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Global Payroll Team
Written by Global Payroll Team
Last updated May 1, 2026
Expert Reviewed
Payroll in Saudi Arabia
EOR Saudi Arabia
PEO Saudi Arabia

Saudi Arabia map

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Mercans offers complete payroll, PEO and HR services in Saudi Arabia

One of the world’s largest oil producers and exporters, Saudi Arabia has increasingly diversified its economy under Vision 2030 and now produces a wide range of industrial goods including petrochemicals, plastics, metal products, construction materials and electrical equipment. The private sector continues to play a growing role in the economy, with Vision 2030 targeting a 65% contribution to GDP by 2030. Saudi Arabia has a young and growing population of approximately 35.3 million and remains one of the largest markets in the Middle East.

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Doing Business in Saudi Arabia

The government continues to support private sector participation through Vision 2030 reforms, digital government services, and investment promotion initiatives. Saudi Arabia offers access to a large domestic market, a resilient banking sector, and ongoing regulatory modernization. Employers and investors should, however, closely monitor labour, immigration, social insurance, and payroll compliance requirements as these continue to evolve.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Saudi Arabia is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.

Banking

Banking hours vary by institution, with many branches operating from Sunday to Thursday.

Working Week

The standard working week is generally from Sunday to Thursday, although this can vary by employer. Under the Labour Law, normal working time is generally 8 hours per day or 48 hours per week.

Labor Law

Saudi employment relationships are governed by the Labour Law and related regulations issued by the Ministry of Human Resources and Social Development. Employment contracts must comply with statutory rules on probation, working time, leave, termination, and end-of-service benefits. Saudi Arabia has also introduced significant labour market reforms in recent years to support worker mobility and modernize employment regulation.

Main Industries

Crude oil production, petroleum refining, petrochemicals, mining, logistics, construction, financial services, tourism and manufacturing

GDP Growth

1.3%

Dates & Numbers

dd/mm/yyyy

Official State Name

The Kingdom of Saudi Arabia

Population

35.3 million

Capital

Riyadh

Major Languages

Arabic

Currency

Saudi riyal

Internet Domain

.sa

International Dialing Code

+966

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Saudi Arabia
Riyadh, SA
3:44 pm, May 2, 2026
38°C
clear sky
9 %
Wind Gust: 20 mph
Clouds: 0%
Sunrise: 5:17 am
Sunset: 6:22 pm

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Payroll in Saudi

Mercans payroll in Saudi Arabia is a service provided by Mercans to manage and process employees’ salaries and related financial transactions in compliance with Saudi labour laws and regulations. With their experience, expertise, and smart payroll technology, our Saudi payroll team is among the best in the industry in terms of outsourcing payroll services. Mercans is regarded as one of the top payroll companies in Saudi Arabia.

By removing the hassle out of complex and time-consuming payroll procedures, including managing Wage Protection System (WPS) requirements, reporting, and payroll compliance obligations, we are an experienced payroll provider in Saudi Arabia, enabling your team to focus on what they do best, regardless of ever-evolving regulations. For any concerns that you may have regarding payroll in Saudi, our dedicated payroll specialists are available to handle all of your payroll queries and requirements in real-time, so you can rest assured that you are in good hands. In order to allow you to focus on your core business activities, we tailor our services to fit the way your business operates.

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Payroll

In general, wages include the basic wage plus all agreed allowances and bonuses. Companies operating a multi-country payroll should note that Saudi Arabia requires salary payments in the private sector to be monitored through the Wage Protection Program, helping authorities verify that employees are paid accurately and on time.

Electronic payslips are commonly used, provided payroll records are properly maintained

Payslip

Payroll and employment records should be retained in line with applicable statutory and tax requirements

Reports

Employees are entitled to 21 days of paid annual leave, increasing to 30 days after 5 consecutive years of service

Annual Leave

Up to 120 days of sick leave, with the first 30 days fully paid, the next 60 days at 75% pay, and the following 30 days unpaid

Sick Leave

12 weeks of paid maternity leave and 3 days of paid leave upon the birth of a child

Maternity & Paternity Leave

60 days for monthly paid employees and 30 days for non-monthly paid employees

Employee Termination

This is not compulsory but can be paid as a bonus based on performance

13th monthly salary

No universal statutory minimum wage for all private sector employees. SAR 4,000 remains a key threshold for full Saudi employee calculation in Saudization programs

Minimum Wage

Overtime is paid at the hourly wage plus 50% of the basic wage, and all hours worked during holidays and Eids are treated as overtime

Overtime

Half a month’s wage for each of the first 5 years of service and one month’s wage for each subsequent year

Severance Pay

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Employer of Record (EOR) in Saudi Arabia

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Mercans EOR services in Saudi Arabia provide a legally compliant employment solution for companies that wish to hire staff without setting up a legal entity, handling visas, payroll, HR, and employment compliance on their behalf. You can grow your global team with confidence with our localized contracts, easy-to-use invoicing system, and best-in-class compliance standards.

