Labour and Employment Comparative Guide

1 Legal framework

1.1 Are there statutory sources of labour and employment law?

The statutory sources of labour and employment law in Saudi Arabia include the conventions and protocols issued by the International Labour Organization, of which 19 conventions and one protocol have been ratified by Saudi Arabia. The main statutory source of labour and employment law is the Basic Law of Governance, which states in Article 17 that: "Property, capital, and labour are fundamental components of the economic and social entity of the Kingdom. They are private rights that perform a social function, in accordance with Islamic law."

The same law also provides in Article (28) that: "The State facilitates work opportunities for everyone capable of it, and enacts Law/Regulations that protect the worker and the employer".

The Basic Law of Governance was issued on 3 January 1992 by Royal Decree A/90 and was published on 6 March 1992. The Labour Law was issued on 27 September 2005 by Royal Decree M/51 and Council of Ministers Resolution 219 and was published on 28 October 2005

In addition to the international conventions that protect employment and employee/employer rights to which Saudi Arabia is a party, and the clear statements in the Basic Law of Governance that guarantee work opportunities for Saudi citizens, the Labour Law (also not itself a statutory source of labour and employment law) states in Article (3) that:

The aforementioned laws, conventions and protocols all constitute clear statutory sources of labour and employment law in Saudi Arabia.

1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?

In Saudi Arabia, an employment contract governs the employment relationship between the employer and the employee and must not conflict with Labour Law. Article 50 of the Labour Law states that: "An employment contract is a contract concluded between an employer and a worker, whereby the latter undertakes to work under the management or supervision of the employer in return for a wage."

An amendment to Article 51 of the same law provides as follows:

This provision confirms that although an employment contract must be executed in writing, the absence thereof does not mean that the employment relationship is invalid, and an employee can prove the existence of an employment relationship using all means of proof.

An employment contract can afford rights and benefits to the employee that are not mentioned in the Labour Law, as the law sets out only the minimum benefits and rights that must be afforded to employees. An employer can extend benefits and rights to its employees beyond those which are guaranteed by law and can obligate itself under the employment contract.

1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?

As outlined in question 1.2, the rule is to have a written employment contract that governs the employment relationship between the employer and the employee in a way that does not conflict with Labour Law; although the absence of a written employment contract does not affect the validity of the employment relationship.

The amended Article 52 of the Labour Law states that:

Generally, there are two main types of employment contracts in Saudi Arabia:

• fixed-term employment contracts, which can include contracts on a contingent basis, a seasonal basis and so on; and
• indefinite-term employment contracts.

Saudis can be employed under all types of employment contracts, but non-Saudis can only be employed under fixed-term employment contracts, as Article 37 of the Labour Law states that:

2 Employment rights and representations

2.1 What, if any, are the rights to parental leave, at either a national or local level?

The Labour Law affords rights to parental leave, which are primarily set out in Chapter 9 ("Employment of Women"). They include:

• a right to leave before the birth of the child and after the birth;
• a right to leave in case of the child's illness; and
• a rest period for feeding of the child.

2.2 How long does it last and what benefits are given during this time?

The amended Article 151 of the Labour Law clearly states as follows:

Article 154 of the same law states as follows:

The Labour Law also prohibits an employer from terminating a woman's employment contract or giving notice for termination during her pregnancy or while she is on maternity leave. This also applies during a period of illness resulting from either pregnancy or maternity leave, provided that:

• the illness is proven by an approved medical certificate; and
• the period of absence does not exceed 180 days per year, whether consecutive or intermittent.

Also, Article 113 of the same law states that:

• a male worker has a right to three days of parental leave in the event of the birth of a child, which must be taken within days from the date of birth; and
• the employer has the right to request supporting documents in this case.

2.3 Are trade unions recognised and what rights do they have?

In Saudi Arabia, instead of trade unions, there is the Saudi National Committee of Workers Committees, comprised of representatives elected from among the heads of existing committees. This has independent legal personality and is the sole reference for workers' committees in establishments, representing all workers in Saudi Arabia.

2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?

Article 2(1) of the Personal Data Protection Law states that:

The Personal Data Protection Law applies to all processing of personal data, whether in the workplace or elsewhere. In the workplace, employee data is dealt with in a confidential manner as a rule, and any rights or remedies set out in the Personal Data Protection Law will apply to the employment relationship.

2.5 Are contingent worker arrangements specifically regulated?

In general, contingent work is regulated under the same rules as apply to any work governed by the Labour Law, unless provided otherwise by the Minister of Human Resources and Social Development. The Labour Law recognises the following types of contingent work:

• Temporary work: Work considered by its nature to be part of the employer's activities which:
• • must be completed during a specific period; or
  • relates to a specific job and ends with its completion.
• It must not exceed 90 days in either case.
• Incidental work: Work that is not by its nature part of the employer's usual activity and takes no more than 90 days to complete.
• Seasonal work: Work that is performed during known periodical seasons.
• Part-time work: Work performed by a part-time worker for an employer in working hours that are less than half of the establishment's usual daily working hours, regardless of whether the worker performs their duties daily or on certain days of the week.

