Payroll managers and HR teams of a company must know how to do the overtime calculation in KSA. Likewise, employees should know about this process to know how fairly they should receive their overtime. In this way, both parties can have a good working relationship while complying with the laws of the country.
In this article, we will show how to calculate overtime in KSA correctly to comply with labor law regulations. Similarly, we will show you the importance of calculating under the labor laws of the country.
Overview of Overtime Laws
Previously, an employer could require an employee to work for many hours while paying the same base salary. However, the government imposed a law for overtime pay called the Fair Labor Standards Act (FLSA). Nevertheless, when this law came into force, employers had to set 40 working hours per week for the base salary.
Likewise, if employees exceed those 40 hours, the employer must pay overtime as compensation. In the same way, the government established that overtime must be paid 1.5 times the amount of the regular salary. This will be for each hour of work of the employee and this provision is known as time and a half.
With that said, the government set the minimum rate that an employer must pay its workforce for the accumulation of overtime. Additionally, companies could perform the overtime calculation KSA to an amount that is not below the 1.5 established by law.
Legal working hours in Saudi Arabia
Article 98 of the Labor Law of the country establishes that there are 48 hours of work per week and 8 hours per day. Thus, if an employer asks an employee to work more than that time, they must pay them overtime. Likewise, according to Article 101 of said law, daily working hours cannot exceed 11.
Likewise, an employer cannot force a worker to perform their duties for more than 5 hours at a time without granting a 30-minute break. Furthermore, prayer time, food, and rest are not part of the work schedule as established in Article 102 of the Labor Law. The employer and employee must take this into account for the overtime calculation in KSA.
Working Hours during Ramadan
Article 98 of the Saudi Labor Law establishes that the working hours during Ramadan are as follows:
- For Muslim employees. In this case, the hours are 6 a day or 36 hours a week.
- For non-Muslim workers. The hours are the normal working hours, which means 8 hours a day or 48 hours a week.
This is why many offices are only open from 10 am to 4 pm during this holy celebration.
Types of overtime in KSA
The Labor legislation of Saudi Arabia has not established any type of overtime until now. Therefore, daily overtime during the day, night, holidays, and weekends must be paid at a fixed 150%. Also, the overtime calculation in KSA is for all work hours done on holidays and Eid.
Overtime Eligibility Criteria
The eligibility criteria for the overtime calculator in KSA will be, according to Article 106, the following:
Cases where you should not pay overtime
The reasons why an employer should not pay overtime to its workers are the following:
- In budgeting activities, closing accounts, inventories, preparation, and seasonal sales. However, the number of days worked may not exceed 30.
- If the overtime is for the prevention of accidents, to avoid losing perishable materials, or to remedy the impact of an accident.
- If it is about facing unusual work pressure.
- In the case of Eid or other special seasons, activities or seasons indicated by the decision of the Minister.
Additionally, the working day may not exceed 10 hours per day or 60 hours per week. However, it will be a ministerial decision that will allow the number of hours allowed per year to be expanded.
Employees exempt from overtime pay
In this case, employees who will not receive overtime pay will be those under Article 108 of the labor law. Next, we will explain in detail who are the employees who fall into this category:
- People who hold positions of political and management authority or if these positions have any authority over employees.
- People who perform extra or complementary tasks that must be done sometime before or after starting the work.
- Employees who perform jobs as janitors, and guards, except civil security.
Step-by-Step Overtime Calculation
As we have said, the KSA government fixed the overtime calculation in KSA at a ratio of 1.5 of the normal hourly wage. However, you can apply formulas that will calculate overtime to speed up and facilitate this process. Next, we will show you 2 formulas that will help you calculate overtime more easily:
The easiest way to apply the overtime calculator is to use the regular hourly pay rate and the established 1.5. Next, you will see the formula to perform the calculations using these two figures
Overtime pay = Regular hourly pay x 1.5
For example, if an employee earns SAR 12.5 per hour, to calculate the rate we will multiply the figure by the value established by the government. Therefore, you should apply it as follows:
- Overtime Pay Rate = Regular Hourly Pay Rate x 1.5 (overtime multiplier)
- Overtime Pay Rate = SAR 12.5 per hour (Regular Hourly Pay Rate) x 1.5 (Overtime Multiplier)
- Total = SAR 18.75 per hour
Likewise, if the employee works more than 40 hours for 7 days, the law requires the employer to pay the employee an hourly rate of SAR 18.75.
In this section, you will see some methods for the overtime calculation in KSA that group the hours worked. Then, they use the difference between the regular hourly rate of pay and the overtime draw. Also, it is a slightly different formula than the one learned in the section above.
