Employer of Record (EOR) in Saudi Arabia
An EOR in Saudi Arabia allows businesses to enter the market quickly and help maintain compliance with local laws, including the complex kafala sponsorship system, all while reducing the overhead costs of establishing a local entity. Atlas HXM offers a seamless EOR service that handles all aspects of employment from payroll processing to compliant administration.
Partner with Atlas HXM for a cost-effective, compliant solution to hire and manage your workforce in Saudi Arabia.
Quick Overview of EOR in Saudi Arabia
Expanding into Saudi Arabia doesn't have to mean drowning in paperwork or hefty setup costs. With an Employer of Record (EOR), you can bypass the complexities of local regulations and quickly hire employees, all while maintaining compliance with Saudi Arabia's labor laws. From payroll processing and tax compliance to benefits management, an EOR takes care of the legal nitty-gritty like social security contributions and kafala sponsorship requirements, so you can focus on growing your business without the need to set up a costly local entity.
The EOR model offers a low-risk, cost-effective alternative to setting up a subsidiary. Establishing a local entity in Saudi Arabia can cost anywhere from USD 20,000 to USD 50,000 plus the cost of maintaining human resources (HR), legal assistance, accountants and more. It can also become highly administrative. By partnering with an EOR, you can avoid these setup costs and enter the market faster, avoiding the overhead of a physical office. This is especially beneficial for startups, SMEs, and businesses testing new markets, who need to act quickly and comply with complex local regulations including the kafala sponsorship system.
How an EOR Works
Atlas HXM provides EOR services that ensure your business remains compliant with Saudi Arabia's labor laws while you focus on growing your operations, free from administrative and legal burdens.
Candidate Selection
Atlas HXM does not recruit candidates, but will check the employment setup for compliance around new hires like validating right-to-work, reviewing contract terms against Saudi Arabian rules, and configuring payroll and statutory obligations correctly.
Employment Contracts
Atlas HXM drafts and administers employment contracts in compliance with Saudi Arabian labor law. In the contract, we clearly outline employment terms to reduce the risk of future disputes, such as:
Job title and responsibilities
Salary, benefits, and working hours
Leave entitlements and notice periods
Termination terms and conditions
Employment contracts can be written in Arabic or bilingual format for non-Saudi employees, ensuring full legal compliance.
Payroll & Benefits Management
Payroll is processed in Saudi riyals (SAR), including:
Accurate tax withholdings and social security contributions to GOSI
Statutory benefits such as end-of-service benefits and pension contributions
The EOR also helps maintain compliance with mandatory benefits, including the minimum wage requirements for Saudi nationals (SAR 4,000 monthly) and proper overtime calculations at 150% of basic pay.
Ongoing HR Support
Provides HR support, including: Leave management, employee relations and regulatory updates throughout the employee's tenure. This allows businesses to focus on core operations, while Atlas HXM handles ongoing compliance with Saudi Arabia's evolving labor reforms.
What to Choose: EOR vs PEO
Work Life in Saudi Arabia
Saudi Arabia's employment framework balances business needs with comprehensive employee protections. Here's what you need to know:
Employment Types:
Permanent: Indefinite contracts for Saudi nationals with full statutory benefits and strong job security protections.
Fixed-Term: can be used for both the local and foreign employees, however the Foreign employees can only be employed under fixed-term contracts with maximum 4-year duration including renewals, with the possibility of renewing the contract after that, year by year.
Temporary: a short-term, project-based employment agreement designed for specific, non-permanent tasks or to cover employee leaves. Under Saudi Labor Law, these contracts typically last up to 3 months and can be renewed only once for the same duration
Probation Periods: Maximum 180 days , unextendible . Probation periods must be explicitly stated in employment contracts. Either party can terminate without notice during probation. The EOR ensures that all terms comply with Saudi labor law.
Working Hours & Overtime: The workweek is 48 hours (standard 40 Hours weekly - 8 hours daily), reduced to 36 hours (6 hours daily) during Ramadan for employees. The maximum of the total working hours including overtime cannot exceed 60 hours weekly.
Overtime is paid at 150% of basic hourly wage . All work on Fridays and public holidays is considered overtime. The EOR ensures that all overtime calculations comply with local regulations.
