Do I Need a Local Entity to Hire in Saudi Arabia?

In Saudi Arabia, a "local entity" generally refers to a business presence recognized by local authorities, such as a subsidiary or branch office. This setup allows you to be recognized as an employer and manage payroll and employment obligations according to Saudi labor laws.

Without a local entity, you typically cannot perform essential tasks like registering as an employer, managing payroll, or issuing compliant employment contracts. Fortunately, using an Employer of Record (EOR) can help you hire employees in Saudi Arabia without the need for a local entity.

What is Required to Employ Someone in Saudi Arabia?

• Local employing entity required to directly employ? Yes (unless using an EOR)
• Payroll registration required? Yes (employer registration with the General Organization for Social Insurance)
• Withholding/tax remittance required? Yes (mandatory income tax withholding applies)
• Social contributions required? Yes (employers must contribute to social insurance)
• Local employment agreement required? Yes (written contracts are mandatory)
• Mandatory benefits to budget? Yes (statutory leave and social security contributions)
• Works council/collective agreements considerations? Not applicable (Saudi Arabia does not have works councils)

Best Options If You're Hiring in Saudi Arabia

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should proceed with caution.

While hiring contractors allows you to avoid the complexities of establishing a local entity, it’s crucial to ensure that the contractor relationship is genuinely independent. Misclassification can lead to significant legal risks, especially if the contractor is effectively functioning as an employee.

• Ensure the contractor has multiple clients to demonstrate independence.
• Avoid controlling the contractor's work hours or methods.
• Keep the contractor's role distinct from core business functions.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to establish an entity in Saudi Arabia, depending on the type of business and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 5,000–15,000 SAR per month ($1,333–$4,000)
• Payroll provider: Estimated 500–1,500 SAR per employee per month ($133–$400)
• Employer registrations and recurring compliance: Estimated 2,000–5,000 SAR per year ($533–$1,333)
• Corporate tax filings and annual reporting: Estimated 10,000–30,000 SAR per year ($2,666–$8,000)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Saudi Arabia

Hiring in Saudi Arabia can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Saudi Arabia quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.