Payroll in Saudi Arabia
Navigating payroll in Saudi Arabia requires precision and expertise. At Mercans, we understand that managing payroll services in Saudi Arabia can be a complex endeavor due to the country’s unique labor laws and regulations. Our commitment to simplifying this process for businesses like yours remains unwavering.
Saudi Arabia’s dynamic economy and diverse workforce demand a payroll solution that ensures compliance and accuracy. Whether you’re a local enterprise or a global corporation, our payroll services in Saudi Arabia are tailored to meet your specific needs. With our comprehensive expertise, advanced technology, and commitment to excellence, we’re here to empower your business in Saudi Arabia.
Transforming Payroll with Advanced Technology, Seamless Integrations, and Recognized Excellence
At Mercans, we take pride in our position as a leading provider of payroll technology and payroll services in Saudi Arabia. Our comprehensive suite of payroll solutions encompasses every aspect of payroll management, delivering a seamless experience for businesses of all sizes and complexities.
- Technology-Driven Solutions: Mercans harnesses state-of-the-art technology to streamline payroll processes in Saudi Arabia. Our advanced payroll system simplifies intricate tasks, from payroll setup to processing, ensuring precise and timely payments. Whether it’s managing payroll taxes, administration, or adhering to local regulations, our technology-driven approach enhances efficiency and accuracy in the Saudi Arabian payroll landscape. Learn More About Mercans’ Payroll Technology
- Seamless Integrations for Effortless Payroll: At Mercans, we prioritize seamless integrations to elevate your payroll and HR experience in Saudi Arabia. Our successful integrations with industry-leading HCM platforms, such as UKG, Workday, Oracle HCM, SAP Success Factors, DarwinBox, and Ceridian, enhance workforce management. By eliminating data redundancy and enabling real-time data flow, our unified HCM and payroll solution not only consolidates payroll processing costs but also streamlines administration. Explore our integrations and discover how they can benefit your Saudi Arabian business at Integrate HCM with Mercans.
- Recognitions in Excellence: Mercans’ unwavering commitment to excellence in payroll services has earned us recognition both within Saudi Arabia and beyond. Our dedication to compliance, precision, and innovation positions us as a trusted partner for businesses seeking reliable payroll solutions. Discover more about our achievements in the realm of Saudi Arabian payroll services at Awards and Recognition.
From managing payroll for small businesses to offering comprehensive global payroll services, Mercans’ capabilities span a wide spectrum. Our expertise extends to payroll reporting, HR and payroll integration, payroll automation, and precise payroll calculations. We also provide flexible payroll frequencies to cater to diverse business needs within Saudi Arabia.
Mercans’ Comprehensive Suite of Payroll Solutions
At Mercans, we are dedicated to delivering comprehensive payroll services in Saudi Arabia that cater to a diverse range of business needs. Let’s explore two crucial aspects of our payroll offerings in the context of Saudi Arabia: Global Payroll Outsourcing and Global Payroll SaaS (Software as a Service).
Global Payroll Outsourcing in Saudi Arabia:
Discover Mercans’ extensive payroll services tailored to enhance and streamline your payroll operations in Saudi Arabia and beyond:
- Managed Services: Mercans’ Managed Services provide a hassle-free payroll experience in Saudi Arabia. We oversee every aspect, from setup to processing and compliance. Our expert team meticulously handles your employees’ wages, salaries, and compensation, allowing you to focus on your core business activities. Trust us to manage payroll laws and compliance effectively.Learn more.
- HRMS (Human Resources Management System): Mercans’ Global Payroll Outsourcing service simplifies payroll management in Saudi Arabia. As leaders in payroll technology, we optimize payroll setup, processing, compliance, and tax management. By outsourcing to Mercans, you gain confidence in accurate and efficient payroll handling, freeing up time for core business operations.
- Global Payroll SaaS: Experience the power of Mercans’ Global Payroll SaaS, an innovative solution that enables seamless payroll management in Saudi Arabia and 160 countries. Our advanced technology ensures effortless payroll processing, compliance, and tax management, replacing manual administration with precision and efficiency. Explore more about our integrated platform, offering over 100 inbound and outbound integrations with leading business software applications, such as HCM, HRM, financial, and ERP solutions. Embrace automation and streamline your payroll processes with Mercans. Learn more.
