companies
Companies have several Saudi Arabia payroll options, including:
- Remote payroll: Larger companies may have the resources to add employees in Saudi Arabia to the parent company’s payroll. Although doing so streamlines the payroll process, employees in Saudi Arabia will have separate payroll regulations than employees working for the parent company.
- Saudi Arabia payroll processing company: Employers can also opt to work with a local company in Saudi Arabia that will handle payroll. Although they will pay employees, the company is still responsible for matters of compliance.
- Internal payroll: If companies have a commitment to Saudi Arabia, they may want to open an internal payroll at this international office. However, doing so will require a significant amount of money and more HR employees.
- Partner with an Employer of Record (EOR): When companies leverage the support and expertise of an EOR like G-P, they can focus on growing their business while we take on the complexities of payroll set up and compliance management.
How to establish payroll in Saudi Arabia
Before companies can establish your Saudi Arabia payroll, they have to establish a subsidiary. This process is often lengthy and can take several months or longer. Certain steps throughout the process may also have expenses, making it important for companies to budget the correct amount.
Entitlement and termination terms
Before hiring employees and establishing payroll, it’s critical to outline entitlement and termination terms. Saudi Arabia allows probation periods of up to 90 days based on an agreement between the employer and the employee. Certain employment contracts include how much notice must be given to employees before the end of employment, and once employment ends, an employee is entitled to an “end-of-service award” depending on their wages.
Streamline global payroll management with G-P
G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.