Saudi Labour Law for Employers (2026): Key Rules

By Rozy — Business Consultant, Noble Core · Updated June 2026

This guide sets out, factually, the key employer obligations under the Saudi Labour Law in 2026 — contracts, hours, the latest amendments, end-of-service, leave, probation, termination, wage protection and Saudization — so you can comply with confidence. It is general guidance; always confirm specifics on the official Ministry of Human Resources and Social Development (MHRSD) portals.

Who the Saudi Labour Law applies to

The Saudi Labour Law, issued under Royal Decree M/51 and supervised by the Ministry of Human Resources and Social Development (MHRSD), governs the relationship between private-sector employers and their workers — both Saudi nationals and expatriates. It sets minimum standards that an employment contract cannot fall below: an employer may offer more generous terms than the law, but never less. The law is administered through a connected set of government platforms — Qiwa for contracts and work permits, GOSI for social insurance, Mudad for the Wage Protection System, and Muqeem for residency (Iqama) — so compliance today is largely a matter of keeping these digital records accurate and up to date.

You can read the full text and the latest executive regulations on the official MHRSD website at hrsd.gov.sa.

It is worth understanding the spirit behind the law as well as its letter. Saudi Arabia’s labour framework has moved steadily toward a modern, worker-protective and digitally enforced model that supports the Kingdom’s Vision 2030 ambitions for a productive, attractive private sector. For employers, this is good news: the rules are clearer than ever, most processes are now self-service online, and an establishment that keeps its digital records in order will rarely face surprises. The cost of non-compliance, however, has also become more automatic — because the platforms cross-check one another, a gap in one system (an undocumented contract, a missed WPS payment) can quietly affect your standing in others. The practical takeaway is to treat HR compliance as an ongoing data-hygiene task rather than a once-a-year paperwork exercise.

Employment contracts must be documented on Qiwa

Every employee should have a written, fixed-term employment contract that states the job title, wage, working hours, leave and notice terms. In 2026 the contract is not just a private document — it must be electronically documented and authenticated on the Qiwa platform. This is the single most important administrative obligation for employers, because the authenticated Qiwa contract is what other systems read from.

Key points for employers in 2026:

• For a non-Saudi employee, a contract without a stated term now defaults to one year and renews automatically if work continues.
• Effective 15 April 2026, only Saudi employees with an electronically documented and authenticated Qiwa contract are counted toward your Saudization score — so undocumented contracts cost you twice.
• The contract must reflect the same wage that is paid through the Wage Protection System, or the mismatch will be flagged.

A compliant contract should, as a minimum, capture the parties’ names and identifiers, the job title and duties, the wage (basic plus any allowances), the contract term, probation length, working hours, leave entitlements, notice periods, and the place of work. Where the worker is a non-Saudi national, the contract is also linked to the work permit and Iqama, so the job title on the contract should match the profession on the work permit. Getting these details right at the outset avoids friction later — for instance, when transferring an employee, renewing a permit, or calculating end-of-service. Many disputes that reach the labour courts trace back to a vague or inconsistent contract, so precise drafting is one of the cheapest forms of risk management available to an employer.

If you are still setting up your entity, see our guide to company formation in Saudi Arabia for how the labour file fits into the wider registration process. The labour file (establishment file with MHRSD and Qiwa) is typically opened soon after the Commercial Registration, and it is the foundation on which work permits, GOSI registration and WPS all depend.

Working hours, overtime and rest

Standard working hours are 8 hours per day or 48 hours per week, reduced to 6 hours per day (36 per week) for Muslim employees during the holy month of Ramadan. Employers must respect daily and weekly rest, and overtime is paid at a premium.

Item	Standard rule	Notes
Daily hours	8 hours	Up to 9 hours in some seasonal/retail activities
Weekly hours	48 hours	6-day week; Friday is the weekly rest day
Ramadan hours	6 hours/day	For Muslim employees
Overtime rate	150% of basic hourly wage	Hourly wage + 50% for each extra hour
Weekly rest	At least 24 continuous hours	Normally Friday

Figures reflect the 2026 framework and may be adjusted by executive regulation — confirm the current rules on hrsd.gov.sa.

