Employee Benefits in Saudi Arabia

Who Is Entitled to Employee Benefits in Saudi Arabia

In Saudi Arabia, employee benefits primarily apply to full-time employees working under a formal employment contract that is compliant with the Saudi Labor Law. These employees are entitled to a baseline of statutory benefits, including social insurance, paid leave, and end-of-service payments. Part-time employees and temporary workers may be eligible for some benefits depending on their contract terms, but they are not automatically entitled to the full range of protections unless explicitly stated.

Foreign workers – who make up a significant portion of Saudi Arabia’s workforce – are also entitled to statutory protections, including medical insurance, paid leave, and end-of-service benefits. Employers must ensure that all employment relationships, whether with Saudi nationals or expatriates, follow the Kingdom’s labor regulations to maintain compliance and protect employee welfare.

Overview of Employee Benefits in Saudi Arabia

Employee benefits in Saudi Arabia combine statutory requirements defined under Saudi Labor Law and employer-enhanced offerings that help attract top talent in a competitive market. While the government mandates core protections like medical insurance, paid annual leave, and end-of-service benefits, many employers expand their packages with housing allowances, transportation benefits, and performance-based incentives. These added benefits align with the local workplace culture, where comprehensive compensation packages are highly valued.

Mandatory Employee Benefits in Saudi Arabia

Mandatory benefits are legally required and form the core of any employee benefits package in Saudi Arabia. Here’s a comprehensive list of mandatory benefits in Saudi Arabia:

Medical Insurance

Medical insurance is mandatory for all private sector employees and their dependents under the Cooperative Health Insurance Law. Employers must enroll employees in an approved health insurance company and maintain active coverage throughout employment. This benefit ensures access to essential healthcare services and reduces financial risk for employees.

Social Insurance (GOSI)

Saudi and expatriate employees are subject to the General Organization for Social Insurance (GOSI) system, but with different contribution structures. Saudi nationals receive broader social security coverage – including retirement, disability, and unemployment benefits – while expatriates are mainly covered for occupational hazards. Employers are responsible for registering employees, submitting monthly contributions, and maintaining accurate wage records.

End-of-Service Benefits

Employees are entitled to an end-of-service award based on their length of employment and final wage. The benefit is calculated under Saudi Labor Law and increases with years of service. Employers must prepare accurate service and payroll documentation to calculate the final lump-sum payment. This benefit plays a major role in employee financial security.

Paid Annual Leave

Employees are entitled to at least 21 days of paid annual leave, increasing to 30 days after five years of service. Employers must ensure leave is taken within the appropriate period and properly paid. This statutory entitlement helps balance work demands with rest and recovery.

Sick Leave

Employees are entitled to up to 90 days of sick leave per year, paid on a sliding scale. Medical certificates must be submitted for approval. This leave ensures employees can recover from illness without compromising income.

Maternity and Paternity Leave

Female employees receive 10 weeks of maternity leave, while male employees are granted 3 days of paternity leave. Employers must collect medical documentation or birth records as part of compliance. These benefits support working families and improve workplace inclusivity.

Supplemental Employee Benefits in Saudi Arabia

Supplemental benefits are not required by law, but can help you stand out as an employer and attract top talent. They include:

Housing Allowance

Housing allowances are one of the most common supplemental benefits in Saudi Arabia, often representing a significant percentage of total compensation. These allowances help employees manage living expenses and are especially important for expatriate workers.

Transportation Allowance

Many employers offer a transportation stipend or company-provided transport to help employees commute safely and affordably. This benefit eases daily living costs and increases punctuality and morale.

Private Health Insurance Enhancements

Beyond basic required medical coverage, employers frequently offer higher-tier health plans that include dental, vision, and specialist services. These enhancements improve access to high-quality healthcare and help attract skilled professionals.

Education Allowances

For expatriate families, education allowances are a highly valued benefit. Employers may cover partial or full tuition for dependent children. Proper documentation is required for reimbursement.

Performance Bonuses

Bonuses linked to performance, productivity, or company profitability are common in Saudi Arabia’s compensation culture. These financial incentives help drive results and reward employee contributions.

Well-being and Lifestyle Programs

Gym memberships, wellness stipends, cultural programs, and mental health resources can improve overall well-being and support a more engaged workforce.

Tax Implications of Employee Benefits in Saudi Arabia

Saudi Arabia does not impose personal income tax on employee wages, which means most benefits are not taxed at the individual level. However, employers should still maintain clear records for accounting, compliance, and VAT considerations on certain services.

 
• Most employee benefits are not taxable to employees due to the absence of income tax
 
• Employers must ensure proper documentation for allowances, reimbursements, and health insurance
 
• Certain employer-provided services may have VAT implications for the company

Legal Considerations for Employee Benefits in Saudi Arabia

Employee benefits in Saudi Arabia are governed primarily by the Saudi Labor Law, the Cooperative Health Insurance Law, and GOSI regulations. These laws outline employer requirements regarding health insurance coverage, paid leave, social insurance contributions, and termination benefits. Employers must stay compliant with these regulations to avoid penalties and protect employee rights.

Penalties for non-compliance can include fines, business restrictions, or legal disputes initiated by employees. For example, failure to provide mandatory medical insurance or register employees with GOSI can lead to administrative and financial consequences. Because benefits regulations can evolve with ongoing labor reforms, employers should review policies regularly – ideally annually – to ensure full compliance.

How Benefits Impact Employee Cost

Employee benefits can significantly increase employer payroll costs in Saudi Arabia. GOSI contributions, mandatory medical insurance, paid leave, and end-of-service benefits all add to the total cost of employment. For expatriate-heavy organizations, supplemental benefits like housing and transportation allowances can further increase expenses.

To manage costs, employers often benchmark benefits against industry standards, adjust allowance structures, or introduce performance-based incentives. Strong benefits packages enhance employee satisfaction and reduce turnover, improving productivity and helping retain top performers.

How Can Playroll Help with Benefits Management in Saudi Arabia?

Managing employee benefits across multiple countries can be complex, but it doesn’t have to be. Playroll simplifies the process by handling administrative tasks, ensuring compliance with local regulations, and providing access to tailored benefits packages in 180+ regions.

With everything managed through a single platform, companies can focus on supporting their teams  – wherever they are.

• Pick and choose from localized benefits packages to attract and retain global talent.
• Built-in compliance to stay ahead of evolving regulations.
• Manage leave, expenses, and more, through one intuitive dashboard.