Operating a Business

flag Saudi Arabia Saudi Arabia: Operating a Business

In this page: Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labour | Management of Human Resources

 

Legal Forms of Companies

Sole Proprietorship
Number of partners: One single person.
Capital (max/min): No minimum capital required.
Shareholders and liability: The individual entrepreneur is liable for the company's debts with his personal possessions.
Limited Liability Company
Number of partners: Minimum one director and one shareholder
Capital (max/min): Minimum SAR 100,000.
Shareholders and liability: Liability is limited to the amount contributed.
Joint Stock Company
Number of partners: Minimum three directors and one shareholder
Capital (max/min): Minimum SAR 500,000.
Shareholders and liability: Liability is limited to the amount contributed.
Limited Partnership
Number of partners: Minimum one director and two partners
Capital (max/min): No minimum capital
Shareholders and liability: At least one partner must have an unlimited liability. Liability of other partners is limited to the amount contributed.
 

Business Directories

Financial Information Directories
Dun & Bradstreet - Worldwide directory with financial information on businesses

To go further, check out our service Business Directories.


 

Business Setup Procedures

Setting Up a Company Saudi Arabia Middle East & North Africa
Procedures (number) 3.00 6.28
Time (days) 10.40 19.51

Source: Doing Business - Latest available data.

 
The Competent Organisation
Saudi Arabian General Investment Authority (SAGIA)

Saudi Arabian Standards Organisation (SASO)

Ministry of Commerce and Industry

Ministry of Finance

Department of Zakat and Income Tax

For Further Information
Consult the Doing Business website, to know about procedures to start a Business in Saudi Arabia.
The Ministry of Commerce and Industry, for Business licenses.
 

Recovery Procedures

Principle
Saudi Arabia has written a commercial law that is generally applied consistently. Law allows debtors to conclude financial settlements with their creditors through committees under the Saudi Chambers of Commerce and Industry or through the Board of Grievances.
Bankruptcy Laws
The country has written a bankruptcy law that was enacted by Royal Decree no. N/16 dated 4/9/1416H (corresponding to 1/24/96). It is called Regulation on Bankruptcy Protective Settlement.

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The Active Population in Figures

201820192020
Labour Force 14,020,75814,387,60414,455,587

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 57.85%57.50%57.95%
Men activity rate 80.79%80.32%80.71%
Women activity rate 23.72%23.12%23.31%

Source: International Labour Organization, ILOSTAT database

 
Employed Persons, by Occupation (% of Total Labour Force) 2014
Public administration and defence; compulsory social security 16.1%
Wholesale and retail trade; repair of motor vehicles and motorcycles 14.5%
Construction 12.8%
Education 11.8%
Manufacturing 7.2%
Human health and social work activities 5.5%
Agriculture, forestry and fishing 5.3%
Transportation and storage 3.5%
Accommodation and food service activities 3.4%
Administrative and support service activities 1.7%
Professional, scientific and technical activities 1.4%
Mining and quarrying 1.4%
Financial and insurance activities 1.3%
Information and communication 1.2%
Real estate activities 1.1%
Electricity, gas, steam and air conditioning supply 1.0%
Water supply; sewerage, waste management and remediation activities 0.7%
Arts, entertainment and recreation 0.2%
 
For Further Statistics
Ministry of Economy and Planning
For Further Information About the Labour Market
ILO, International Labour Organisation

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Working Conditions

Opening Hours
 
  • Legal Weekly Duration
8 hours a day or 48 hours a week. The number of working hours may be raised to 9 hours a day where the workman does not work continuously, such as seasonal establishments, hotel, snack bars, restaurants, etc.
  • Maximum Duration
In the month of Ramadan actual working hours shall not exceed 6 hours a day or 36 hours a week, exclusive of the intervals reserved for prayer, rest, and meals.
Working Rest Day
Friday
Paid Annual Vacation
20 days with full wages payable in advance on completion of 1 year of service. 30 days when the workman completes 5 continuous years.
Retirement Age
60 years for men and 55 years for women.
Child Labour and Minimum Age For Employment
14 years is the minimum age for employment.

18 years for working in a mine or a quarry.