Beyond the headline numbers, employers should note a few practical points. Time spent on prescribed rest breaks, prayer and meals does not generally count as working hours, but employees should not remain on the premises more than eleven hours in a single day once breaks are included. For employees engaged on a monthly wage, the day of the weekly rest is paid. Friday is the standard weekly rest day, though employers in certain sectors may, with the worker’s agreement and within the law, substitute another day. Accurate timekeeping matters because overtime, rest violations and underpaid premiums are among the most common subjects of inspection and complaint. Many establishments now use the same digital systems that feed Qiwa and Mudad to log attendance, which keeps the wage actually paid consistent with the hours actually worked.

The 2025 amendments every employer should know

On 18 February 2025, a wide-ranging set of amendments — approved by the Council of Ministers on 6 August 2024 — came into force. They are designed to support Vision 2030’s goal of a skilled, fairly treated workforce. The most relevant changes for employers are:

• Probation extended to a maximum of 180 days (previously 90), giving employers more time to assess a new hire.
• Resignation formally recognised as a lawful reason for ending a contract; an employee can resign with notice without paying compensation, while an employer may justifiably defer accepting a resignation by up to 60 days.
• Equal opportunity strengthened under Article 61: employers must not weaken equal treatment through exclusion, differentiation or preference.
• Training duty: employers are expected to set training and qualification policies to develop their workforce.
• Default one-year term for non-Saudi open-ended contracts, as noted above.

For employers, the most useful way to read the 2025 amendments is as a clarification rather than a tightening. Many of the changes simply write down, in law, practices that responsible employers were already following — fair treatment, transparent reasons for ending a contract, and structured probation. The practical action items are straightforward: review your standard contract template against the new rules, make sure probation is stated explicitly and within the 180-day cap, add or update a training-and-development policy, and ensure your HR team understands that a resignation served with proper notice is now a clean, lawful exit that should be processed promptly through Qiwa. Aligning your internal policies with the amended law early avoids having to renegotiate terms later and signals to talent that you are a compliant, modern employer.

Probation and termination rules

Probation must be stated explicitly in the contract and can now run for up to 180 days. During probation either party may end the contract; only one day’s notice is generally required, though where termination falls near the end of probation, the employer should give at least seven days’ notice before the final day.

For confirmed employees, lawful termination requires a valid reason and proper notice. For an indefinite or open-ended arrangement, the standard notice period is typically 60 days where the worker is paid monthly and 30 days otherwise, unless the contract sets a longer period. Ending a contract without a legitimate ground, or without the required notice, exposes the employer to compensation claims before the labour courts — commonly the wages for the remaining term of a fixed-term contract, or a statutory award for an open-ended one. Good practice is to document performance issues in writing, give the employee a fair opportunity to improve, follow a consistent disciplinary process, and serve written notice through the proper channels.

Article 80 of the law lists specific circumstances in which an employer may end a contract without notice or end-of-service award — for example serious misconduct, repeated unexcused absence beyond the stated limits, or assault — but these are narrow and must be properly evidenced and documented at the time. Relying on Article 80 loosely is risky; if a labour court finds the dismissal was not justified, the employer can owe both the unpaid award and compensation. When an employee genuinely leaves, the offboarding is processed digitally: the final settlement (including any accrued leave and end-of-service) is calculated, Saudization status is updated, and Iqama transfer or exit is handled through Qiwa and Muqeem. Completing these steps promptly protects both parties and keeps your establishment file clean.

End-of-service benefits (gratuity)

End-of-service benefit (ESB) is a statutory gratuity every eligible employee earns on leaving. The standard calculation is based on the final wage:

• Half a month’s wage for each of the first 5 years of service.
• One full month’s wage for each year of service beyond 5 years.

