Top 10 Considerations for Successful Employee Benefits in Saudi Arabia

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By Ashutosh Agarwal, Manager, Global Benefits, GoGlobal

The Kingdom of Saudi Arabia is undergoing a seismic shift, transitioning from its legacy of oil dependence to embrace a more diversified economy fueled by rapid growth industries. This shift is driven by significant investments, including the recent announcement of a groundbreaking $40 billion AI fund and visionary projects like the planned futuristic city of Neom. 

Despite the Kingdom’s appeal for international companies looking to expand and hire, as reported by Bloomberg, talent development remains a formidable challenge across key industries. Amid this dynamic yet fiercely competitive labor market, employee benefits play a pivotal role in driving a company’s success.  

In this blog post, we explore the top 10 essential considerations for administering both statutory and supplemental benefits in Saudi Arabia, aimed at helping you attract, engage and retain top talent. 

  • GOSI Management: Adhering to contributions for The General Organization for Social Insurance (GOSI) is the foundation for administering statutory benefits in Saudi Arabia, safeguarding compliance with social security and end-of-service benefits regulations. Navigating these regulations can be particularly challenging for international companies due to the intricacies of local laws and cultural nuances, making it essential for organizations to have a deep understanding of the regulatory landscape to effectively manage employee benefits. 
  • Varying Employee and Employer Contributions: Navigating varying contribution structures for expatriate and national employees is essential for financial planning and compliance in Saudi Arbia. This can be a challenge for international companies due to the complex nature of the regulations. Saudi nationals must register with GOSI, with both employee and employer making monthly pension fund contributions to cover pensions, disability, unemployment insurance and occupational hazard insurance. GCC nationals must also register with GOSI to make pension contributions, which are then transferred to the relevant social insurance authority based on the requirements of their home country. Saudis contribute 9.75% and employers 11.75% to GOSI. The employer is responsible for deducting and paying social insurance contributions for their employees, which are calculated based on the employee’s monthly salary. Expats’ contributions are based on basic salary plus housing with a 2% occupational hazard paid by the employer. Social insurance contributions are based on the monthly basic salary plus housing, computed at 2%. The latter is not social insurance but rather an occupational hazard paid by the employer. 
  • Saudization Compliance: Saudization, a policy implemented by the Ministry of Labor and Social Development since 1985, mandates that companies operating in Saudi Arabia fill specific percentages of their workforce with Saudi nationals. This policy serves as a critical component of the country’s economic development strategy, aiming to reduce unemployment rates among Saudi citizens, promote diversity in the workforce and foster social responsibility within the business community. However, achieving compliance can pose significant challenges, particularly for international companies as they navigate the intricacies of the policy, industry-specific quotas and the need to balance recruitment strategies with talent requirements. 
  • Local Healthcare Solutions: Employers must provide basic health insurance coverage as mandated by insurance regulators. Many employers extend these benefits by offering more comprehensive healthcare options. This grants access to a broader network of providers and specialized treatments. Supplemental healthcare not only enhances employee well-being but also serves as a recruitment and retention tool, showcasing the employer’s commitment to employee satisfaction and creating a more attractive work environment. 
  • Statutory Leave Allowances: Employees in Saudi Arabia are entitled to a minimum of 21 days of annual paid leave, which increases to 30 days after five years of continuous service. Employees also have access to various types of leave, including sick leave, bereavement leave, maternity leave, education leave and religious leave, with specific provisions for Muslim employees regarding Hajj pilgrimage leave. Employers may impose restrictions on the number of employees eligible for Hajj leave each year.  
  • Strategic Supplemental Benefits: Employers in the Kingdom can enhance the employee experience by offering housing, transport allowances, annual flight tickets and educational support. These supplemental benefits actively address practical needs, while bolstering employee well-being and professional development. 
  • Consider Equity Compensation: While not yet common practice in Saudi Arabia, there is a growing global trend towards equity compensation. Recognizing the unique opportunity equity compensation presents, employers must thoroughly understand the legal and tax implications to effectively implement programs. By offering employees a stake in the company’s success, organizations can align their interests with long-term growth objectives and foster a culture of ownership and commitment. However, navigating the complexities of equity compensation requires careful planning and adherence to regulatory requirements, emphasizing the need for expert guidance in this evolving landscape. 
  • Potential Tax Liabilities: Employer-provided benefits are generally not subject to personal income tax in Saudi Arabia. However, value added tax (VAT) applies to specific types of goods and services. While monetary allowances typically do not incur VAT, offerings like health insurance and housing subsidies may be subject to VAT. Employers are obligated to pay VAT on purchases made to provide employee benefits. 
  • The Power of Benchmarking: As Saudi Arabia’s economy diversifies and attracts more foreign firms, workforce trends and expectations are rapidly evolving. Regular benchmarking of benefits against industry standards contributes to competitive, valuable benefit offerings, identifying areas for improvement and alignment with workforce expectations. 
  • Communication and Adaptation: Transparent communication about the value of benefits, coupled with regular feedback mechanisms, fosters employee engagement and satisfaction. Adapting benefit packages to evolving market trends and employee needs is essential for delivering value and enjoying long-term success. When used properly, your benefits package can help build a motivated and loyal workforce that propels your company to new heights. 

 A solution for optimizing your benefits strategy in Saudi Arabia 

Talent is the cornerstone of success when expanding globally, especially in a dynamic economy like Saudi Arabia. Creating a competitive benefits strategy and managing statutory benefits effectively are vital for attracting and keeping the best talent on your team. However, the competitive talent market and nuanced regulatory challenges in the Kingdom require careful handling to mitigate risks and avoid setbacks. 

Working with local HR experts, such as an Employer of Record (EOR), can simplify the hiring and onboarding process by eliminating the need to establish a legal entity. EOR providers equipped with comprehensive cross-border HR support can assist in compliantly administering statutory benefits and designing supplemental benefits that resonate among the Saudi workforce, ranging from equity compensation to tailored healthcare solutions and other perks like housing support and education subsidies.  

The specialized knowledge of a trusted EOR partner can aid in benchmarking your benefits offerings, providing a competitive edge in the market. After your EOR partner supports you in designing and implementing the benefits package, they can also communicate it to your workforce. This way, your team understands and utilizes the benefits –maximizing the return on your investment.  

By partnering with an EOR who possess nuanced understanding of Saudi Arabia’s regulations, cultural norms and market dynamics, you gain peace of mind knowing that benefits are being handled by the experts. This arrangement not only enhances talent attraction, engagement and retention but also frees up resources so you can focus on core business activities – fostering successful global expansion ventures in the Kingdom. 

Contact us today to discover how the GoGlobal Global Benefits Team can help you design benefits that fuel business expansion and hiring in Saudi Arabia.