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The Cost of Labour

Pay

Minimum Wage
SAR 4,000 - Private firms are required to pay citizens a minimum of SAR 4,000/month to count nationals for Nitaqat Saudization program purposes. However, they are neither statutorily required nor are they obliged by Nitaqat program regulations.
Average Wage
SAR 10,186 for the Saudi, SAR 4,023 for the Non Saudi (GaStat, Q4 2021)
Other Forms of Pay
  • Pay For Overtime
normal wage + 50%
  • Pay For Rest Days Worked
Double the normal wage
 

Social Security Costs

The Areas Covered
Social security covers old age, disability and survivor pensions, work injury and unemployment. Visit the ISSA for more details.
Contributions
Contributions Paid By the Employer: Employers contribute 9% of monthly covered payroll (monthly earnings considered are min SAR 1,500 and max SAR 45,000) to GOSI and 2% salary of all employees for work injury. From 1 Sep 2014, an additional 1% unemployment insurance contribution is required.
Contributions Paid By the Employee: Saudi employees contribute 9% of gross monthly covered earnings, within the maximum limit of SAR 45,000. From 1 Sep 2014, an additional 1% unemployment insurance contribution is required.
Self-employed Saudi residents contribute 18% of monthly covered declared earnings (monthly earnings considered are min SAR 1,200 and max SAR 45,000). Unemployment insurance contribution is not applicable to self-employed individuals.
Competent Organization
General Organization for Social Insurance (GOSI)

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Management of Human Resources

 

Recruitment

Method of Recruitment
Direct recruiting is the most popular method of recruitment. However, the Internet is also rapidly becoming a popular hiring tool.
Recruitment Agencies
Saudi Arabia has no nationally-organised job centres. It is the responsibility of the Ministries of Labour and Social Affairs to manage employment.
Recruitment Websites
Bayt
4International Careers and Jobs
 

The Contract

Type of Contract
Broadly there are two types of contracts: Permanent and Fixed-term.

Majority of the contacts for foreigners in the labour sector are of fixed-term, while as for the locals these are of permanent type. As of April 2017, following a decision made by the Ministry of Labour, foreigners are excluded from working under any contract at malls in Saudi Arabia.

The number of 'temporary contracts' is very low.

Breach of Contracts

  • Retirement
The contract can be terminated by agreement of the two parties, at end of period of contract, at the request of either part in case of indefinite term contract or in case of force majeure.
  • Dismissals
According to Saudi law, an employer has a right to terminate the services of an employee without giving a reason, though this position has been weakened through various court orders.

However, employees cannot be dismissed while they are on sick leave, disablement leave or maternity leave.

  • Other Possible Methods
•  Collective dismissals due to economic reasons.

•  Disciplinary dismissals

•  Resignation as per the terms of contract.

Labour Laws
Summary of Saudi Arabia Labour Law
Consult Doing Business Website, to obtain a summary of the labor regulations that apply to local entreprises.
 

Dispute Settlement

 

Conciliation Process

  • Legal Framework
Labour Offices attempt to amicably resolve the dispute between the worker and the employer. In case the attempt is futile, complaints referred to the one of the two commissions- the Preliminary Commissions for Settlement of Labour Disputes, the High Commission for Settlement of Labour Disputes. The commissions settle these cases on the basis of Labour Laws.
  • Procedure
Islamic Law (the Sharia) forms the basis for Labour Laws in the country. Visit the below given links:

Settlement of Commercial Disputes - Saudia-online.

Labour and Workmen Law - Saudia-online.

 

Judicial Structures

  • Legal Framework
Islamic Law (the Sharia) is the main source of law in Saudi Arabia. Since 2010, Saudi Arabia has began the process of codifying the Sharia regulations in order to bring clarity and uniformity to judicial rulings.
  • Competent Legal Body
There are 37 Labour Offices in the country. In case of failure of dispute settlement, the case can be referred to the Preliminary Commissions and High Commission.
 

Social Partners

Social Dialogue and Involvement of Social Partners
The labour law does not provide for collective bargaining. However, the companies that employ more than 100 Saudis are allowed to form "labour committees." Currently, there are 15 labour committees registered in the Kingdom.
Regulation Bodies
Ministry of Human Resources and Social Development
 
 

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Latest Update: November 2022