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Minimum Wage in Saudi Arabia: Guidelines, Compliance, and Solutions

The minimum wage in Saudi Arabia is an important issue for employees and employers. According to labor law in the Kingdom of Saudi Arabia, all employers have to pay their employees a minimum wage. This salary varies depending on the sector and region, but normally, you can find it at SAR 4,000. It is important to note that in addition to the minimum wage, employers have to provide employees with other benefits. For instance, transportation and accommodation.

In this article, we will provide you with information with details about the minimum wage in Saudi Arabia. All employers must implement strategies and solutions to comply with the requirements on this topic. That is why below you will see some of the most useful for any company. In addition, we will give you information on how to calculate Saudi Arabia minimum wage and how to comply with labor laws. This way, you can avoid sanctions for non-compliance with any regulations.

Recent Changes in Minimum Wage

minimum wage in saudi arabia

Currently, no Saudi Arabia minimum wage is officially established for people working in the private sector. However, the Saudi minimum wage for the public sector is 3,000 Saudi riyals. In this way, the Ministry of Human Resources and Social Development recently announced an increase in the calculation of the minimum wage for Saudis who work in the private sector.

Therefore, salaries in Saudi Arabia for the private sector increased from 3,000 to 4,000 Saudi riyals. Furthermore, this increase must apply to both current and future workers in the labor market. On the other hand, you should understand that there is no minimum salary in Saudi Arabia for foreigners working in the private sector.

According to a survey conducted by a renowned recruiting company, wages and salaries are expected to increase by 3% on average this year. This is due to the growth of new opportunities created by large-scale projects. In addition, establishing companies in Saudi Arabia is also an important factor to take into account.

Who is affected by the New Minimum Wage?

The measure to increase the minimum wage aims to improve the well-being of workers. In addition, it seeks to strengthen the national labor market. You find this change among the 5 important updates introduced in the regulations; which govern the employee support initiative, which is offered to private sector establishments by Hadaf.

Thanks to the updates, a change of approach is sought. In this way, it is designed to adapt to market evolution and address emerging challenges at the same time. Furthermore, the document consists of an important review; eliminating the requirement for a grace period to submit applications for the employment support initiative within the initial 120 days of the employee’s registration for social security.

Under the updated guidelines, establishments will now be able to apply for 90-day support. All this after the employee’s registration, effectively marking the conclusion of the trial period.

Strategies for Minimum Wage

There are various strategies for private sector companies to comply with the new minimum wage policies. For this reason, we will present you with these strategies related to salaries in Saudi.

Review employment contracts: All companies should review their employees’ employment contracts. This way, they can ensure that all legal minimum wage requirements in Saudi Arabia are met. However, if contracts do not meet these requirements, they must be updated.

Calculate the minimum wage: Companies have to calculate the minimum wage following the labor laws of Saudi Arabia. Furthermore, the labor salary in Saudi Arabia varies according to the sector and region. Thus, companies must be always aware of specific requirements.

Provide additional benefits: Apart from a minimum wage, companies have to provide their employees with certain benefits. Among these benefits, you can find accommodation and transportation. Companies must ensure benefits comply with labor laws.

Keep Accurate Records: Companies should always keep accurate records of the salaries and benefits they provide to their employees. This is because compliance with labor laws is necessary to avoid sanctions for non-compliance. In this way, companies can avoid having to pay any fine for violating a labor law.

Complying with Payroll Regulations

Managing payroll is crucial for any business. This involves calculating salaries, deducting taxes, and ensuring that all employees are paid correctly and on time. In this way, when referring to companies that operate in Saudi Arabia, this task can become complicated. This is due to specific local regulations and compliance standards in the country.

Implementing a robust payroll system is crucial to being able to manage payroll compliantly. For this reason, you must be able to calculate salaries, manage social security deductions, deduct taxes, and ensure timely payment. In this way, the system must generate reports that are accurate and can help audit and resolve disputes.