Article 6 of the Labour Law states that:

Article 120 of the same law states that:

3 Employment benefits

3.1 Is there a national minimum wage that must be adhered to?

Article 89 of the Labour Law states that: "The Council of Ministers may, when necessary – and based on the Minister's proposal – set a minimum wage."

Generally, the minimum wage for each profession is decided by the Ministry of Human Resources and Social Development, which sets a minimum wage for each profession as part of its plan for the localisation of professions.

Recently, the Ministry of Human Resources and Social Development announced the issuance of a set of decisions that will increase the rates of localisation in 269 professions across various sectors in partnership with a number of supervisory bodies, including:

• the Ministry of Health;
• the Ministry of Commerce; and
• the Ministry of Municipalities and Housing.

In order for an employer to be considered compliant with the localisation and Saudisation plan, minimum wages must be adhered to, as the calculation of Saudisation compliance percentages is based on the wages of Saudi employees. This means that where an establishment hires all Saudi employees but does not adhere to the minimum wage for each profession, it will not be considered to be compliant with the localisation and Saudisation plan. Adherence to the minimum wage set for each profession also enables an employer to benefit from programmes established by the Ministry of Human Resources and Social Development; non-compliant employers are barred from participation in such programmes.

3.2 Is there an entitlement to payment for overtime?

Yes, employees are entitled to overtime pay in Saudi Arabia.

Previously, Article 107 of the Labour Law stated as follows:

Now, the amended Article 107 provides as follows:

The amended provision allows the employer and the employee to agree on additional leave days instead of overtime pay, and in all cases the employee must be compensated for overtime.

3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?

Yes, the Labour Law guarantees annual leave for employees, as Article 109 states as follows:

3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?

Yes, in order for an employee to take sick leave, they must provide the employer with a sick leave certificate/medical report stating their need for sick leave. Article 117 of the Labour Law states as follows:

3.5 Is there a statutory retirement age? If so, what is it?

Yes, the retirement age stipulated in the new Social Insurance Law is 65.

4 Discrimination and harassment

4.1 What actions are classified as unlawfully discriminatory?

Article 3 of the Labour Law states that:

In Saudi Arabia, employment is a constitutional right for all Saudi citizens and the Labour Law clearly states that all Saudi citizens are equal in right to work. Hence, any form of discrimination – whether based on race, gender, age or any other ground, and whether during the employment relationship or during the recruitment stage – is considered illegal discrimination and is punishable by law.

4.2 Are there specified groups or classifications entitled to protection?

Yes, Article 28 of the Labour Law states as follows:

This provision ensures that employers employ vocationally rehabilitated disabled persons as part of their employee pool, as it imposes a special obligation on employers to recruit such employees as a form of protection afforded to this specific group.

Also, Chapter 10 of the Labour Law ("Employment of Minors") extends specific protection to minors. Article 161 of the law states that:

4.3 What protections are employed against discrimination in the workforce?

In Saudi Arabia, any form of discrimination in the workforce is prohibited. The Ministry of Human Resources and Social Development has stated that any discrimination by an employer towards applicants or employees is a serious violation that requires reporting.

4.4 How is a discrimination claim processed?

A complaint of discrimination under the Labour Law can be filed with the Ministry of Human Resources and Social Development, which will consider the matter and issue a decision accordingly. Discrimination is penalised as follows:

• Employers with up to 20 employees will be fined SAR 1,000 per discrimination case.
• Employers with between 21 and 49 employees will be fined SAR 2,000 per discrimination case.
• Employers with at least 50 employees will be fined SAR 3,000 per discrimination case.

4.5 What remedies are available?

The Labour Law does not specify the financial remedies that are available to victims of discrimination. However, a victim can pursue a civil claim for damages against an individual or employer that has caused them harm.

4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?

In Saudi Arabia, any form of harm caused to an individual is a crime that is punishable by law and may incur compensable damage. Where such harm is caused in the workplace, the punishment imposed on the perpetrator is usually aggravated.

For example, the Anti-harassment Law states that harassment is punishable by:

• imprisonment for up to two years;
• a fine of up to SAR 100,000; or
• both.

However, if the harassment occurred in the workplace, if the victim is a child or a person with special needs, or if the perpetrator has direct or indirect authority over the victim:

• it will be punishable by:
• • imprisonment for up to five years;
  • a fine of up to SAR 300,000; or
  • both; and
• the victim can also pursue a civil action to claim private rights.