For example, an employee with a final monthly wage of SAR 10,000 and 7 years of service would be entitled to roughly SAR 25,000 for the first 5 years (5 × half a month) plus SAR 20,000 for the next 2 years (2 × one month) — about SAR 45,000 in total, subject to the rules on resignation versus employer-led termination. A part-year of service is counted proportionately, so an employee leaving part-way through a year still earns a pro-rated share for that period.

Where the employee resigns (rather than being terminated by the employer), the award has historically been scaled depending on length of service — for instance, a reduced fraction for shorter tenures and the full amount once the employee has completed a longer period of continuous service. Because the precise resignation scaling can be adjusted by regulation, employers should confirm the current treatment for their case rather than rely on a rule of thumb. The most important employer habit is to accrue for the end-of-service liability month by month in the accounts, so the payment is fully provisioned and never lands as an unexpected lump sum at separation. Treating ESB as a real, growing obligation — rather than an afterthought — also makes workforce planning and cash-flow forecasting far more accurate.

Leave entitlements employers must provide

The law sets minimum paid-leave entitlements that employers must honour:

Leave type	Entitlement	Pay
Annual leave (under 5 years)	21 days per year	Full pay, prepaid
Annual leave (5+ years)	30 days per year	Full pay
Sick leave	Up to 120 days/year	30 days full, next 60 days at 75%, final 30 days unpaid
Maternity leave	12 weeks	Full pay; at least 6 weeks taken after childbirth
Paternity leave	3 days	Full pay
Hajj leave	10–15 days (once in service)	Full pay, conditions apply

Public holidays (Eid Al-Fitr, Eid Al-Adha, and Saudi National Day among others) are paid days off on top of annual leave. Always confirm the exact day counts and conditions in the current executive regulations.

A few employer-side rules are worth highlighting. Annual leave is a right the employee cannot simply waive for cash while still employed — the intent is that the worker actually rests — though accrued, untaken leave is paid out on departure. The employee should generally take leave within the leave year, and the employer has reasonable discretion to schedule it around operational needs. Sick leave must be supported by an approved medical report, and the tiered pay structure (full, then partial, then unpaid) runs across the rolling year rather than per illness. Maternity protections include the right to return to the same or an equivalent role, and nursing mothers are entitled to paid nursing breaks for a defined period after returning to work. Building these entitlements into your HR system — and tracking balances accurately — prevents both inadvertent shortfalls and disputes over what was owed.

Wage Protection System (WPS) via Mudad

Employers must pay wages on time and through the Wage Protection System (WPS), operated via the Mudad platform. In 2026 Mudad is effectively mandatory for covered private-sector employers and is tightly integrated with Qiwa, GOSI and the banking system. Salaries must be uploaded and paid from registered Saudi bank accounts, and the amounts must match the documented contracts. Late payment, unauthorised deductions or wage mismatches can trigger fines and service suspensions. Treat WPS as your central payroll-compliance hub: accurate, on-time, bank-channelled wages keep your establishment in good standing across all the connected systems.

In practice, a compliant monthly payroll cycle looks like this: each employee’s documented Qiwa contract sets the agreed wage; the establishment runs payroll and pays salaries from a registered Saudi bank account by the contractual date (and never later than the limit the law allows after the pay period ends); Mudad records the disbursement and matches it against the documented contracts and GOSI registrations. When the figures align, the establishment’s wage-protection status stays green. When they do not — a salary paid short, paid late, or paid outside the system — the platform flags the discrepancy, which can lead to fines and, for repeated issues, suspension of services such as new work permits. Because Mudad now feeds the Saudization classification too, reliable WPS compliance is not merely about avoiding penalties; it actively supports a higher Nitaqat band and the smoother government services that come with it. A simple discipline — pay the right amount, to the right account, on time, every month — is the most cost-effective compliance investment an employer can make.