Additionally, a payroll system that can integrate with your accounting and human resources systems is a huge plus. On the other hand, you find that Saudi Arabia introduced the Wage Protection System or WPS in 2013. It is crucial for employers to pay their employees on time to prevent payroll delays or issues. The Ministry of Labor and Social Development oversees and enforces this system.

Additionally, non-compliance may result in sanctions, such as suspension of business operations. Also, you can find blocking services and fines. Furthermore, employers must register employees with GOSI. In this way, GOSI is responsible for covering employees against any occupational risk or death during work.

Key Payroll Guidelines for 2023

In Saudi Arabia, there are a series of guidelines that employers have to comply with. Thus, they comply with labor laws and minimum wage requirements in KSA. These guidelines also include information on pay frequency, work hours, vacations, and other leave. Additionally, these guidelines provide information on how to calculate the minimum wage and how to comply with labor laws.

Employers must follow these regulations to avoid legal and financial penalties. This way, you can guarantee fair salaries for your employees. Below, we will show you in detail some of these key payroll guidelines for 2023.

Payroll cycle: In KSA, the frequency of payroll can be monthly or weekly. All employers have to pay weekly employees once a week. But, if employees’ payments are monthly, it must be at least once a month.

Working hours: In Saudi Arabia, the working week is usually 48 hours; that is, 8 hours a day for 5 days a week. Furthermore, during the Ramadan period, the working day is reduced to 6 hours a day.

Overtime: Any work that exceeds the standard work hours per week must be paid as overtime. These overtime hours are regulated according to employment contracts or collective agreements. You have to know that the daily workday cannot exceed 11 hours. Once the eighth hour is over, the worker has to receive 150% of the salary.

Paid Time Off: According to article 109 of the Labor Law, the right to annual leave depends on the employee’s seniority. The distribution plan is as follows.

  • If the employee has one to five years of service, they will have access to 21 days of annual leave.
  • If the employee has more than five years of service, they have access to 30 days of annual leave.

Reporting and Documentation Requirements

minimum wage in saudi arabia

In principle, according to Saudi labor law, all employers have to provide employees with an employment contract. The employment contract must include information about the minimum salary in Saudi Arabia, working conditions, and working hours. It is important to highlight that this contract must be in writing.

The contract has to follow the model of the Ministry of Human Resources and Social Development (HRSD). Which contains basic information about the employer and the employee. For instance, the name of the employer and employee, the registered address of the employer and employee, nationality, and the worker’s identification. The worker must have his Iqama in force, otherwise, he has to go through the renewal process.

In addition, the minimum wage in Saudi Arabia and its possible allocations must be specified. The employee’s job description, job identification, and start date must be made clear. Finally, both parties may incorporate additional conditions and terms, which cannot contradict the provisions of the labor law.

It is important to keep in mind that all foreign employees need a visa. For any employee to acquire a work visa in Saudi Arabia, you have to have a sponsor. This sponsor must be a third national and your employer. Employers must register with the Ministry of the Interior and have a file with all the information of the employer’s foreign employees.

You have to know that Saudi Arabia’s quota system and naturalization program can make the process of employing a foreigner. The reason is that this process is relatively restrictive and complex. All applicable procedures involve a consular process in the country of origin followed by several steps. All of this will be post-arrival before definitive residency rights are granted.

Step-by-Step Payroll Process

The payroll process in Saudi Arabia can be difficult to implement and understand. That is why payroll experts divide this process into three phases. The first phase is pre-payroll, the second is payroll and the last is post-payroll. Below you will see a brief description of each of the stages.

Pre-payroll phase: Before paying workers in the Kingdom of Saudi Arabia, you have to have an organization that complies with labor laws. Among the most important aspects that must be collected before paying payroll are:

  • Company configuration.
  • Employee work profile.
  • Location of employment.
  • Exit or dismissal policy.
  • Attendance and entry time policies.
  • Statutory components or general policies of the company.
  • Components of the minimum wage in Saudi Arabia.
  • Payroll payment schedule.
  • Information of all workers.