Choose Mercans for a seamless and efficient payroll solution tailored to your unique needs. Learn more about these solutions at Mercans – Global Payroll Outsourcing.
Global Payroll SaaS (Software as a Service) in Saudi Arabia:
Mercans’ Global Payroll SaaS provides businesses with a sophisticated yet user-friendly payroll software in Saudi Arabia. Whether you’re a small business or a multinational corporation, our SaaS platform is designed to meet your specific payroll needs. From payroll calculation to reporting, our software streamlines payroll processes, ensuring error-free payments. The system seamlessly integrates with your existing HR infrastructure, creating a unified platform for HR and payroll management. With Mercans’ Global Payroll SaaS, businesses in Saudi Arabia can effortlessly handle payroll setup, processing, taxes, and compliance. Our solution enhances efficiency, accuracy, and simplifies the complexities of managing payroll in Saudi Arabia.
Establishing an Entity in Saudi Arabia
Setting up a legal entity in Saudi Arabia involves several steps and tasks, typically spanning a period of 90 to 180 days. Below is an outline of the key steps in the legal entity setup process along with the estimated timeframes:Legal Entity Setup Process in Saudi Arabia:
Prepare Articles of Association (AOA) or Board Resoluloyee Fixed and Variabletion (14 days)Draft and finalize the company’s AOA or obtain a board resolution, specifying key details about the business.
Obtain SAGIA License (60 – 90 days)Apply for and obtain a license from the Saudi Arabian General Investment Authority (SAGIA) to facilitate foreign investment.
Open Bank Account & Deposit Capital (5 days)Establish a corporate bank account in Saudi Arabia and deposit the required minimum capital.
Obtain Commercial Registration (CR) (5 days)Apply for and obtain the Commercial Registration (CR) certificate from the Ministry of Commerce and Investment. The CR includes essential company information.
Chamber of Commerce Registration (2 days)Register your business with the local Chamber of Commerce, which is typically located in the city where your business operates.
Secure Office (30 days)Secure suitable office space in Saudi Arabia, as it is a prerequisite for registering your business.
Municipality (Baladia) License (14 days)Apply for and obtain a municipality license, often referred to as the “Baladia” license, from the local municipality where your business is located.
Ministry of Labor RegistrationHire a Saudi national within 30 days to comply with labor laws and regulations. This step is crucial for businesses operating in Saudi Arabia.
*GOSI Registration (2 days)Register with the General Organization for Social Insurance (GOSI) to comply with social insurance and employee benefits requirements.
Wasel Registration (2 days)Register with the Wasel system, which is part of the Saudi Arabian telecommunications infrastructure.
Muqeem Registration (2 days)Register with the Muqeem system to facilitate the management of expatriate employee residency permits.
Obtain DZIT License (14 days)Apply for and obtain a license from the Department of Zakat and Income Tax (DZIT) to comply with tax regulations in Saudi Arabia.
Saudi Arabia Payroll Requirements
Saudi Labor Law governs payroll requirements. While there isn’t specific payslip guidance, it’s common practice to provide monthly payslips. Payments are regulated by the Wage Protection System (WPS), requiring salary transfers within two weeks of due dates or contract specifications. A local employment contract and salary transfer in Saudi riyals are mandatory for both Saudi nationals and expats. Registration with the Ministry of Labor (MOL) is obligatory. When an employee changes employers, their name must be removed from the MOL and GOSI, while the GOSI number remains unchanged.
Registration of employees to Statutory Bodies
When establishing your payroll in Saudi Arabia, it’s essential to ensure compliance with various statutory bodies, including tax authorities and social security agencies. Registering your employees with these entities is a fundamental step in the process, and Mercans will handle these registrations as part of our standard service where legally permitted.
- Tax Registration: When establishing your payroll in Saudi Arabia, it’s essential to ensure compliance with various statutory authorities, including tax authorities and social security agencies. Registering your employees with these entities is a fundamental step in the process, and Mercans will handle these registrations as part of our standard service where legally permitted.
