Operating a Business

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Saudi Arabia: Operating a Business

In this page: Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labour | Management of Human Resources

Legal Forms of Companies

Sole Proprietorship: Number of partners: One single person.
Capital (max/min): No minimum capital required.
Shareholders and liability: The individual entrepreneur is liable for the company's debts with his personal possessions.
Limited Liability Company: Number of partners: Minimum one director and one shareholder
Capital (max/min): Minimum SAR 100,000.
Shareholders and liability: Liability is limited to the amount contributed.
Joint Stock Company: Number of partners: Minimum three directors and one shareholder
Capital (max/min): Minimum SAR 500,000.
Shareholders and liability: Liability is limited to the amount contributed.
Limited Partnership: Number of partners: Minimum one director and two partners
Capital (max/min): No minimum capital
Shareholders and liability: At least one partner must have an unlimited liability. Liability of other partners is limited to the amount contributed.

Business Setup Procedures

Setting Up a Company	Saudi Arabia	Middle East & North Africa
Procedures (number)	3.00	6.28
Time (days)	10.40	19.51

Source: Doing Business - Latest available data.

The Competent Organisation: Saudi Arabian General Investment Authority (SAGIA)

Saudi Arabian Standards Organisation (SASO)

Ministry of Commerce and Industry

Ministry of Finance

Department of Zakat and Income Tax
For Further Information: Consult the Doing Business website, to know about procedures to start a Business in Saudi Arabia.
The Ministry of Commerce and Industry, for Business licenses.

Financial Information Directories

Dun & Bradstreet - Worldwide directory with financial information on businesses

Recovery Procedures

Principle: Saudi Arabia has written a commercial law that is generally applied consistently. Law allows debtors to conclude financial settlements with their creditors through committees under the Saudi Chambers of Commerce and Industry or through the Board of Grievances.
Bankruptcy Laws: The country has written a bankruptcy law that was enacted by Royal Decree no. N/16 dated 4/9/1416H (corresponding to 1/24/96). It is called Regulation on Bankruptcy Protective Settlement.

The Active Population in Figures

	2018	2019	2020
Labour Force	14,020,758	14,387,604	14,455,587

Source: International Labour Organization, ILOSTAT database

	2017	2018	2019
Total activity rate	57.85%	57.50%	57.95%
Men activity rate	80.79%	80.32%	80.71%
Women activity rate	23.72%	23.12%	23.31%

Source: International Labour Organization, ILOSTAT database

Employed Persons, by Occupation (% of Total Labour Force)	2014
Public administration and defence; compulsory social security	16.1%
Wholesale and retail trade; repair of motor vehicles and motorcycles	14.5%
Construction	12.8%
Education	11.8%
Manufacturing	7.2%
Human health and social work activities	5.5%
Agriculture, forestry and fishing	5.3%
Transportation and storage	3.5%
Accommodation and food service activities	3.4%
Administrative and support service activities	1.7%
Professional, scientific and technical activities	1.4%
Mining and quarrying	1.4%
Financial and insurance activities	1.3%
Information and communication	1.2%
Real estate activities	1.1%
Electricity, gas, steam and air conditioning supply	1.0%
Water supply; sewerage, waste management and remediation activities	0.7%
Arts, entertainment and recreation	0.2%

For Further Statistics: Ministry of Economy and Planning
For Further Information About the Labour Market: ILO, International Labour Organisation

Working Conditions

Opening Hours
Legal Weekly Duration: 8 hours a day or 48 hours a week. The number of working hours may be raised to 9 hours a day where the workman does not work continuously, such as seasonal establishments, hotel, snack bars, restaurants, etc.
Maximum Duration: In the month of Ramadan actual working hours shall not exceed 6 hours a day or 36 hours a week, exclusive of the intervals reserved for prayer, rest, and meals.

Working Rest Day: Friday
Paid Annual Vacation: 20 days with full wages payable in advance on completion of 1 year of service. 30 days when the workman completes 5 continuous years.
Retirement Age: 60 years for men and 55 years for women.
Child Labour and Minimum Age For Employment: 14 years is the minimum age for employment.
18 years for working in a mine or a quarry.

