Labor laws in Saudi Arabia continue to evolve, as the country’s attention remains focused on enabling a business-friendly environment that attracts top talent and multinational companies.
The latest amendments, which took effect on February 18th, 2025, introduce long-term structural changes while setting new standards for labor protections globally.
These reforms enhance job security, streamline employer-employee relationships, and create a conducive, transparent work environment where employees feel more satisfied.
Staying informed of these updates is important for global companies setting up a business in Saudi Arabia. To achieve full market integration, hiring local talent is a key element of localization in Saudi Arabia—almost 31.25% of businesses hiring Saudi professionals said it significantly enhanced stakeholder engagement and cultural understanding in our latest Saudi Market Entry Report.
A Snapshot of the Key Amendments to Labor Laws in Saudi Arabia (2025)
Fixed-Term Contracts for Non-Saudi Employees
- Non-Saudi employees must have a written, fixed-term contract.
- If no duration is specified, it is automatically considered a one-year contract, starting from the day the employee commences working.
Resignation Procedures
- A resignation becomes automatically accepted if the employer doesn’t respond within 30 days.
- Employers can delay acceptance for up to 60 days, provided they give a written justification.
- Employees can withdraw their resignation within 7 days unless it has already been accepted.
Dismissals & Notice Periods
- Monthly-paid employees: 30 days’ notice if the worker resigns; 60 days if the employer wishes to terminate.
- Non-monthly employees: 30 days’ notice from either the employer or employee side.
- Bankruptcy is a lawful reason for termination; postdated resignations are prohibited.
Maternity & Paternity Leave
- Maternity leave: Extended to 12 weeks.
- Paternity leave: 3 days, to be taken within 7 days of childbirth.
- Bereavement leave: An additional 3 days for the loss of a sibling.
Workplace Grievance Policy
- Employees must be formally notified in writing of any penalties.
- They have 30 days (excluding official holidays) to file a grievance.
Extended Probation Period
- Now up to 180 days (previously 90).
- Specific leave types (Eid, sick leave) are no longer excluded by default from the calculation.
- This update allows for greater flexibility in defining which types of leave to count during the probation period.
Overtime Compensation
- Employers can offer paid time off in lieu of overtime pay, contingent upon employee consent.
Training & Saudization Compliance
- Mandatory skills development and training programs for Saudi employees.
Penalty for Non-Compliance with Saudization
- The Ministry of Human Resources may withhold work permit renewals if Saudization quotas are not met, allowing non-Saudi employees to transfer employers without consent.
What Do Changes Mean for Foreign Businesses Expanding to Saudi?
Improved employment conditions are central to Saudi Arabia’s objectives of nurturing a versatile, resilient labor force, ultimately leading to increased productivity and reduced unemployment, a strategic focus in Vision 2030.
The requirement to enforce mandatory training programs for Saudi nationals represents a genuine breakthrough in how countries approach national workforce development. To put things into perspective, many countries offer financial incentives, whether they are tax measures or subsidized loans, to promote labor force development and effectively align education with labor market needs.
However, with the new amendments, companies of different sizes in Saudi are legally mandated to develop structured employee training. This makes it a compliance matter that businesses must adhere to.
From another standpoint, this particular legislation creates a newfound demand for professional corporate training service providers, either domestic or global firms.
By embracing these changes, foreign businesses can have a more skilled, diverse staff, reduce turnover, and boost organizational efficiency. This is all while improving compliance with statutory obligations, a precondition for long-term business growth in Saudi.
With the new labor laws in Saudi Arabia, business owners need to adapt their hiring handbooks and workplace policies to ensure full compliance.
Fostering compliance with statutory compliance has proven to be the foundation upon which foreign businesses can improve operational readiness and seamlessly drive an impactful market presence.
The findings of our report showed that 81% of businesses stated that completing their licensing procedures and compliance tasks was crucial to unlocking partnerships and tender opportunities. Broadly speaking, businesses that fully dedicate market-oriented resources are those that are better positioned to cultivate robust relationships with key stakeholders.
Reaping the rewards is largely contingent upon attracting top-tier Saudi employees and maintaining full adherence to laws and regulations.
What are the Next Steps for Businesses in Saudi Arabia?
