Question 1

What is GOSI and how much does the employer pay?

Accepted Answer

GOSI (General Organization for Social Insurance) is Saudi Arabia's mandatory social insurance system. Employers pay 11.75% of basic salary plus housing allowance for Saudi employees (9.75% for retirement + 2% for occupational hazards). For non-Saudi employees, the employer pays only 2% for occupational hazards coverage.

Question 2

What is the difference in cost between a Saudi and non-Saudi employee?

Accepted Answer

Saudi employees have higher GOSI contributions (11.75% vs 2%) but no Iqama, work permit, or dependent fees. Non-Saudi employees have lower GOSI but incur additional costs including work permits (SAR 1,200+/year), Iqama renewal (SAR 650/year), dependent fees (SAR 400/month each), and mandatory insurance. The total cost difference depends on the salary level and number of dependents.

Question 3

What allowances are mandatory in Saudi Arabia?

Accepted Answer

Saudi labor law does not strictly mandate specific allowances beyond the basic salary. However, market practice and industry standards have made housing and transport allowances standard components of most employment packages. Housing is commonly set at 25% of basic salary. Some collective agreements or sector-specific regulations may require certain allowances.

Question 4

How are end-of-service benefits calculated?

Accepted Answer

End-of-service benefits are based on the last basic salary plus housing allowance. For the first 5 years, employees receive half a month's wage per year. After 5 years, they receive a full month's wage per additional year. If the employee resigns, the benefit is reduced: one-third for 2-5 years of service, two-thirds for 5-10 years, and full amount for 10+ years.

Question 5

What is Nitaqat and how does it affect hiring costs?

Accepted Answer

Nitaqat (Saudization) requires companies to employ a minimum percentage of Saudi nationals, varying by industry and company size. Companies failing to meet requirements face restrictions on visas and services. This affects costs because Saudi employees typically command higher salaries and have higher GOSI contributions, but are necessary to maintain favorable Nitaqat status and avoid penalties.

Question 6

What are the hidden costs of employing non-Saudi workers?

Accepted Answer

Beyond salary and GOSI, non-Saudi employee costs include: work permit fees (SAR 100-800/month), Iqama renewal (SAR 650/year), dependent fees (SAR 400/month per dependent), exit/re-entry visas, mandatory medical insurance for employee and dependents, and potential recruitment and relocation costs. These can add SAR 15,000 to SAR 40,000+ per year per employee.