The Cost of Labour

Pay

Minimum Wage: SAR 4,000 - Private firms are required to pay citizens a minimum of SAR 4,000/month to count nationals for Nitaqat Saudization program purposes. However, they are neither statutorily required nor are they obliged by Nitaqat program regulations.
Average Wage: SAR 10,186 for the Saudi, SAR 4,023 for the Non Saudi (GaStat, Q4 2021)
Other Forms of Pay
Pay For Overtime: normal wage + 50%
Pay For Rest Days Worked: Double the normal wage

Social Security Costs

The Areas Covered: Social security covers old age, disability and survivor pensions, work injury and unemployment. Visit the ISSA for more details.
Contributions: Contributions Paid By the Employer: Employers contribute 9% of monthly covered payroll (monthly earnings considered are min SAR 1,500 and max SAR 45,000) to GOSI and 2% salary of all employees for work injury. From 1 Sep 2014, an additional 1% unemployment insurance contribution is required.
Contributions Paid By the Employee: Saudi employees contribute 9% of gross monthly covered earnings, within the maximum limit of SAR 45,000. From 1 Sep 2014, an additional 1% unemployment insurance contribution is required.
Self-employed Saudi residents contribute 18% of monthly covered declared earnings (monthly earnings considered are min SAR 1,200 and max SAR 45,000). Unemployment insurance contribution is not applicable to self-employed individuals.
Competent Organization: General Organization for Social Insurance (GOSI)

Management of Human Resources

Recruitment

Method of Recruitment: Direct recruiting is the most popular method of recruitment. However, the Internet is also rapidly becoming a popular hiring tool.
Recruitment Agencies: Saudi Arabia has no nationally-organised job centres. It is the responsibility of the Ministries of Labour and Social Affairs to manage employment.
Recruitment Websites: Bayt
4International Careers and Jobs

The Contract

Type of Contract

Broadly there are two types of contracts: Permanent and Fixed-term.

Majority of the contacts for foreigners in the labour sector are of fixed-term, while as for the locals these are of permanent type. As of April 2017, following a decision made by the Ministry of Labour, foreigners are excluded from working under any contract at malls in Saudi Arabia.

The number of 'temporary contracts' is very low.

Breach of Contracts

Retirement

The contract can be terminated by agreement of the two parties, at end of period of contract, at the request of either part in case of indefinite term contract or in case of force majeure.

Dismissals

According to Saudi law, an employer has a right to terminate the services of an employee without giving a reason, though this position has been weakened through various court orders.

However, employees cannot be dismissed while they are on sick leave, disablement leave or maternity leave.

Other Possible Methods

• Collective dismissals due to economic reasons.

• Disciplinary dismissals

• Resignation as per the terms of contract.

Labour Laws

Summary of Saudi Arabia Labour Law
Consult Doing Business Website, to obtain a summary of the labor regulations that apply to local entreprises.

Dispute Settlement

Conciliation Process

Legal Framework

Labour Offices attempt to amicably resolve the dispute between the worker and the employer. In case the attempt is futile, complaints referred to the one of the two commissions- the Preliminary Commissions for Settlement of Labour Disputes, the High Commission for Settlement of Labour Disputes. The commissions settle these cases on the basis of Labour Laws.

Procedure

Islamic Law (the Sharia) forms the basis for Labour Laws in the country. Visit the below given links:

Settlement of Commercial Disputes - Saudia-online.

Labour and Workmen Law - Saudia-online.

Judicial Structures

Legal Framework: Islamic Law (the Sharia) is the main source of law in Saudi Arabia. Since 2010, Saudi Arabia has began the process of codifying the Sharia regulations in order to bring clarity and uniformity to judicial rulings.
Competent Legal Body: There are 37 Labour Offices in the country. In case of failure of dispute settlement, the case can be referred to the Preliminary Commissions and High Commission.

Social Partners

Social Dialogue and Involvement of Social Partners: The labour law does not provide for collective bargaining. However, the companies that employ more than 100 Saudis are allowed to form "labour committees." Currently, there are 15 labour committees registered in the Kingdom.
Regulation Bodies: Ministry of Human Resources and Social Development

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