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Saudi Arabia may be best-known for its oil reserves, but that’s not all the country has to offer. Saudi Arabia is also a great place to do business, due to its strong economic performance, and diversifying economy with a focus on new areas of growth like tourism.
If you’re thinking about hiring employees in Saudi Arabia, it is important to understand some of the cultural, financial and regulatory differences that apply to employers there.
35.34M (16.1M labor force)
Saudi Riyal (SAR)
GDP per capita
Ease of Doing Business
52nd in the world
Saudi Arabia has maintained strong economic growth in recent years and is expected to achieve economic growth of 4.9% in 2022, double the growth of 2021, according to the World Bank. The economy is expected to benefit from rebounding oil prices, but also from diversification of the economy away from an over-reliance on oil. The non-oil sector now accounts for almost 60% of GDP.
Since 2017, the government has been working on a plan called Vision 2030, which aims to boost private sector growth, and these economic reforms are starting to show results, with privatization, deregulation and foreign investment driving growth.
The most important sectors for business growth in Saudi Arabia are construction, healthcare, retail, and manufacturing. These sectors are expected to see the highest levels of growth over the next few years.
The construction sector growth is being driven by ongoing government investment in infrastructure projects, such as railways and airports. Healthcare sector growth is being driven by rising demand for healthcare services due to the country’s large population and increasing life expectancy. Retail sector growth is being driven by rising incomes and a growing middle class. Manufacturing sector growth is being driven by foreign investment and government initiatives to diversify the economy away from oil production.
Despite these positive prospects, businesses operating in Saudi Arabia will still need to navigate some challenges over the next few years. These include increased competition and labour market reforms.
The Saudi Arabian Business Environment is subject to a number of laws and regulations. The Government has outlined its plans for economic development in Saudi Arabia through the Saudi Vision 2030. This provides guidance on foreign investment, privatization and diversification of the economy away from oil dependence.
The key pieces of legislation that govern employment relationships in Saudi Arabia are the Labour Law, Social Insurance Law, and Regulation of the Private Sector.
Saudi Arabia encourages foreign investment aside from a few protected industries, but has a number of strict regulations such as the recent Anti Concealment Law, which comes with very strict penalties.
The existing regulations implement certain provisions of the Capital Market Law, which promotes transparency, fairness and orderliness in securities trading and ensures investor protection. They also aim to monitor financial reporting by listed companies so that investors have accurate information before making investment decisions
Doing business in Saudi Arabia can be a challenge for foreign businesses due to cultural differences. It is important to be aware of these differences in order to avoid any misunderstandings. The Saudi Arabian business culture is based on Islamic principles and the country’s patriarchal community structure.
Business culture in Saudi Arabia is very hierarchical: Decisions are made at the top of an organization and then communicated downwards. Managers usually give detailed instruction and don’t expect employees beneath them to demonstrate initiative.
Not also that Saudis have a relaxed attitude to time: Appointments are often not adhered to and meetings may start late or not happen at all. Business deals can take a long time to finalize as they often involve a great deal of socializing and relationship-building before any business is actually conducted.
Touching somebody with your left hand or pointing feet at people is seen as very disrespectful behavior and should be avoided.
The Saudi Arabian culture also places a great deal of importance on personal relationships. Saudis prefer to do business with people they know and trust. It is therefore important to take the time to build relationships before attempting to do any business.
When it comes to recruiting employees in Saudi Arabia, employers need to be aware of the customs and legislation surrounding recruitment. There is a big emphasis on recruiting Saudi nationals where possible, known as Saudization, and some industries like IT and communications have mandates that stipulate a % of employees recruited must be Saudi nationals.
Companies without a presence in Saudi Arabia can opt to have employees recruited under a company that can provide sponsorship and allow them to pay employees salaries via a Saudi based local bank account. A special form of residence permit known as Iqama is required for this.
A large amount of recruitment occurs from referrals, which can be an issue if you haven’t yet established a business presence in Saudi Arabia. Working with Saudi Arabia recruitment support, as offered by companies like Horizons, can help alleviate this issue. Another popular way to recruit is to advertize on job boards and social media or use specialist recruitment agencies, depending on the job role and industry.
Interviews in Saudi Arabia are typically conducted face to face in a formal setting with formal business dress, and often involve multiple rounds. However, video interviews are becoming more common, and are often the only option when hiring foreign employees.
Don’t be afraid to take your time when making a decision. Unlike in Western cultures, where decisions are often made quickly, Saudis tend to take their time and consider all options before coming to a conclusion. This means that you should not expect an immediate answer from a candidate after an interview; instead, give them time to think about your offer and get back to you at a later date.