Building stronger business-to-business relationships and trust is a crucial ingredient of organizational success in Saudi. Hiring local staff is one surefire way to maximize business exposure and empower successful go-to-market (GTM) strategies.
According to our report, a large proportion of surveyed companies cited that hiring national talent significantly increased stakeholder engagement.
This, as a result, has opened the door for a trove of opportunities to build partnerships and collaborations that facilitate their integration into the local economy.
From there, investing in effective talent acquisition strategies and skill development schemes for national employees is an undeniably critical step towards unlocking myriad growth prospects and establishing a dominant market position.
In addition, this enables businesses to remain consistent with Saudization targets—a strategic compliance area and key objective that can be realized with the help of Saudi market expansion partners such as AstroLabs.
So far, the on-ground team has supported over 300 high-growth businesses to fast-track local talent onboarding processes.
Companies that stay apprised of legal changes in Saudi Arabia, fulfill regulatory obligations at the initial market entry stage and post-business incorporation, and commit to local workforce laws can fully capitalize on early market momentum and achieve outsized returns on investment.
Recruitment Compliance Essentials in Saudi:
Saudization Checklist
Understanding the Impact of Labor Law Updates on Local Talent in Saudi Arabia
The new labor updates provide solid protection for national and global employees alike while providing them with increased job security. This in turn drives enhanced productivity and innovation across industries, perpetuating the virtuous cycle of internal growth.
As Saudi continues to pitch itself as a global economic powerhouse, the labor market is increasingly shaped by market disruptions, constantly evolving technological advancements, and changing job dynamics and skill demands.
Countries that prioritize workforce development are most likely to capture heightened investor attention and are better placed to seize emerging opportunities. On a macroeconomic level, a well-trained, adaptable workforce strengthens the economic foundation of the country, making it less vulnerable to external shocks.
Finding talent is often viewed as a main barrier to business growth; the recent amendments will further fuel the expansion of the country’s skilled labor force, further enhancing Saudi Arabia’s attractiveness to international organizations and multinational corporations.
Over the past few years, AstroLabs has been actively involved in strategic learning and development (L&D) initiatives in collaboration with its partners in Saudi Arabia. These programs encompass a wide range of industries, including fintech.
For two consecutive years, AstroLabs and Bank Saudi Fransi (BSF) have successfully implemented “The Digital Banker” program, aiming to cultivate fintech talents in the Kingdom across a diverse range of areas, including technical and soft skills, leadership development, and industry-specific expertise.
Thus, these initiatives not only help individuals improve employability but also contribute significantly to economic growth by fostering a competent, capable workforce.
Recruitment Compliance Essentials in Saudi Arabia
1. Saudization Compliance Checklist
As a cornerstone of Vision 2030, the Nitaqat (Saudization) initiative represents a government-led strategy to boost Saudi citizen employment across sectors. Under this workforce localization framework, international companies operating in the Kingdom must employ a designated percentage of Saudi nationals, with quotas determined by organizational size and sector classification.
The Saudization Certificate is a mandatory document for global companies seeking to bid on public or private sector projects in Saudi Arabia. This certificate serves as proof of compliance with Saudization and labor law rules and is only issued to companies that meet their pre-defined hiring quota.
The Saudization Certificate is an official document issued by the Ministry of Human Resources and Social Development (HRSD) that validates a company’s compliance with the Saudization requirements.