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An employer of record in Saudi Arabia/EOR in KSA, sometimes referred to as an international PEO, enables your company to hire and onboard workers without incurring the risks of setting up a local business. With our Global Employer of Record solutions, you can hire your team directly through our local legal entities in each country while we handle payroll, tax, benefits, and compliance, so you can focus on growing your business.

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Our platform has been designed to work as a unified employment platform with automated workflows, digital signatures, payroll, contractor payouts, and all types of compliance solutions that you might require to maintain compliance within your organization.

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Mercans is regarded as a highly trustworthy, efficient and top EOR provider in Saudi Arabia and other countries. Learn about the requirements for hiring, employment, payroll, and benefits for workers in Saudi Arabia and how we can help you in dealing with your international employment needs through our employer of record services, Professional employer organization (PEO) services, and with the assistance of our local HR experts.

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Saudi Arabia PEO

Mercans PEO in Saudi Arabia i.e. Professional Employer Organization offers comprehensive outsourcing solutions for HR, payroll, benefits, and compliance management to help businesses establish a local presence and operate in compliance with Saudi labour laws and regulations. As a Professional Employer Organization, Mercans offers a range of services including employee benefits, payroll administration, and compliance with Saudi labour laws. This allows companies to streamline their HR operations and focus on their core business activities while relying on Mercans to handle the HR and payroll responsibilities.

Partnering with our Saudi Arabia PEO presents the swiftest and most economical avenue to step into the Saudi Arabia market.
Contact us to explore how we can support your growth in Saudi Arabia!

Benefits of Hiring an Employee through a Saudi Arabia PEO

Are you considering expanding your business operations into Saudi Arabia? Partnering with a PEO in Saudi Arabia can offer several advantages that streamline the process and ensure compliance with local regulations. Here are some key benefits:

Efficient Market Entry

When you hire an employee through a PEO in Saudi Arabia, you can swiftly establish your presence in the Saudi Arabian market. This expedites your market entry process, allowing you to focus on your core business activities.

Compliance Assurance

Navigating the complex landscape of Saudi Arabian labour laws and regulations can be challenging. A PEO has the expertise to help ensure that your employment practices align with local laws, reducing the risk of compliance-related issues.

Cost Savings

Hiring and managing employees directly in a foreign country can be expensive due to various administrative and legal requirements. A PEO can help you save costs by managing payroll, benefits, and HR functions efficiently.

Risk Mitigation

In Saudi Arabia, employment laws can change, and non-compliance can lead to legal issues. A PEO stays up to date with the latest labour regulations, helping you avoid legal risks associated with employee management.

Access to Local Talent

Leveraging a PEO in Saudi Arabia provides you with access to a pool of local talent. This can be invaluable for finding skilled professionals who are well-versed in the local business culture and practices.

Administrative Simplification

By outsourcing HR and payroll functions to a PEO, you can simplify your administrative tasks. This allows you to concentrate on your core business strategies without getting bogged down by administrative complexities.

Scalability

As your business grows in Saudi Arabia, a PEO can easily adapt to your changing HR and employment needs. This scalability ensures that you can manage your workforce efficiently, whether you’re expanding or downsizing.

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Tax and Social Security

There is generally no individual income tax on employment income in Saudi Arabia. Social insurance contributions are administered through GOSI, and contribution obligations differ depending on whether the employee is a Saudi or non-Saudi national and on the relevant insurance branch.

Tax

Income tax is generally not imposed on an individual’s earnings from employment in Saudi Arabia. Corporate income tax generally applies at 20% to non-Saudi and non-GCC investors on taxable profits, while VAT remains at 15%.

20%

Corporate Income Tax

–

Personal Income Tax

15%

Sales Tax

15%

VAT

Social Security

Social insurance contributions are paid monthly based on the contributory wage. For Saudi nationals under the main scheme, the annuities branch is 18% split equally between employer and employee, SANED unemployment insurance is 1.5% each for employer and employee, and occupational hazards are generally 2% employer-paid. Non-Saudi workers are generally covered for occupational hazards only.

