Payroll taxes in Saudi Arabia that are of key importance to employers include GOSI contributions, occupational hazards insurance, and unemployment insurance for Saudi nationals. Learn more about the processes for setting up payroll, calculating taxes, submitting payments compliantly, and adhering to due dates in Saudi Arabia.
Capital City
Riyadh
Currency
Saudi Riyal
(
﷼
)
Timezone
AST
(
GMT +3
)
Payroll
Monthly
Employment Cost
2% - 12%
Managing payroll taxes in Saudi Arabia presents a unique landscape for employers, as the Kingdom operates without a traditional personal income tax system. Instead, employers must navigate social insurance contributions, occupational hazard payments, and various mandatory fees that impact both Saudi nationals and expatriate employees differently.
For businesses operating in Saudi Arabia, understanding these obligations is essential not only for compliance but also for effective workforce management. Non-compliance can result in significant penalties, including fines of SAR 3,000 per employee for late payments and potential suspension of government services. This article aims to guide both small businesses and larger enterprises through the key components of Saudi Arabia's payroll system, including calculation methods, submission requirements, and critical deadlines.
1 January - 31 December is the 12-month accounting period that businesses in Saudi Arabia use for financial and tax reporting purposes.
The payroll cycle in Saudi Arabia is usually monthly, with employees being paid by the 10th day of the following month.
As of January 1, 2025, Saudi Arabia’s general minimum wage rate is SAR 4,000 per month in the private sector for Saudi workers. In the public sector, the minimum wage for Saudi nationals is 3,000 SAR per month
The minimum wage in Saudi Arabia is adjusted periodically – it was last increased in April 2021.
13-month payments in Saudi Arabia are not obligatory, but employers have the choice to issue performance-based bonuses as they see fit.
Payroll calculation in Saudi Arabia involves several components that affect employee compensation. The process begins with determining the basic salary, which forms the foundation of the payroll calculation. Employers then add various allowances, which typically include housing allowance (often 25-30% of basic salary), transportation allowance, and potentially other benefits like mobile phone or food allowances.
For Saudi nationals, employers must deduct the employee's portion of GOSI (General Organization for Social Insurance) contributions, which amounts to 9% of the basic salary plus housing allowance, with an additional 0.75% for unemployment insurance. For expatriate employees, there are no mandatory deductions from their salaries for social insurance.
The calculation must also account for overtime payments (150% of regular hourly rate for the first two hours, 200% thereafter), and any approved deductions such as loan repayments (limited to 10% of monthly wages). The final net salary is then processed through the Wage Protection System (WPS) to ensure timely and accurate payment to employees.
Saudi Arabia's payroll tax system differs significantly from many other countries as it does not impose personal income tax. Instead, the system focuses on social insurance contributions and other mandatory fees that employers must manage. Each of these has specific regulations that businesses must follow to remain compliant.
GOSI represents the primary social security system in Saudi Arabia. For Saudi employees, the total contribution rate is 21.5%, with employers contributing 12% and employees contributing 9.75% (9% for social insurance and 0.75% for unemployment insurance). For non-Saudi employees, the contribution is much lower at 2%, paid entirely by the employer and covering only occupational hazards.
These contributions are calculated based on the employee's basic wage plus housing allowance, with a maximum contribution ceiling of 45,000 SAR per month. GOSI payments must be made monthly and are due by the 15th of the following month. Failure to register employees with GOSI within 15 days of employment or late payments can result in penalties, including fines and potential legal action.
Occupational Hazards Insurance is a component of the GOSI system that provides coverage for work-related injuries and illnesses. For Saudi employees, this is included in the overall GOSI contribution. For non-Saudi employees, employers must contribute 2% of the salary specifically for occupational hazards coverage.
This insurance is mandatory for all employees regardless of nationality and must be paid monthly along with other GOSI contributions. The coverage provides employees with medical care, disability benefits, and compensation in case of work-related injuries. Non-compliance can result in penalties similar to those for general GOSI violations, including fines and potential suspension of government services.
Unemployment Insurance, known as SANED, applies only to Saudi nationals. The total contribution is 1.5% of the employee's base salary, split equally between employer and employee (0.75% each). This program provides temporary financial support to Saudi employees who lose their jobs due to circumstances beyond their control.
SANED contributions are collected alongside regular GOSI payments and follow the same payment schedule and deadlines. The program offers eligible Saudi employees up to 12 months of financial support while they search for new employment. Employers who fail to make these contributions face penalties including fines and potential suspension of government services.
Setting up a payroll in Saudi Arabia requires registration with several government entities. First, businesses must register with the Ministry of Human Resources and Social Development (MHRSD) to obtain a unified number. This registration is essential for hiring employees and managing labor relations.
Next, employers must register with the General Organization for Social Insurance (GOSI) within 15 days of hiring their first employee. This registration enables the company to make mandatory social insurance contributions for both Saudi and expatriate employees.
Additionally, companies must register with the Wage Protection System (WPS) through the MHRSD. The WPS is mandatory for all companies operating in Saudi Arabia and ensures that employees receive their salaries on time through electronic bank transfers.
Selecting the right payroll system is crucial for efficient operations in Saudi Arabia. Businesses should consider systems that can handle the unique aspects of Saudi payroll, including different contribution rates for Saudi and non-Saudi employees, and integration with the Wage Protection System.
When selecting a system, consider factors such as the size of your workforce, budget constraints, and the complexity of your payroll needs. The ideal system should automate calculations, generate compliant reports, and integrate with banking systems for seamless salary disbursement.
Proper employee onboarding is essential for accurate payroll processing in Saudi Arabia. When hiring new employees, employers must collect specific documentation including copies of national ID (for Saudi nationals) or residence permit (Iqama) for expatriates, bank account details for salary transfers, and signed employment contracts specifying salary and allowances.
Employers must also register new employees with GOSI within 15 days of their start date and update the Ministry of Human Resources and Social Development's Qiwa platform with employee information. Setting up clear processes for collecting and updating this information ensures smooth payroll operations and helps avoid compliance issues that could result in penalties or delays in processing employee salaries.
Accurate collection of employee work hours and attendance is fundamental to payroll processing in Saudi Arabia. Employers are required to maintain detailed records of employee attendance, which can be done through various methods including biometric systems, electronic time cards, or digital attendance applications.
For hourly workers, these records are essential for calculating regular wages and overtime pay, which is mandated at 1.5 times the regular rate for the first two overtime hours and double the regular rate for additional hours. Saudi labor law limits the standard workweek to 48 hours (reduced to 36 hours during Ramadan for Muslim employees), making accurate time tracking crucial for compliance and correct compensation.
Salary calculation in Saudi Arabia involves determining the gross salary (basic salary plus allowances) and then applying the appropriate deductions. For Saudi employees, deductions include 9% for GOSI pension contributions and 0.75% for unemployment insurance. Non-Saudi employees do not have these deductions from their salaries.
Employers must also calculate their own contributions, which include 12% of salary for Saudi employees' GOSI and 2% for non-Saudi employees' occupational hazards coverage. Additional calculations may include overtime pay, bonuses, and approved deductions such as loan repayments (limited to 10% of monthly wages). All calculations must comply with Saudi labor law, which restricts total deductions to no more than 50% of an employee's monthly wage.
Saudi employers are required to provide detailed payslips to all employees. These payslips must include information about the basic salary, allowances, overtime payments, bonuses, and all deductions. While there is no specific format mandated by law, payslips should be comprehensive enough to allow employees to understand how their net salary was calculated.
Many companies in Saudi Arabia now provide electronic payslips through email or dedicated HR portals, though physical copies may still be distributed upon request. Regardless of the distribution method, employers should ensure that payslips are provided promptly after salary processing and that they maintain records of these documents for at least two years, as required by Saudi labor regulations.
Employers in Saudi Arabia must submit payroll information to several government entities. GOSI contributions must be reported and paid monthly through the GOSI online portal by the 15th of the following month. The report must include details of all employees, their salaries, and the calculated contributions.
Additionally, employers must submit salary payment information through the Wage Protection System (WPS) before processing salary payments. This system, managed by the Ministry of Human Resources and Social Development, monitors whether employees are paid their full salaries on time. Non-compliance with WPS requirements can result in penalties including fines of SAR 3,000 per employee and potential suspension of government services.
Salary payments in Saudi Arabia must be made through bank transfers to employees' accounts, as mandated by the Wage Protection System. Cash payments are generally not permitted for companies registered with the WPS. The standard payment schedule in Saudi Arabia is monthly, with many companies following the public sector practice of paying on the 27th of each month.