There is currently no legislation preventing you from asking about a candidate’s previous salary when hiring employees in Saudi Arabia.
The typical salary increase at a new job in Saudi Arabia depends on the industry. However, 8-10% is usually a good estimate.
Your onboarding in Saudi Arabia should cover more than just the basics. In addition to a tour of the office and an introduction to the team, orientation should include information on company culture, values, and expectations. In Saudi Arabia, relationships are highly valued so it’s important that your onboarding process also allows for personal interaction between your new employee and their colleagues.
In terms of paperwork, you must provide your new employee with an employee contract. This must be registered with the Ministry of Human Resource and Social Development via the Qiwa platform.
Saudi Arabia has invested heavily in their infrastructure and remote working capabilities; even before the pandemic, most industries were well prepared for home working. As such, most popular remote working tools are familiar and accessible to employees in Saudi Arabia.
Some examples of popular remote working tools are Zoom, Slack, and Microsoft Teams. These tools allow for video conferencing, instant messaging, and file sharing between employees who are working remotely.
Saudi Arabia has a range of national public holidays that are celebrated annually. In 2023 these holidays are:
|22 Feb Wednesday||Founding Day|
|22 Apr Saturday||Eid al-Fitr (Tentative Date)|
|23 Apr to 25 Apr||Eid al-Fitr Holiday (Tentative Date)|
|27 Jun Tuesday||Arafat Day (Tentative Date)|
|28 Jun Wednesday||Eid al-Adha (Tentative Date)|
|29 Jun to 30 Jun||Eid al-Adha Holiday (Tentative Date)|
|23 Sep Saturday||Saudi National Day|
|24 Sep Sunday||Day off for Saudi National Day|
The amount varies between industries and experience levels, but employees in Saudi Arabia receive an average pay raise of around 6% every 12 months.
When considering whether to hire freelancers or employees, businesses in Saudi Arabia must weigh a number of factors. On the one hand, freelancers offer the flexibility to be hired on a project-by-project basis, which can save on costs. Additionally, businesses may have more control over the work product when working with freelancers, as they can provide more specific instructions and feedback. However, employees offer a number of advantages as well.
First and foremost, employees are typically more invested in the company and its success, as they have a long-term stake in the business. Additionally, employees usually have more experience and skills than freelancers, and they can provide valuable insights into the company culture and operations. Ultimately, the decision of whether to hire freelancers or employees depends on the specific needs of the business.
Saudi Arabia has strict regulations in place regarding the hiring of foreigners, and for some industries and job roles there are regulations in place to ensure a certain % of employees are Saudis and limiting the number of expatriates that can be hired for certain roles. Companies are required to provide an update each quarter on the % and job titles of any expatriates they employ.
In order to obtain a work visa, a foreigner must first have a job offer from a Saudi employer or sponsor. The employer must then obtain approval from the Ministry of Labor. Once the work visa is granted, the foreigner must obtain a residency permit, which must be renewed every year. In addition, employers are required to withhold taxes from the salaries of their foreign employees.
There are a number of visas and work permits available to foreign workers, and the requirements vary depending on the type of work you wish to hire them for. In general, however, employees must obtain a sponsorship from a Saudi Arabian employer, as well as a work permit from the Ministry of Labor. The process can be time-consuming and complicated, but working with a PEO/EOR in Saudi Arabia with specialist knowledge of local regulations can help make the process smoother.
You can open a branch office in Saudia Arabia if you have an existing GCC company in another country and you obtain the correct license. The branch office may only operate within the scope of the license issued by The Ministry of Commerce and Industry.
Agency Agreements are usually the most convenient way to enter the Saudi market; although it does not technically create a separate legal entity. Foreign investors can conduct business in Saudi Arabia through a local agent without the need to obtain a SAGIA foreign investment license. A commercial agency agreement must be registered with the Ministry of Commerce and Industry. A commercial agent must be appointed, and they are responsible for representing, promoting, and selling goods and services on behalf of the business under terms set in said Agreement.
The two most popular options for hiring employees in Saudia Arabia are:
Option 1: Open a subsidiary
Follow the process outlined above for opening a subsidiary in Saudi Arabia. Then use that subsidiary to hire your employees there.
Option 2: Hire through an Employer of Record solution
Horizons offers Employer of Record (EOR) solutions in Saudi Arabia which mean you can have a team in Saudi Arabia report to you, but Horizons takes care of payroll, employment tax and compliance in Saudi Arabia as the legal employer there.
Your business can easily hire employees in Saudi Arabia without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 180+ countries worldwide. All you need to do is focus on your business.