Up to 23%

Social Security Rate

≤ 12.5%

Social Security Rate for Employers

≤ 10.5%

Social Security Rate for Employees

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Employment Law

Saudi Arabia has introduced significant labour market reforms in recent years to improve worker protections, strengthen contract transparency, and support labour mobility. Employers must ensure compliance with written contract requirements, wage protection, statutory leave entitlements, working time rules, and end-of-service award obligations.

Employment Agreement

Labour contracts must be in writing and should be drawn up in Arabic. The Ministry provides a model employment contract, and the contract must state key terms such as wage, benefits, type of work, place of work, start date, and duration where fixed-term.

Working condition

Normal working hours are generally 8 hours per day or 48 hours per week. During Ramadan, the maximum working hours for Muslim employees are reduced to 6 hours per day or 36 hours per week. Overtime rules and certain exclusions apply for particular categories of employees.

Leaves

Employees are entitled to annual leave, sick leave, Eid and official holidays, Hajj leave in qualifying cases, and personal leave for marriage, childbirth, and bereavement. Current labour guidance also reflects 12 weeks of paid maternity leave and 3 days of paid leave upon the birth of a child.

Employment termination

An employee’s employment may be terminated for lawful reasons including mutual agreement, expiry of a fixed-term contract, resignation, retirement, force majeure, or notice given in an indefinite-term contract. For indefinite-term contracts, notice must be given in writing and may not be less than 60 days for monthly paid employees or 30 days for others.

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30 to 60 days

Minimum notice period for terminating an employee

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10 days

Total number of public holidays

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48

Working hours per week

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5 days

Total number of days for Compassionate & Bereavement Leave

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Immigration

Foreign nationals generally cannot work in Saudi Arabia without the appropriate work authorization and residence status. In most cases, the Saudi employer sponsors the process and arranges the relevant work visa, work permit, and residence permit procedures through the competent authorities.

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Residency permits

Foreign nationals working in Saudi Arabia are generally sponsored by an employer in the Kingdom. Following the issuance of the relevant entry or work visa, the employer arranges the residence permit process. Residence permits may be issued and renewed subject to compliance with immigration and labour requirements, and employers can use official government platforms for work permit inquiries and related services.

Work Permit validity

Commonly one year, subject to renewal

Required Documents

A passport valid for the required period

A recent passport-size color photograph

Completed visa and work authorization application documents

Medical reports and tests as required by the authorities

Letter of employment from the sponsoring company in Saudi Arabia

Signed copy of the employment contract

Educational and professional certificates where required for the role

Police clearance or criminal record certificate where required

Supporting immigration, sponsorship, and residence permit documents as requested by the relevant authority

Compliant, reliable, error-free and touchless payroll in Saudi Arabia

Build the best team and hire top talent compliantly in Saudi Arabia. Get in touch with Saudi Arabia payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Saudi Arabia and how does it support foreign companies?

    Mercans provides Employer of Record services in Saudi Arabia that enable global companies to hire employees quickly and compliantly. Acting as the legal employer, Mercans manages employment contracts, payroll, statutory contributions, and compliance with Saudi labor regulations. This solution allows international businesses to operate in Saudi Arabia without establishing a local entity, while maintaining full control of day-to-day management.

    Why should businesses use an EOR instead of establishing a legal entity in Saudi Arabia?

    Working with Mercans as your EOR in Saudi Arabia removes the need for complex company registration and ongoing administrative requirements. Businesses can enter the market immediately, saving time and costs while ensuring full compliance with Saudi employment and tax laws. Mercans handles HR, payroll, and legal responsibilities so organizations can focus on expanding their operations and achieving business objectives.

    How does payroll outsourcing in Saudi Arabia ensure compliance with labor and tax regulations?

    Mercans’ payroll outsourcing services in Saudi Arabia guarantee compliance with all local regulations. The team manages accurate salary processing, social insurance contributions, end-of-service benefits, and tax reporting in line with Saudi labor standards. Regular updates to payroll systems ensure adherence to the latest legislation and protect clients from compliance risks.

    Can an Employer of Record in Saudi Arabia hire employees and manage work permits for international companies?

    Yes. Mercans can hire both Saudi nationals and expatriate employees on behalf of foreign companies. The team also manages visa sponsorship, work permit applications, and residency processes, ensuring a fully compliant employment experience for both local and international staff.

    What are the main benefits of using EOR and payroll services in Saudi Arabia for global expansion?

    Partnering with Mercans for Employer of Record and payroll services in Saudi Arabia offers significant advantages. Companies benefit from fast market entry, reduced administrative workload, cost efficiency, and guaranteed compliance with Saudi labor and tax laws. With Mercans’ local expertise and advanced HR technology, businesses can manage their workforce seamlessly and scale operations across Saudi Arabia with confidence.

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