Employers must ensure that salaries are paid no later than the 10th day of the following month to avoid penalties under the WPS. For weekly paid employees, payments should be made at the end of each week. Banking systems in Saudi Arabia support various payment methods, including bulk transfers and payroll cards, making it easier for employers to process payments efficiently while maintaining compliance with WPS requirements.
Understanding the tax obligations for both employers and employees is crucial when operating in Saudi Arabia's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Saudi Arabia.
Employer payroll contributions are generally estimated at an additional 2% - 12% on top of the employee salary in Saudi Arabia.
In Saudi Arabia , the typical estimation for employee payroll contributions cost is around 10%.
Saudi Arabia does not impose any income tax.
To qualify for Saudi Arabia's old-age retirement pension, individuals must be at least 58 years old and have contributed for a minimum of 120 months to the General Organization for Social Insurance (GOSI). Those with 300 months of contributions are eligible for retirement at any age, and the minimum monthly old-age state pension is 1,984 SAR.
Make better business decisions by consolidating global payroll data, while seamlessly syncing your existing payroll operations.
Instantly integrate outsourced and in-house payroll. Interactive variance analysis to prevent errors. Create custom reports and access in-depth analytics. 
Global employers operating in Saudi Arabia often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Saudi Arabia.
Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date – including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.
In Saudi Arabia, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.
Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.
Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.
Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.
A global payroll management platform is a software solution designed to streamline and automate the payroll processes for organizations with employees across multiple countries. It helps ensure accurate and timely payment while maintaining compliance with legal and regulatory requirements in Saudi Arabia.
Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:
Disclaimer
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.
ABOUT THE AUTHOR
Milani Notshe
Milani is a seasoned research and content specialist at Playroll, a leading Employer Of Record (EOR) provider. Backed by a strong background in Politics, Philosophy and Economics, she specializes in identifying emerging compliance and global HR trends to keep employers up to date on the global employment landscape.
Back to Top
.svg)
Copied to Clipboard
.png)
Payroll taxes in Saudi Arabia are primarily calculated through GOSI contributions. For Saudi employees, employers contribute 12% of the employee's basic salary plus housing allowance, while employees contribute 9.75% (9% for pension and 0.75% for unemployment insurance). For non-Saudi employees, only employers make contributions at a rate of 2% for occupational hazards coverage. These calculations are subject to a maximum monthly salary cap of SAR 45,000. Additional employer costs may include medical insurance premiums, Saudization fees for expatriate employees, and the Ajeer program fees.
Employers in Saudi Arabia can manage payroll through various options, including in-house processing with specialized software, outsourcing to local payroll service providers, using international payroll solutions with Saudi compliance, implementing hybrid models, or leveraging cloud-based platforms like Playroll that support local regulations. The ideal choice depends on the company’s size, operational complexity, and budget needs.
The key elements of payroll in Saudi Arabia include calculating basic salary, housing and transportation allowances, GOSI contributions (with different rates for Saudi and non-Saudi employees), unemployment insurance for Saudi nationals, overtime pay (typically 1.5x or 2x the regular rate), end of service benefits, compliance with the Wage Protection System, medical insurance, Saudization fees for expatriates, and maintaining proper documentation and records.
Saudi Arabia does not have a traditional personal income tax system. Instead, the primary payroll taxes are social insurance contributions through GOSI. For Saudi employees, the total contribution rate is 21.5% (12% employer, 9.75% employee). For non-Saudi employees, the rate is much lower at 2% (paid entirely by the employer). Employers also face additional costs such as medical insurance (varies by provider, typically SAR 2,000-4,000 annually per employee), Saudization fees for expatriate workers (SAR 800-9,600 annually per worker depending on the company's Saudization ratio), and Ajeer program fees.
Estimate hiring costs, benefits, and expenses across markets to improve budgeting and financial planning.
Set competitive salaries with real-time data, ensuring fair pay and financial stability.
Explore our comprehensive guides to work permits and visas across the globe to streamline immigration.
Get detailed guidance to hire in every state if you don’t have your own entities set up, covering payroll, leave, and more.
Effortlessly navigate global tax laws and required contributions for accurate planning and compliance.
Track local minimum wage laws to ensure fair compensation and global compliance.
Expand strategically with up-to-date insights into local labor laws and cost-saving opportunities.
Understand statutory and optional benefits to stay competitive in each market.
Where to next?
Your “everything you ever needed to know” guides to compliant global employment around the world.
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
.svg)
Back
.webp)
.svg)