Leave Entitlements
Leave Type | Eligibility / Duration | Payment / Notes |
|---|---|---|
Annual Leave | Minimum 21 days annually (30 days after 5 years) | Full salary; cannot be forfeited |
Maternity Leave | 12 weeks (4 weeks before, 8 weeks after birth) | Fully paid |
Paternity Leave | 3 days for child's birth | Fully paid; supporting documents may be required |
Sick Leave | 120 calendar days annually | First 30 days: 100% pay Next 60 days: 75% pay Final 30 days: unpaid |
Public Holidays | Eid Al-Fitr, Eid Al-Adha, National Day, others | Paid holidays; overtime rates for work performed |
Payroll & Benefits: Minimum wage for Saudi nationals is SAR 4,000 monthly (no minimum for foreign workers). Atlas HXM manages payroll in SAR, social security contributions to GOSI, mandatory end-of-service benefits, and comprehensive leave administration. Supplemental benefits often include housing allowances, transportation allowances, and medical insurance.
Atlas HXM helps ensure that employees are supported and compliant with Saudi Arabia's labor laws while businesses can focus on operations without administrative burdens.
What to Choose: Indirect vs Direct EOR
Taxes & Compliance
Saudi Arabia operates on a calendar-year tax system, running from January 1 to December 31. Employers must submit monthly social security contributions to GOSI, withholding tax obligations by the 10th of the following month, and annual corporate income tax returns within 120 days after the tax year-end. The Zakat, Tax and Customs Authority (ZATCA) oversees tax compliance and filing requirements.
Category | Details |
|---|---|
Employer Payroll Tax | No traditional payroll taxes
|
Employee Payroll Tax | No personal income tax on employment income
|
Pension System | GOSI pension system for Saudi nationals
|
VAT & EOR Costs: Saudi Arabia applies a 15% VAT rate to most services, including EOR fees. EOR services are generally subject to standard VAT rates as professional services. Businesses may be able to recover VAT paid on EOR services depending on their VAT registration status and business activities.
Atlas HXM handles tax compliance, including social security contribution calculations, withholding tax requirements, year-end filings, and expatriate tax planning, ensuring businesses remain compliant with local laws while minimizing administrative burden.
Termination
The unlimited Employment agreements can be terminated after providing awritten notice: 60 days for monthly-paid employees. The employee can resign after a 1-month notice period, and the Employer has 30 days to act on the request and can delay acceptance for up to 60 days if work interests require it
During probation, either party can terminate without notice.
End-of-service benefits are mandatory regardless of termination reason: 15 days' wages for each of the first 5 years, plus one month's wages for each subsequent year.
The EOR ensures proper handling of terminations, including notice periods, severance calculations, final wages, and required documentation.
5 Things to Look for in an EOR Provider in Saudi Arabia
Deep expertise in Saudi labor laws, kafala sponsorship system, Saudization requirements, and recent labor reform initiatives.
Advanced technology for payroll, GOSI contributions, and HR system integration.
Experience with your industry and foreign worker visa processes.
Strong compliance track record and established relationships with Saudi authorities and legal advisors.
Global presence to support multi-country expansion, with verified security and compliance standards (ISO 27001/27017/27018, GDPR).
Atlas HXM provides direct EOR services, managing payroll, compliance and benefits efficiently. Atlas HXM's unified platform automates HR, payroll, and compliance tasks, while offering premium employee support, global benefits, and access to 9,000+ learning courses. Recognized by Everest Group PEAK Matrix 2025 and NelsonHall NEAT Assessment 2026, Atlas HXM combines compliance, technology, and global expertise.
FAQs
How quickly can I hire employees in Saudi Arabia through an EOR?
You can typically hire employees within 2-4 weeks, compared to 4-8 months required for establishing a local entity and navigating kafala sponsorship requirements.
What is the minimum wage in Saudi Arabia?
The minimum wage for Saudi nationals in the private sector is SAR 4,000 monthly. There is no mandated minimum wage for foreign workers.
Can foreign workers change employers in Saudi Arabia?
Yes, under the 2021 Labor Reform Initiative, foreign workers can transfer sponsorship between employers, providing more flexibility than the traditional kafala system.
How is overtime calculated in Saudi Arabia?
Overtime is paid at 150% of the employee's basic hourly wage for work beyond standard hours.
What is the main employer social security contributions?
Employers contribute to GOSI for social security coverage, with rates varying based on employee nationality and coverage type.
What is the standard annual leave entitlement?
Employees are entitled to minimum 21 days annual leave, increasing to 30 days after 5 years of service with the same employer.