- Tax and Social Security Notifications: Our registrations involve notifying the relevant statutory authorities, both in terms of tax and social security, regarding new starters and leavers. Mercans will perform these registrations seamlessly to ensure compliance with Saudi Arabian regulations.
- Social Security/Insurance (GOSI) Guidelines:
- Social Security/Insurance (GOSI) is applicable to all employees who are Saudi Arabian nationals and are aged between 18 and 60 years. Additionally, other GCC nationals (Bahrain, Kuwait, Saudi Arabia, Oman, and Qatar) might also be subject to Social Security deductions if employed in Saudi Arabia.
- However, non-Saudi nationals who are not GCC nationals are exempt from employee Social Security deductions. For these employees, only employer Occupational Hazard contributions must be made.
- New Employee Registration: When hiring a new employee, it is imperative to promptly register them through the GOSI online portal, ensuring compliance with the law. This registration should be completed within a maximum of 15 days from the employment start date.
- Handling Leavers: In the event of an employee leaving your company, it is essential to inform GOSI by the 15th of the following month after the last day of their employment. The employer must also de-register all leavers from GOSI through the GOSI online portal.
- Ensuring Compliance: Proper registration and de-registration of employees with these statutory bodies are critical to meeting legal requirements and providing your workforce with the necessary protections and benefits. Trust Mercans to manage these processes efficiently, ensuring your compliance with Saudi Arabian regulations.
Declaration to Statutory Bodies
Ensuring adherence to statutory regulations is paramount in Saudi Arabia, necessitating accurate and timely declarations to relevant authorities. Here’s a comprehensive breakdown of key aspects to consider:
- Tax Declarations: As an integral part of your Saudi Arabian payroll, you must regularly submit tax declarations. These declarations should encompass detailed information concerning income, deductions, and tax liabilities. Precise reporting to tax authorities is pivotal to guarantee your business’s compliance with tax regulations.
- Social Security Declarations: Maintaining updated employee records, tracking contributions, and ensuring comprehensive benefits coverage requires timely declarations to social security bodies. Accuracy in these declarations is instrumental in securing essential social security benefits for your employees.
- GOSI Compliance: Another critical aspect is remitting monthly dues based on the amounts reported on the GOSI online system. It’s imperative to obtain the due amount from GOSI’s online system, which regularly reports the monthly social security obligations. Making these payments through the SADAD system ensures the total GOSI contributions are remitted accurately and on time.
- Timely Payment: It’s important to note that payment of monthly Social Security dues must be completed within 15 calendar days from the month-end to avoid penalties and maintain compliance.
Payroll Process in Saudi Arabia
For efficient payroll processing, we adhere to a structured timeline:
Cut-off DateThis marks the final date for the Client to submit both permanent and variable data in the agreed format each month. Late submissions may impact payment dates, and we may not have sufficient time for our usual quality checks.
Sign-off DateBefore final processing, we provide trial outputs for the Client’s review. After examination, the Client confirms acceptance and reports any significant errors or omissions.
Final Processing Date (Payroll Commit)On this date, we commit payroll results following the Payroll Procedure Manual, ensuring pay slips and reports are accurate and error-free.
Pay DateThe Client determines the employee payment date, and it’s essential to execute payments based on instructions provided by Mercans to ensure timely disbursement.
Closing DateThe Client’s approval of the current payroll cycle closes it, marking the beginning of the next pay period.
Availability of Payroll OutputsMercans guarantees availability of Payroll Outputs within three working days after the payroll processing date.
During the pay period, the Client’s Payroll Coordinator collects all transactions, ensuring they are available on the cut-off date. Transactions are approved and agreed upon. Delays in transaction availability may result in a new output return date.
Mercans verifies the correctness of client-submitted transactions, particularly regarding taxation and social security legislation. We also identify improbable transactions before payroll processing.
Typical transactions impacting payroll processing include changes in employee details, new hires, terminations, fixed payroll components, variable transactions, final settlements, wage-tax reduction schemes, and loans provided.
On the Closing date, we confirm the delivery of Output Reports and payment of employees with the Client to close the payroll for the month. If the Client is unavailable on the Closing date, alternative arrangements are made promptly.
