Doing Business In Saudi Arabia - Dr. Mohamed Al-Amri & Co.

Dr. M. Al Amri &Co.
LABOR LAW AND SOCIAL INSURANCE
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General
The Labor and Workmen Law regulates all matters relating to Labor in the Kingdom.
Labor relations
The Labor Law does not allow the formation of labor and trade unions in the Kingdom.
Disputes between employers and employees are referred to the "Commission for Settlement of
Disputes " which has the exclusive jurisdiction to render decision on such matters. The law
provides for inspection of business premises by inspectors from the Ministry of Labor to ensure
compliance with the provisions of the Labor and Workmen Law.
Working hours, holidays and vacations
The law stipulates the maximum working hours to be 8 per day or 48 hours per week in all
months of the year with the exception of Ramadan ( the Muslim holy month of fasting ) when
the maximum number of working hours are restricted to 6 per day or 36 hours per week. In the
case of businesses such as hotels, restaurants, seasonal enterprises and where approval has been
granted by the Minister of Labor, the maximum number of daily working hours may be
increased to nine. Similarly the number of daily working hours may be reduced for people
employed in industries or operations classified as hazardous or harmful by the Minister of Labor.
Friday is the weekly holiday in Saudi Arabia as it is in most other Muslim countries. Presently
there are 10 days of public holidays each year. In addition to these public holidays employees are
entitled to a minimum of 15 days vacation after one year of service or 21 days after three years
of service. However, the normal practice in the Kingdom is 30 days annual vacation in addition
to the public holidays.
Termination of employment
A labor contract entered into for a specified term terminates upon the expiry of its term. If both
parties mutually agree to apply the contract thereafter then it is deemed to have been renewed for
an unlimited duration. Contracts of unlimited duration may be cancelled for a valid reason by
either party to the contract provided a 30 days prior notice is given if the employee is paid
monthly. For other employees a 15 days prior notice is necessary.
On the expiry of specified-term contracts or the termination of unlimited duration contracts by
employers, employees are entitled to a service award of half a month's salary for each of the first
five years of service and one month's salary for each year thereafter. The current rate of pay is
taken as the basis for computation of the service award. If an employee with an unlimited
duration contract resigns, he is entitled to one-third of the specified-term award if his period of
service is between two and five years; it is two-thirds of the specified-term award if his service
period is more than five and less than ten years; and the full specified-term award if his service
period is more than ten years.
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