Labor Law Saudi Arabia

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1. 2025 Employment Contracts & Worker Classifications

Digital Contract Requirements

All employment agreements must now be:

Created and signed electronically via Qiwa platform
Available in Arabic + employee’s language (AI-translated)
Blockchain-verified to prevent alterations

Worker Categories

Full-time employees: 40-hour work week
Part-time workers: Max 20 hours/week
Flexi-Work Visa holders: Project-based professionals
Robot/AI workers: New classification with special regulations

Key Change: Probation periods reduced from 90 to 60 days maximum.

2. Working Hours & Leave Policies (2025 Updates)

Standard Work Schedule

40 hours/week (8 hours/day)
6 hours/day during Ramadan
Minimum 2 office days/week required for remote workers

Leave Entitlements

After five years of employment, annual leave has been extended from 21 days to 30 days. There are still 60 days of sick leave annually, with the first 30 days being paid in full. The biggest modification is the addition of a 3-week paternity leave and a 14-week maternity leave extension (up from 10 weeks).

Important: Within 30 days of resignation, all unused leave must be reimbursed.

3. Wages & Benefits in 2025

Minimum Wage Updates

The minimum pay for Saudi employees is currently 4,500 SAR per month, whereas the minimum wage for foreign workers is 3,000 SAR. The minimum requirement for the new Flexi-Work category is 2,200 SAR.

Mandatory Benefits

All employees are entitled to:

25% housing allowance of basic salary
10% transport allowance
5% tech allowance for digital upskilling

New Rule: By the fifth of every month, salaries must be paid digitally via WPS.

4. Termination & Dispute Resolution

Valid Reasons for Termination

Employers may terminate for:
✔ Documented performance issues (after 3 warnings)
✔ Genuine company restructuring
✔ Automation replacement (new in 2025)

Severance Pay Calculation

Severance is calculated as:

15 days salary/year for under 2 years service
1 month salary/year for 2-5 years service
2 months salary/year beyond 5 years

New Protection: Workers have 30 days to contest terminations using the Labour Court App.

5. Saudization (Nitaqat) Updates for 2025

Sector-Specific Targets

The need for saudization has grown across all sectors:

Healthcare: 45% Saudi workforce
Retail: 50% Saudi workforce
Engineering: 35% Saudi workforce
IT: 40% Saudi workforce

Penalties for Non-Compliance

Companies in the “Red” category face:

4,000 SAR monthly fine per missing Saudi hire
2-year recruitment ban for repeat violations

Bonus: Businesses that surpass their goals receive Platinum status advantages.

6. Women's Employment Reforms

Key 2025 Changes

Women workers now benefit from:

Night shift work permitted in all sectors
Mandatory equal pay certification for large firms
Remote work options for mothers
10% tax discount for companies with 30%+ female workforce

Progress: The percentage of women in the workforce has increased from 19% in 2016 to 37%.

7. Regulations for AI & Robot Workers

New 2025 Rules

The Kingdom has introduced:

20% cap on robotic workforce in most sectors
6-month notice before replacing humans with automation
Robot tax of 500 SAR per machine worker monthly

Future Focus: UBI trials for displaced workers coming in 2026.

Conclusion: Compliance Checklist for 2025 ➡

To ensure compliance:
✔ Digitize all contracts on Qiwa platform
✔ Meet Saudization targets with monthly tracking
✔ Use WPS payroll for salary payments
✔ Train HR teams on new termination rules

Violation Penalties:Penalties of up to 100,000 SAR and potential deportation are also conceivable.

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