When Companies Require the Certificate
- Participating in government procurement opportunities
- Pursuing contracts with private sector organizations
- Requesting expanded work permit allocations for expatriate staff
- Processing commercial registration renewals
- Accessing services from the Ministry of Labor and HRSD
Key Quota Calculations
- Saudi employees earning below SAR 4,000 monthly contribute only 0.5 toward the Saudization quota
- Hiring one employee with a disability counts as 4 individuals toward the quota
- GCC nationals are treated as Saudi nationals for Saudization calculation purposes
- Saudi employees registered with multiple employers only count toward their primary company’s quota
- Male and female employees contribute equally to Saudization requirements with no gender distinctions
Related read: Saudi Plans New Saudization Rates for 269 Professions in Private Sector
2- Work Permit Requirements
Eligibility Criteria for Permit Approval:
- The employee has entered Saudi Arabia through legal channels and holds work authorization
- The employee possesses professional credentials and educational qualifications needed in the Kingdom
- The employee maintains a valid employment agreement with the sponsoring employer
Employer Financial Obligations:
- Residence permit (Iqama) and work authorization fees, including renewals and any late payment penalties
- Recruitment costs for hiring expatriate workers
- Airfare for the employee’s return to their home country upon contract termination
- Fees for occupation transfers, exit/reentry visas
Employment Contract Requirements in Saudi Arabia:
1. Employer and Employee Details
- Full legal names and identification information
- Contact details and addresses
- Company registration information
2. Job Title and Description
- Official job title
- Detailed responsibilities and duties
- Reporting structure and department
3. Probation Period Terms
- Duration (up to 180 days maximum)
- Evaluation criteria
- Terms for extension or early confirmation
4. Start Date and Contract Duration
- Employment commencement date
- Contract length (fixed-term or open-ended)
- Notice period requirements for resignation or termination
- Renewal terms and conditions
5. End-of-Service Award Calculations
- Calculation methodology based on years of service
- Payment terms and conditions
- Eligibility criteria
6. Salary Breakdown and Benefits
- Base salary amount
- Housing allowance
- Transportation allowance
- Other benefits and bonuses
- Payment frequency and method
7. Holiday and Annual Leave Entitlements
- Annual leave days (21 or 30 days based on tenure)
- Public holidays
- Sick leave provisions
- Maternity/paternity leave
- Other special leave types
8. Confidentiality and Non-Compete Clauses
- Confidentiality obligations during and after employment
- Non-compete restrictions (if applicable)
- Intellectual property rights
- Data protection requirements
9. Working Hours and Overtime Policies
- Standard working hours per day/week
- Break times and rest periods
- Overtime compensation rates
- Alternative compensation options (time off in lieu)
- Weekend and holiday work provisions
Common Hiring Mistakes Foreign Companies Make
Employee Misclassification: One of the most common hiring mistakes is applying for a visa that doesn’t match the employee’s role, job title, or contract duration. The visa may not legally cover the employee’s actual duties, leading to government rejection or penalties. Companies may lose the visa fee investment if the application is rejected or voided. In severe cases, the employee could face deportation or a reentry ban.
Late or Missed Iqama Renewals: Beyond the visa, each employee must hold a valid Iqama throughout their employment. A common mistake is initiating renewal too late or forgetting it altogether. Without a valid Iqama, the employee becomes non-compliant and cannot legally work, loses access to essential services such as healthcare and banking, and the employer faces fines and potential legal exposure.
Mismanaging Government Portals and Systems: Saudi Arabia’s regulatory environment relies heavily on integrated digital platforms. Missteps in managing government systems such as Muqeem, Qiwa, and Mudad can quickly escalate into wider compliance issues. Examples include failing to remove terminated employees from the system, missing Zakat or VAT filing deadlines, failing to submit GOSI contributions correctly, and not meeting Saudization quotas.
Treating Compliance as a Last-Minute Effort: Handling compliance reactively leaves companies vulnerable to being stuck in crisis management mode. Labor laws, Saudization targets, and visa rules are continuously evolving. As businesses scale, compliance obligations multiply and become harder to manage. Non-compliance damages reputation, disrupts operations, and leads to financial losses.
Frequently Asked Questions (FAQs) about Saudi Arabia Labor Laws (2025)
Have there been changes to annual leave entitlements?
Annual leave entitlements remain at:
- 21 days for employees with less than 5 years of service
- 30 days for employees with more than 5 years of service. However, new guidelines allow for more flexible leave scheduling and accumulation.
What are the new regulations regarding contract termination?
The new guidelines mandate a 60-day notice for monthly-paid employees terminated upon the employer’s wish. In case the employee initiates resignation, they will need to serve a 30-day notice period.
How have probationary period regulations changed?
The revised text establishes a maximum probation period of 180 days. It excludes the written agreement requirement to extend the initial 90-day period.
What are the consequences of non-compliance with these amendments?
The new amendments mandate improved penalties for non-compliance with Saudization and unauthorized recruitment, with the Ministry of Human Resources and Social Development authorized to withhold work permit renewals for violations.
What changes have been made to employment contract requirements?
According to the new labor law updates, non-Saudi employees now have to secure written contracts with a fixed term. Check out our employee onboarding playbook for a step-by-step guide to comprehensive hiring processes.