Payroll Process in Saudi Arabia (KSA)
Managing an organization’s payroll for all of its employees takes a lot of time and effort. Entrust the intricate payroll activities like GOSI contribution, Wage Protection System (WPS), Mudad Platform, statutory leaves, End of Service Gratuity and much more to the established and trusted solutions provider. Employing HLB HAMT, one of the leading payroll outsourcing firms, to precisely monitor your payroll process will ensure that everything runs well.
For more than 20 years, HLB HAMT has served clients throughout the GCC, the Middle East, and Africa. HLB HAMT has a long history of servicing clients in a variety of sectors. We combine our extensive experience with cutting-edge technology to offer you payroll services that are both reasonable and simple to understand. Our experts are based regionally and are familiar with all aspects of payroll processing for clients all around the world.
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Kingdom of Saudi Arabia (KSA) has become a more appealing option for businesses than it has ever been due to a major governmental structure that makes the kingdom more accessible to world trade. Payroll, benefit administration, and remuneration are all common tasks for businesses looking to expand in Saudi Arabia.
Payroll Process in KSA: Our Features
Some of the most significant KSA payroll policies, processes, and practices are given below.
Social Security Contribution (GOSI)
GOSI contribution percentage for Saudi National is set at 21.5 percent of the employee’s basic wage and housing allowance, with the company paying 11.75 percent and the employee paying 9.75%. For Expatriates, contribution is 2%, which is to be paid by the employer. SAR 45,000 is the maximum base amount used in GOSI calculations.
To find out more about GOSI, Click here.
KSA Wage Protection System
Wage Protection System (WPS) is compulsory for all private sector enterprises in Saudi Arabia. The WPS procedure is detailed below:
- Each organization must register with the WPS payment program provided by its bank in Saudi Arabia.
- The organisation will use the standard template provided by the bank to process WPS salary through the bank.
- The bank will generate a WPS confirmation file in txt format within 3+ business days from the processing of the WPS salary upload file.
- Organization will be required to upload the WPS confirmation file in Ministry of Labor portal through Mudad platform on or before 10th of next month.
Mudad is a digital payroll system implemented by the Ministry of Labor that monitors payroll violations by the employer, regulating payment of wages, etc. The basic process relating to the Mudad platform is outlined below:
- Register the organisation with the Mudad platform.
- After processing WPS salary for a month, Organization will be required to upload the WPS confirmation file through the Mudad portal on or before the 10th of next month.
- The Portal will provide response\violations to justify the violation.
- The organisation needs to submit reasons for the notes along with related proof. There are two channels for the submission of reasons. One channel is to submit through the online portal, i.e., Mudad, and the second is directly through the labour office.
Types of Statutory Leaves in KSA
A. Annual Leave
- 21 days per year for the first five years
- 30 days per year from sixth year onwards.
B. Sick Leave
- 120 days of Sick leave in a year
- For Fist 30 Days – Full Pay
- Next 60 Days – 75% pay
- Next 30 Days – unpaid
C. Maternity leave
– Ten weeks
D. Hajj Leave
10 -15 Days
E. Marriage Leave
– 5 days
F. Paternity Leave
– 3 Days
G. Compassionate Leave
– 5 days
H. Iddah Leave
- Muslim woman four-month and ten-day
- Non-Muslim women – 15 days
Please read our article on KSA Leave Policy here for a comprehensive understanding.
End of Service Gratuity
The end-of-service Gratuity is a monetary payment eligible to an employee as a lump sum at the end of service. Gratuity calculation is accrued at the following basis
- Half a month’s salary per year for the first five years.
- From the sixth year onwards, a full month’s salary is paid per year.
For a comprehensive understanding of KSA gratuity accrual and settlement, please refer to our article.
Statutory pay components
The KSA labor law does not define the components that should make up an employee’s salary; there are no defined statutory components. Payroll is not subject to income tax, and hence there are no mandatory tax deductions. However, KSA nationals are subject to mandatory national pension plan contributions.
Working Hours and Overtime
A worker may not actually work for more than nine hours a day if the employer uses the daily work criterion or more than forty-five hours a week if the employer uses the weekly work criterion. During the month of Ramadan, Muslims’ actual working hours are limited to a maximum of seven hours per day or thirty-five hours per week. The employer shall pay the worker for overtime working hours an additional amount equal to the hourly wage plus 50% of his basic wage.
End of Service Benefits
The employee is eligible for the following post-employment perks.
- Unprocessed Salary
- End of service Gratuity
- Air ticket for repatriation
- If applicable, pay for the notice period.
- Any unused leave (Vacation).
- Any other unpaid payments or deductions
- Any other benefits or compensation mentioned in Employment Contract
In order to get a detailed understanding about KSA payroll, please refer to our article.
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Overtime Calculation in KSA
When an employee works more hours than normal, those extra hours are considered overtime, and the payment made for the extra hours worked is referred to as overtime payment.
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