5 Dismissals and terminations

5.1 Must a valid reason be given to lawfully terminate an employment contract?

Yes, a valid reason must be given to lawfully terminate any type of employment contract. Article 75 of the Labour Law stipulates two essential conditions for the termination of an indefinite-term employment contract to be lawful:

• The contract must be terminated for a valid reason; and
• Notice must be submitted within the specified period.

A recent amendment to the Labour Law allows a fixed-term employee to resign at any time for any reason, as long as 30 days' notice is provided to and accepted by the employer. The employer is considered to have accepted the resignation of 30 days have passed since its submission without a response from the employer.

5.2 Is a minimum notice period required?

Yes, the legislature has specified the notice period for termination of an employment contract for a valid reason. Either the employee or the employer must provide notice within the period specified by law; otherwise, compensation is required. Article 75 of the Labour Law states that where the employment contract is for an indefinite term and the wage is paid monthly, either party may terminate it based on a valid reason. If the termination is by the employee, the employee must give written notice to the employer at least 30 days prior to the date of termination; and if the termination is by the employer, the employer must give written notice to the employee at least 60 days prior to the date of termination.

Article 75 further provides that:

5.3 What rights do employees have when arguing unfair dismissal?

The Labour Law set out the compensation required in case of unlawful termination. Article 77 states that:

5.4 What rights, if any, are there to statutory severance pay?

The Labour Law guarantees employees a severance pay or 'end of service award', to be paid at the end of the employment relationship. Article 84 of the Labour Law stipulates that when the employment relationship ends, the employer must pay the employee a severance pay for the service period, calculated on the basis of:

• half a month's wages for each of the first five years of the employee's service; and
• one month's wages for each of the following years.

The employee is also entitled to severance pay for parts of the year in proportion to the period spent at work.

Article 85 of the Labour Law specifies how severance pay is calculated where an employment relationship ends due to the employee's resignation. Where an employee resigns, they will be entitled to:

• one-third of the severance pay after a service period of between two and five consecutive years;
• two-thirds of the severance pay after a service period of between five and 10 consecutive years; and
• full severance pay after a service period of at least 10 years.

As an exception to what is stated in Article 85, full severance pay will be due if:

• an employee leaves work due to an event of force majeure beyond their control; or
• a female employee terminates the contract within:
• • six months of the date of her marriage; or
  • three months of the date of her delivery of a baby.

In all cases, the last wage of the employee will be the basis for calculating the severance pay.

6 Employment tribunals

6.1 How are employment-related complaints dealt with?

In Saudi Arabia, all employment-related complaints and disputes must first be discussed amicably through the Amicable Settlement for Labour Disputes, as the Amicable Settlement for Labour Disputes is both a tribunal and a pre-court trial procedure. If no agreement is reached, the matter may be referred to the labour court.

Where disciplinary penalties are imposed on an employee, before resorting to the Amicable Settlement and the labour court, the employee must first file a written grievance with the competent authority at the employer within 30 days – excluding official holidays – of the date of notification of the imposition of such penalties. If the grievance is rejected or is not decided upon in writing within 15 days of submission, the employee can object to the decision to impose such penalties before the Amicable Settlement for Labour Disputes and then the labour courts within 30 days – excluding official holidays – of the date of rejection of their grievance or the expiry of the period specified for deciding on the grievance, whichever is sooner.

6.2 What are the procedures and timeframes for employment-related tribunals actions?

As mentioned in question 6.1, in Saudi Arabia, all employment-related complaints and disputes must first be discussed amicably through the Amicable Settlement for Labour Disputes. If no agreement is reached, the matter may be referred to the labour court.

Article 234 of the Labour Law states as follows:

7 Trends and predictions

7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The answers provided in this Q&A reflect the employment landscape based on current Saudi law and its application by the Saudi courts. However, the amendments discussed throughout the Q&A are very new, as they only entered into force on 19 February 2025.

The main change to the employment regime is the introduction of resignation as a new standalone reason for the termination of an employment contract. This amendment was introduced because forced labour has been universally condemned and the International Labour Organization Forced Labor Convention (29/1930) and the Abolition of Forced Labor Convention (105/1957) prohibit all forms of forced or compulsory labour.

Saudi Arabia ratified the Forced Labour Convention and the Abolition of Forced Labor Convention on 15 June 1978.

8 Tips and traps

8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?

A comprehensive reading of the Saudi labour legislation will assist in navigating the employment regime, as it leaves little confusion for the reader, even if they do not have a legal background. It is also important to observe the specified notice periods for any matter as stated by law – whether for resignation, termination or even the renewal or non-renewal of an employment contract – to prevent any potential unlawful actions requiring compensation from arising.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.