Payroll Processing in Saudi Arabia
When it comes to payroll processing services in Saudi Arabia, businesses often seek external assistance to ensure accuracy and compliance. Here’s a summary of the key aspects:
Social Security Declarations in Saudi Arabia:
- Service Description: Mercans assists in the monthly submission of social security declarations.
- Filing Frequency: Declarations are filed on a monthly basis.
- Payment Frequency: Payments are made monthly.
- Due Date: Declarations must be submitted within 15 days from the end of each month.
- Process Definition: Social security deductions are calculated based on January values of relevant periodic pay elements. No declaration is required for this process.
- Payment Procedure: Monthly dues are remitted by wire transfer, aligned with the amount reported on the GOSI (General Organization of Social Insurance) online system.
- Payment Options: Wire transfer. A power of attorney is needed for payments made on behalf of the Client.
Responsibility Matrix for Monthly Social Security Payment in Saudi Arabia:
Task 01Obtain the amount due from the GOSI online systems (Client responsibility).
Task 02Make a payment through the SADAD system for the total GOSI contribution due (Client responsibility).
Task 03Archive the necessary records (Client responsibility).
Pre-processing: Data Preparation & Control:Retroactive Changes:
- Retroactive change in individual pay slip.
- Retroactive changes in multiple pay slips.
- Payroll Processing
- Executing payroll instructions.
- Payroll Checking
- Processing of Payroll Outputs
Standard Payroll Process – Types and Frequencies:
- Monthly Payroll – Typically, salaries are paid on a monthly basis in Saudi Arabia.
- Bi-weekly/Fortnightly Payroll – Some organizations pay their employees every two weeks.
- Semi-Monthly Payroll – Others prefer a semi-monthly schedule.
- Weekly Payroll – In specific cases, weekly payroll is used.
- Advance Payment Run – Issuing advance payments.
- 13th Salary Run – The annual bonus salary.
- Bonus Run – Special bonuses, as required.
- Individual off-cycle manual pay calculations – Addressing individual payment adjustments.
- Tax Year: The fiscal/tax year in Saudi Arabia runs from January 1st to December 31st.
Summary of Reports & Declarations in Saudi Arabia:Social Security Authority:
- Annual Declarations of salaries with the Social Security Authority.
Payroll Administration in Saudi Arabia
Payroll administration in Saudi Arabia encompasses various crucial aspects. Below are key points with summaries for each:
Employee Fixed and VariablePayroll administration in Saudi Arabia encompasses both fixed and variable elements. Fixed components include the basic salary and housing allowance, while variable aspects consist of bonuses, commissions, and other variable incentives.
Maintenance of Client Master DataEnsuring accurate and up-to-date client master data is crucial for payroll accuracy. This involves maintaining records of employees, their roles, salary structures, and other relevant details.
Changes in Fixed Employee TransactionsPayroll administrators must efficiently handle changes in fixed employee transactions, such as salary adjustments, promotions, or changes in employment terms.
Variable TransactionsManaging variable transactions, which can fluctuate based on performance or sales targets, requires careful tracking and computation to ensure accurate payroll processing.
Emergency CasesIn emergency situations, like unexpected medical leaves or sudden workforce changes, payroll administrators must swiftly adapt payroll calculations to address unforeseen circumstances.
Starters/New EmployeesOnboarding new employees involves setting up payroll accounts, ensuring compliance with tax and social security regulations, and accurately calculating their initial pay
LeaversWhen employees leave the company, payroll administrators must handle final settlements, including any outstanding dues, accrued benefits, and tax considerations.
Absence Recording for Paid AbsencesManaging paid absences, such as holidays, paid Haj leaves, and educational leave, necessitates meticulous recording to ensure employees receive their entitled benefits.
HolidayRecording and processing paid holiday leaves, in accordance with company policies and local regulations, is essential for maintaining accurate payroll records.<
Paid HajAdministering paid Haj leave involves verifying eligibility, calculating the applicable entitlements, and ensuring compliance with statutory requirements.
Educational LeaveAccurately tracking and processing educational leave requests, including any related allowances or benefits, is essential for payroll administrators.
