Employee benefits and compensation are the backbone of attracting and retaining top talent in Saudi Arabia. With mega projects like NEOM and a young workforce entering the job market, the Kingdom offers incredible opportunities. But there’s a catch, getting compensation and benefits right is crucial.
Mistakes can lead to fines, high turnover, or even reputational damage. Do it right, and you’ll have a motivated team driving your Saudi operations forward.
This guide breaks down everything you need to know about employee compensation, statutory benefits, and best practices to build a competitive package in Saudi Arabia.
Read more: Get tips on How to Find Jobs in Saudi Arabia
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Statutory Benefits under Saudi Labor Law
The Saudi Labor Law outlines several mandatory benefits for all employees. Here’s a summary of the key ones:
Tip: Ensure your HR systems are updated annually with public holidays and Ramadan working hours to stay compliant.
Know more about Maternity leave and bereavement leave.
Common Additional Benefits in Saudi Arabia
Most companies go beyond the legal minimum to attract and retain talent. Below are the most common optional benefits:
These perks help employers stand out in a competitive hiring environment, especially when hiring skilled expats or specialized local talent.
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Pay Regulations in Saudi Arabia
Compensation is governed by several key rules to ensure fairness and compliance:
Pro Tip: Always calculate gratuity through an automated system to avoid compliance risks.
Also read: What is Defined Contributions Plan?
Tax Considerations
Saudi Arabia has no personal income tax, making total compensation packages more attractive to employees. However:
- VAT (15%) applies to certain benefits like housing or health insurance purchased from external providers.
- Cash allowances are not subject to VAT.
Employers should ensure proper documentation for VAT compliance.
Read more: What Is Employee Turnover & How to Reduce it?
How to Build a Competitive Benefits Plan
Designing an attractive plan goes beyond compliance, it’s about aligning benefits with your company’s culture and employee needs.
1. Benchmark Competitors
Analyze compensation packages in your industry to stay competitive, especially for high-demand roles like engineers, developers, and project managers.
2. Offer Flexibility
Allow employees to choose benefit tiers, for example, multiple health insurance options or hybrid work allowances.
3. Streamline Processes
Digitize leave requests, expense claims, and payroll systems to enhance employee satisfaction and reduce admin time.
4. Communicate Value
Show employees the total worth of their compensation package (salary + benefits). Transparency boosts trust and retention.
5. Collect Feedback
Run quarterly or annual surveys to understand benefit satisfaction and identify areas for improvement.
Read more: Get tips on 2025 Recruitment Statistics
Example of Competitive Packages by Industry
Read more: Top Talent in Saudi Arabia’s private sector
Conclusion
To succeed in Saudi Arabia, employers must blend compliance with creativity. A well-designed compensation and benefits package not only meets legal obligations but also strengthens employer branding, improves retention, and drives productivity.
By investing in your employees’ well-being, you’re investing in your company’s long-term growth.