Saudization (Nitaqat) and GOSI obligations

Through the Nitaqat programme, MHRSD requires private-sector employers to keep a minimum percentage of Saudi nationals in their workforce, set by company size, sector and the professions employed. Higher Saudization bands (Green to Platinum) unlock faster services and work-permit benefits; falling into the Red band restricts them. From 15 April 2026, only authenticated Qiwa contracts count toward your ratio, and consistent Mudad/WPS compliance feeds into your classification — establishments above a 90% compliance rate can earn quality points that lift them within the Platinum range. Separately, every employer must register staff with GOSI (the General Organization for Social Insurance) and pay the required social-insurance contributions. For a deeper view of the licensing side of operating in the Kingdom, see our MISA licence guide.

Common mistakes to avoid

• Hiring on a verbal or paper-only agreement and failing to document the contract on Qiwa.
• Paying wages in cash or from a non-registered account instead of through WPS/Mudad.
• Letting the contracted wage differ from the wage actually paid through WPS.
• Treating the new 180-day probation as automatic without stating it in the contract.
• Terminating a confirmed employee without a valid reason or proper notice, inviting a labour claim.
• Forgetting to accrue end-of-service benefits, then facing a large lump sum at separation.
• Missing GOSI registration or under-reporting wages to reduce contributions.
• Ignoring your Nitaqat band until work permits and transfers are blocked.

Frequently Asked Questions

What are the main employer obligations under Saudi labour law in 2026?

Employers must document every contract on Qiwa, cap hours at 8 per day or 48 per week, pay wages through the WPS via Mudad, register staff with GOSI, provide statutory leave and end-of-service benefits, and meet their Nitaqat (Saudization) ratio. The MHRSD supervises compliance through these connected digital platforms.

What changed in the Saudi labour law amendments of 2025?

Effective 18 February 2025, probation was extended to a maximum of 180 days, resignation was recognised as a lawful reason for ending a contract, equal-opportunity duties under Article 61 were strengthened, employers gained a training-policy duty, and open-ended non-Saudi contracts now default to a one-year renewable term.

How are end-of-service benefits calculated in Saudi Arabia?

End-of-service benefit is half a month’s wage for each of the first 5 years of service and one full month’s wage for each year beyond 5. It is based on the final wage. The exact amount can vary with whether the employee resigned or was terminated by the employer, so confirm the rules for your case.

What are the legal working hours and overtime rules?

Standard hours are 8 per day or 48 per week, reduced to 6 per day during Ramadan for Muslim employees. The weekly rest day is normally Friday, with at least 24 continuous hours off. Overtime is paid at 150% of the basic hourly wage — the normal rate plus 50% for each extra hour.

Do employers have to use Qiwa and Mudad?

Yes. Contracts must be electronically documented and authenticated on Qiwa, and wages must be paid through the Wage Protection System via the Mudad platform from registered Saudi bank accounts. From 15 April 2026, only authenticated Qiwa contracts count toward Saudization, making proper documentation essential.

How long can a probation period be in Saudi Arabia?

Since the February 2025 amendments, probation can last up to 180 days, provided it is stated explicitly in the contract. During probation either party may terminate, usually with one day’s notice, though at least seven days’ notice is expected when termination occurs near the end of the probation period.

What leave must employers provide?

Minimums include 21 days of annual leave (rising to 30 after 5 years), up to 120 days of sick leave (30 full pay, 60 at 75%, 30 unpaid), 12 weeks of maternity leave, 3 days of paternity leave, and Hajj leave once during service, plus paid public holidays. Confirm exact conditions in the current MHRSD regulations.

What is Nitaqat and how does it affect employers?

Nitaqat is Saudi Arabia’s Saudization programme, requiring a minimum share of Saudi nationals based on company size and sector. Bands run from Red to Platinum; higher bands unlock faster services and permits. From 15 April 2026 only authenticated Qiwa contracts count toward the ratio, and strong WPS/Mudad compliance improves your classification.