Absences Impacting the SalaryPayroll administrators need to account for various types of absences that impact an employee’s salary, such as unpaid leaves or deductions for unauthorized time off.
Tax and Social Security in Saudi Arabia:
- Registration with General Authority of Zakat: To register for Zakat, an Islamic wealth tax, employers must complete an online application on the General Authority of Zakat and Tax (GAZT) website. This involves attaching required documents, and once approved, a unique ID is issued, essential for participation in government contracts and tenders.
- Corporate Income Tax: Non-Saudi investors are subject to income tax, while Saudi citizen investors and GCC country citizens face Zakat. In cases of mixed Saudi and non-Saudi ownership, taxable income for non-Saudi interests is subject to income tax, and the Saudi portion contributes to Zakat.
- Permanent Establishment: Non-resident entities can establish a permanent presence (PE) in Saudi Arabia based on specific criteria, such as fixed places of business or authorized agents conducting business activities on their behalf.
- Personal Income Tax: Saudi Arabia does not impose individual income tax on employment earnings; only social insurance tax applies.
- Social Security: Employers must contribute to social security, covering injuries from occupational hazards. Saudi national employees face additional annuity and unemployment insurance contributions under GOSI, with certain limits.
- Reporting: In Saudi Arabia, the tax year follows the calendar year, and new hires, departures, and salary changes must be reported promptly to relevant authorities.
- Wage Protection System: Employers with over 20 employees are required to use the WPS for salary payments, involving registration, bank accounts, and monthly processing steps to ensure timely and full salary payments.
Payroll Taxes in Saudi Arabia
Managing payroll taxes in Saudi Arabia is a critical responsibility. Here’s a summary of the key points:
In Saudi Arabia, employees do not incur payroll taxes on their personal income, especially when they solely earn their livelihood within the country. However, in accordance with the law, resident employees are obligated to make a social security deduction of 10%. Additionally, a 2% deduction is applicable for pension and unemployment insurance.
Conversely, employers bear the tax burden, with the specific amount or percentage dependent on their type of business:
- Social security (GOSI): 12% for residents, 2% for non-residents.
- Pension contributions and unemployment insurance (SANID): 18%.
- Occupational hazard insurance: 2%.
- Corporate income tax: 20%.
Saudi Arabia has forged tax treaties with more than 20 countries, including the United Kingdom and the United Arab Emirates, aiming to prevent tax evasion and mitigate the issue of double taxation for Saudi Arabian citizens.
Furthermore, the prevailing standard VAT rate in Saudi Arabia stands at 15.00%.
Payroll Compliance in KSA
Maintaining payroll compliance in Saudi Arabia involves adherence to key dates and rules across various critical areas:
- Onboarding: Ensuring proper onboarding procedures for employees is essential to initiate the payroll process accurately.
- Statutory Filings & Contributions: Businesses in Saudi Arabia must meticulously manage statutory filings and contributions. Timely and accurate submissions to tax and social security authorities are imperative to remain compliant. This includes regular reporting and declarations.
- Pension: Complying with pension regulations is crucial, as employers are responsible for ensuring employees receive necessary benefits in accordance with the law.
- Social Security: Employers are obligated to contribute to the social security system, guaranteeing employees access to vital benefits. Compliance with these contribution requirements is vital to meet legal obligations and maintain a compliant payroll system.
Payroll Outsourcing in KSA
Outsourcing payroll in Saudi Arabia offers numerous advantages. It saves valuable time by entrusting meticulous payroll tasks to experts like Mercans, enabling a focus on strategic business plans and improving customer service. Their unmatched accuracy ensures flawless payroll processing, reducing errors to a minimum. Additionally, Mercans handles all reporting requirements, freeing your team from repetitive administrative tasks. Moreover, their expertise ensures seamless compliance with legal regulations, providing peace of mind when managing an international team.
In conclusion, payroll services in Saudi Arabia encompass various aspects, from employee registration to tax compliance and outsourcing. To navigate the complexities of payroll in Saudi Arabia effectively, businesses must prioritize compliance, accuracy, and employee welfare. Outsourcing payroll can be a valuable solution for businesses looking to streamline their operations and ensure compliance with local regulations.