Below you can see an example of this method with the same figure of SAR 12.5 as the regular salary of the employee:
- Overtime pay = Regular Hourly Pay x 0.5
- Overtime pay rate = SAR 12.5 per hour x 0.5
- Total = SAR 6.25
Hence, the hourly pay rate is SAR 12 plus the overtime rate of SAR 6.25. This is equivalent to the 18.75 SAR seen in the example in the previous section. However, the rate given is only for some occasions because the calculation is based on half of the base hourly wage of the employee.
Additionally, so that you can better understand the formulas that we have provided, we will see other examples in different scenarios:
- Employee X’s base hourly wage is SAR 15.
- X normal working time is 40 hours a week.
- During a particularly busy period, said employee worked 58 hours in 1 week.
- The overtime rate for your business is the one set by the government of the country (1.5 times of the regular hourly rate).
Taking these numbers into account, we will explain the step by step process to do the overtime calculation in KSA:
- Step 1. First, calculate the regular salary for the total period that you record on the X hours worked sheet. You can do it the way we will show you next:
- Basic salary = 58 hours or total worked x SAR 15 per hour or regular rate of pay = SAR 870
However, this figure takes into account only the basic salary of worker X and does not include payment for overtime.
- Step 2. For overtime calculation in KSA, you will need to use the formula from the first section. Therefore, the overtime pay rate is = SAR 7.5
- Step 3. Now, use the overtime worked and multiply it by the overtime pay rate, like this:
- Overtime = 58 total hours worked – 40 or standard work week = 18
- Overtime pay = 18 overtime hours x SAR 7.5 per hour or overtime pay rate
- Total = SAR 135
- Step 4. Finally, to find the total net salary that X earned for the week, add the basic salary plus the overtime pay, like this:
- Net salary = Base Salary + Overtime Payment
- Net salary = SAR 870 + SAR 135
- Total = SAR 1005
This way, you will pay the exact payment amount using the total hour worked by the employee in any week.
The KSA overtime calculator for separate schedules includes the following calculation:
- Separate the hours worked in normal hours and the extra hours as follows:
- Overtime = Total time worked – Regular work week = 58 hours – 40 hours
- Overtime = 18
This calculation may seem basic to you but it is necessary because occasionally an employee may work 20 minutes, 45, or other fractions of time. This is when you will need the above method. Also, if you follow these steps, you will have no problem doing the overtime calculation in KSA no matter what figures you have.
- In this step, you will need to calculate your overtime stipend rate, as shown below:
- Overtime pay = Regular pay rate x 1.5
- Overtime pay rate = SAR 15 per hour (regular pay rate) x 1.5 (overtime multiplier)
- Total = SAR 22.5 per hour
- Now, calculate the payment for the regular hours worked with the following formula:
- Regular Pay = Regular Workweek x Regular Pay Rate
- Regular pay = 40 hours (Regular work week) x SAR 15 per hour (Regular wage rate)
- Total = SAR 600
- Calculate the overtime hours worked with the formula you will see below:
- Overtime payment = Overtime hours x Overtime pay
- Overtime payment = 18 hours (Overtime worked) x SAR 22.5 per hour (Overtime pay)
- Total = SAR 405
- Next, you must add the regular payment with the overtime that will give you the total weekly pay:
- Gross Salary = Regular Salary + Overtime Pay
- Gross Salary = SAR 600 (Regular Salary) + SAR 405 (Overtime Pay)
- Total = SAR 1005
Additionally, if you look at the total hours in the previous section, you will notice that both methods generate the same total salary.
Importance of Accurate Overtime Records
Correctly applying the Saudi overtime calculator is important because it will have a considerable impact on the schedules and budget of the company. Likewise, it is a quality that every manager of any kind of industry has to master. Additionally, if you need to send the timesheets of the workers for processing at another company, it is convenient to handle these formulas.
On the other hand, a relevant fact why you must make accurate calculations is to understand where and how they fit into your payroll process. Consequently, it means that you will have to answer key questions such as:
- Is the employee eligible to receive overtime pay?
- What is the regular salary of the worker?
- How much should be paid for overtime?
- What will be the federal, state, and local laws that regulate overtime for your business?
This way, you can comply with the established labor laws for the overtime calculation in KSA. Likewise, maintaining an accurate calculation will allow you to keep your employees comfortable in your company, increasing talent retention.
Final Thoughts on Overtime Calculation in Saudi Arabia
Employees in Saudi Arabia and any other country are an essential part of not only the growth of your business but also the economic development of the nation. Therefore, public and private companies must be guarantors of respect for the rights of employees in both sectors. Through correct payment, following the laws, and being on time, employees can rest assured and be more productive.
Thus, the overtime calculation in KSA with any of the methods explained here benefits your business. This way you will have more productive employees, more comfortable with their work, and you will retain the talent your company needs. To better understand the calculation process and learn more about labor laws, you can contact us now.