Hiring Employees in Saudi Arabia in 2025: What You Need to Know

Saudi Arabia has rapidly emerged as a significant player in the global talent market, thanks to its Vision 2030 program, investments in education and professional training, and focus on economic diversification. 

With a young, digitally savvy population, high English proficiency among graduates, and increasing female workforce participation, Saudi Arabia is attracting global attention for talent in engineering, IT, finance, and project management. Its strategic Middle East location gives companies access to both regional and international markets, making it a compelling destination for global talent acquisition.

For U.S. companies, hiring in Saudi Arabia offers unique advantages. The Kingdom’s workforce policies incentivize hiring Saudi nationals, but also allow for highly skilled expatriates. 

By leveraging Saudi Arabia’s talent pool, U.S. organizations benefit from cost efficiencies, time-zone overlap with Europe and Asia, and a modernizing business environment. The rise of remote work, strong infrastructure, and a maturing tech ecosystem further strengthen the case for U.S. businesses seeking a foothold in the region.

How to Hire Employees in Saudi Arabia

Assess Your Hiring Needs

• Full-time vs. project-based support: Decide if you need permanent employees or contractors for specialized projects.

• Local compliance requirements: Saudi Arabia enforces strict labor laws, including Saudization (Nitaqat) quotas, especially when hiring expatriates.

• Onboarding speed vs. long-term control: Weigh rapid market entry (using an Employer of Record) against direct control (setting up a legal entity).

Hiring Options

• Set Up a Legal Entity: Hire directly for full control and a long-term presence. This involves administrative complexity and compliance with Saudization quotas.

• Partner with an Employer of Record (EOR): An EOR acts as the legal employer, handling payroll, benefits, and compliance. This streamlines hiring and reduces risk. Learn the top reasons to use an Employer of Record.

EOR vs. Legal Entity Comparison

Aspect	Employer of Record (EOR)	Legal Entity
Pros	Rapid onboarding; compliance handled; no local office needed	Full control over hiring and operations; strong local presence; long-term retention
Cons	Higher per-employee costs; less direct HR control	High setup costs; compliance complexity
Cost	Low initial investment, monthly fee	High setup and ongoing costs
Compliance	EOR manages all benefits and filings	Company is responsible for all compliance

EOR vs. Legal Entity 

Understanding Worker Classification

Employees vs. Contractors

Feature	Employee	Contractor
Governing Law	Saudi Labor Law	Commercial contract law
Sponsorship	Employer sponsored	Self or third-party sponsored
End-of-Service	Eligible (EOSG)	Not eligible
Contract Type	Fixed/indefinite	Project-based
Work Permit	Required, by employer	May require business license
Social Security (GOSI)	Mandatory	Not required (unless stipulated)
Termination	Strict rules	Per contract
Work Control	Employer dictated	Flexible
Taxation	No personal income tax	Zakat/VAT may apply

Employees vs. Contractors

Legal and tax implications: Employees receive statutory protections; contractors do not. Misclassification can lead to penalties.

Paying Contractors: Contractors are paid via invoicing per contract. Ensure contracts are clear on scope and deliverables.

Hiring Costs & Payroll in Saudi Arabia

Hiring Costs Overview

• Base salary (must meet minimum wage)
• Social security (GOSI): 12% for Saudis, 2% for expatriates (employer contribution)
• Work permit and Iqama fees for expatriates
• End-of-service gratuity (for employees)
• EOR service fees (if applicable)

Payroll Setup Steps

• Register with the General Organization for Social Insurance (GOSI)
• Enroll employees and maintain records
• Set up payroll cycles and salary transfers
• Deduct and remit social security
• Provide detailed payslips

Income Tax Rates

• No personal income tax for employees
• Employers pay levies for expatriates and GOSI contributions
• Contractors may be subject to Zakat or VAT

Payment Methods

• Direct deposit to Saudi bank accounts (common for employees)
• International wire transfers (for expatriates/contractors)
• EOR-managed payroll

Using Global Payroll Services

• Automate salary disbursement, deductions, and filings
• Ensures compliance with local regulations and quotas
• Ideal for scaling and distributed teams. Learn how Employer of Record services streamline payroll and benefits.

Compliance Risks When Hiring

• Incorrect Payroll Contributions: Failing to remit GOSI can result in fines and legal action.
• Permanent Establishment Risk: Engaging in regular business without a local entity can trigger tax liability.
• Statutory Benefits: Must provide gratuity, paid leave, and social security.
• Misclassification Risks: Incorrectly classifying employees can result in back payments and legal action. Compare Employer of Record and staffing agency approaches.
• Regional Law Variances: Labor laws are national, but sector-specific rules may apply.

Onboarding New Employees

Before Their First Day

• Draft/sign Arabic employment contract (job title, salary, benefits, duration)
• Verify passport, work permit (Iqama), and educational certificates
• Register with GOSI; process work permit/visa for expatriates

On Day 1

• Welcome and orient employee on policies and team
• Issue IT equipment and credentials
• Review labor law provisions, cultural norms, and safety

First 90 Days

• Monitor performance during probation (max 90 days, extendable once)
• Confirm permanent employment after probation

Offer Letter Essentials

• Include job title, start date, salary, benefits, probation, work location, hours
• Translate into Arabic; both parties sign

NDAs & Confidentiality

• NDAs are enforceable and recommended for sensitive roles

Background Checks

• Permitted for education, employment, and criminal records (with consent)
• Comply with Saudi data protection laws

Managing Remote Employees

Computer & App Access

• Provide secure devices and VPNs
• Grant access to business apps, communication, and document tools
• Use best practices for security and backup. Learn how EORs help manage distributed teams.

Intellectual Property Protections

• Include IP assignment clauses in contracts
• Use NDAs and proprietary information agreements

Types of IP rights:

• Copyright
• Patents
• Trademarks
• Trade secrets

Complying with Labor Laws

Working Conditions

• Employees: 8-hour day, 48-hour week; reduced Ramadan hours; 150% overtime; statutory leave entitlements
• Contractors: Conditions per contract, no statutory benefits

No At-Will Employment

• Termination must follow legal procedures and valid reasons

Trade Unions

• Traditional unions not permitted; limited labor committees exist

Terminating Employees

Acceptable Reasons

• Redundancy/restructuring
• Poor performance (with documentation)
• Misconduct or policy violation
• End of fixed-term contract

Notice Periods & Protections

• Standard notice: 30 days (may vary)
• Entitled to gratuity, accrued leave, service certificate
• Unfair dismissal can lead to penalties

Why U.S. Companies Should Consider Hiring in Saudi Arabia

Access to Skilled Talent

• High demand in engineering, IT, finance, project management
• Strong education system and government investment in STEM
• Rising English proficiency and multicultural workforce

Cost Efficiency

• Lower salaries than U.S. equivalents; substantial savings
• No income tax for employees; lower overheads

Time Zone Overlap

• GMT+3 overlaps with European and Asian business hours
• Ideal for 24/7 support, development, and operations

Remote-Friendly Infrastructure

• High internet penetration, 5G, coworking spaces
• Government digital economy initiatives
• Modern offices and maturing startup ecosystem

Expand in Saudi Arabia with Compliant Hiring and Saudization Support

Hiring in Saudi Arabia gives U.S. companies access to a dynamic, skilled workforce with cost efficiencies and robust infrastructure. While labor laws and Saudization quotas add complexity, solutions like EOR partnerships, compliance planning, and investment in onboarding help organizations succeed. 

Understanding the legal, payroll, and cultural context enables U.S. businesses to build compliant, high-performing teams and achieve long-term growth in this market.