Payroll Phase: This process consists of calculating your employee’s total income before determining applicable deductions. The company’s attendance policy is helpful here. The reason is that the hours employees spend working will determine how much they will receive. By identifying the various involuntary and voluntary deductions, you have to deduct them from the gross salary. You have the option to disburse payments after calculating the net profits.

Post-payroll phase: After completing payroll calculation, you have to follow some final steps to avoid costly mistakes during the process.

  • Salary Payments: For this, you can take advantage of software that includes a direct deposit feature.
  • Payroll calculation: After paying workers, you have to make sure you have records to prove the transactions. Thus, you can do payroll accounting to manage the company’s accounts.
  • Payroll Compliance: Reporting payroll data is essential for compliance. Additionally, it will help you complete payroll processing and remittance of deductions. This is before the deadline for submitting reports.

Ensuring Fair Wages for Employees’ Journey

If you want to ensure fair wages for employees in KSA, employers must comply with labor laws. In addition, they must meet all the requirements of the minimum wage in Saudi Arabia. According to the labor law in KSA, all employers are obliged to pay their employees a minimum wage. You have to know that the minimum salary varies depending on the sector and region. However, in general, the minimum wage is SAR 4,000 per month.

Employers not only have to provide a minimum wage; they also have to provide their employees with certain benefits. For instance, transportation and accommodation. Additionally, employers must keep accurate records of the benefits and wages they provide to workers.

To comply with the legal requirements of the minimum wage in Saudi Arabia, employers have to implement some solutions and strategies. In principle, they have to calculate the minimum wage by labor laws. Subsequently, they have to ensure that all employees receive benefits and their respective minimum wages. The reason for this is that it is important to comply with labor laws and avoid penalties for non-compliance.

Finally, you have to know that the job market in Saudi Arabia is highly competitive. Employers have to be prepared to compete with other international and local companies. Furthermore, you have to know all the current trends in the KSA job market and adapt to them.

Addressing Wage Disputes

In the Kingdom of Saudi Arabia, wage disputes are resolved through the Ministry of Labor and Social Development. If an employee has a salary dispute with their employer, they can file a complaint with the Ministry. The Ministry’s job will be to investigate the complaint and take the necessary measures to resolve the dispute. Additionally, if the dispute cannot be resolved through the Ministry, the employee has the option of filing a lawsuit in the Saudi Arabian courts.

Finally, it is important to know that workers have to follow certain deadlines and procedures to file a lawsuit or complaint. You also have to provide evidence and documentation to support your claim. All employers have the option to present a defense and provide evidence and documentation.

Employee Rights and Legal Recourse

All legal rights and remedies of employees in Saudi Arabia are protected by the country’s labor law. According to KSA labor law, all employees have to have a written employment contract with essential information. For instance, working hours, salary, and working conditions.

On the other hand, it is important to know that employers can file a complaint with the Ministry of Labor and Social Development. This is in case they are not paid the minimum wage or have other labor disputes.

It is essential to note that employers have to comply with labor laws and minimum wage requirements in Saudi Arabia. This way, you can avoid financial and legal penalties that can be very costly. Additionally, all employees must follow certain procedures and deadlines if they want to file a lawsuit or stay. Finally, they have to provide proper documentation and evidence to support the claim.

Conclusion: Ensuring Wage Compliance and Employee Well-being in Saudi Arabia (2023)

The minimum wage is an important issue in Saudi Arabia for employees and employers. Thus, in order for employers to comply with legal requirements, they must follow certain strategies and solutions. Additionally, it is important to note that the job market is highly competitive in Saudi Arabia.

For this reason, it is important to know everything about the basic salary in Saudi Arabia in order to avoid any inconvenience. Additionally, meeting all minimum wage requirements in Saudi Arabia is a challenge for employers. However, if you follow all the right solutions and strategies, you will be able to comply with all laws and avoid any penalties.

This article provided all kinds of information about the minimum wage in Saudi Arabia, from its calculation to compliance with labor laws. For this reason, we invite you to visit us at C-UAE to obtain more information about the Saudi world of work. We have a great team of experts who can advise you on many other issues such as the Muqeem visa.

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