How to calculate overtime pay in Saudi Arabia?
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: Formula 1 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. Formula 2 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:
