Payroll for Expatriates in Saudi Arabia: Key Compliance Essentials

As Saudi Arabia moves forward with its Vision 2030 plans, companies in energy, construction, healthcare, and digital services are bringing in overseas talent with specialised skills to support their growth. Managing payroll for this expanding and diverse workforce means carefully following Saudi labour laws, wage rules, and compliance requirements.

With remote and hybrid work becoming more common after 2020, payroll has become even more complex. Employers now need to manage payments for employees who may be working partly from outside the Kingdom while still meeting Saudi Arabia’s payroll, tax, and social-insurance regulations

The Evolving Expatriate Workforce Landscape

Expatriates make up roughly 42 percent of Saudi Arabia’s population and form the backbone of its private-sector labour force. For payroll managers, this means balancing compliance with Nitaqat quotas issued by the Ministry of Human Resources and Social Development (MHRSD) while maintaining accurate pay, benefits, and remittance processes for expatriate staff.

Salary Payments And Wages Protection System

Saudi Arabia’s Wage Protection System (WPS), administered by the MHRSD, mandates that all employee salaries - including those of expatriates - be paid electronically through local banks approved by the Saudi Central Bank (SAMA). Employers must submit monthly payroll files showing payments in Saudi riyal (SAR). Non-compliance can result in fines or suspension of new work visas.

Remote or hybrid employees working temporarily from outside the Kingdom should still receive wages through Saudi accounts if they remain under Saudi sponsorship (iqama). Payroll teams must ensure that off-cycle or overseas transfers are reported properly through WPS to avoid discrepancies.

Income Tax And Social-Insurance Contributions

Saudi Arabia remains largely tax-free for individuals. There is no personal income tax on salaries, whether for nationals or expatriates. However, companies must register for and pay:

• GOSI (General Organization for Social Insurance): Employers contribute 9 percent of a Saudi employee’s wage toward pension and 2 percent toward occupational hazard insurance; for expatriates, only the 2 percent occupational-hazard contribution applies.
• Zakat or Corporate Income Tax: Although not deducted from salaries, multinational employers should determine whether their entity falls under Saudi zakat or corporate-tax rules, which may affect payroll cost allocation.

For hybrid or remote expatriates performing services from another country, double-tax treaty rules may apply. Saudi Arabia has signed over 55 bilateral tax treaties that help prevent dual taxation of income. Employers should verify the employee’s tax residency status and treaty coverage before processing cross-border payroll.

Tracking Hours, Overtime, And Remote Attendance

The Saudi Labour Law caps regular working hours at eight per day or forty-eight per week, with required overtime pay for additional hours. For expatriate and hybrid workers, accurate time tracking is crucial:

• On-site staff in industrial sectors often use biometric or card-based attendance systems that feed directly into payroll.
• Remote employees may log hours through cloud attendance tools or project-management systems integrated with HR platforms.
• Overtime and shift premiums must be computed at least 150 percent of the basic hourly rate, in compliance with Article 107 of the Labour Law.

Digitising time and attendance ensure compliance with Saudi regulations and reduces disputes over pay for mixed work arrangements.

Benefits And Allowances For Expatriates

Expatriate compensation typically includes housing, transport, medical insurance, and sometimes education allowances for dependents. The Council of Health Insurance (CHI) requires all employers to provide medical coverage to expatriate employees and their families under approved policies.

Payroll teams must:

• Ensure allowances are itemised separately in salary statements;
• Deduct any applicable employee co-payments for insurance;
• Verify that benefits comply with Saudi labour standards and contractual terms.

End-of-service benefits (ESB) are another critical component. Expatriates are entitled to ESB at termination based on length of service - half a month’s wage for the first five years and one month’s wage thereafter, as stipulated by Article 84 of the Labour Law.

Managing Remote and Hybrid Payroll Complexities

Hybrid work introduces jurisdictional questions: where is work “performed,” and which country’s laws apply? To stay compliant, companies should:

1. Maintain Saudi residency status (iqama) and local payroll registration for employees officially sponsored in the Kingdom.
2. Verify host-country tax and labour rules if an expatriate works abroad for extended periods.
3. Use cloud-based payroll and attendance systems capable of cross-border reporting and secure data storage.
4. Conduct quarterly audits to confirm GOSI and WPS submissions align with actual work hours and payment records.

Global HR consultancies emphasize the importance of integrating payroll compliance, workforce mobility, and tax governance for remote employees across GCC borders.

Conclusion

Managing payroll for expatriates in Saudi Arabia is a balancing act between compliance, accuracy, and adaptability. With no personal income tax but strict social-insurance, WPS, and labour-law mandates, employers must maintain robust controls and transparent reporting.

As hybrid and remote work blur geographic boundaries, automation, accurate time tracking, and proactive compliance monitoring are key to ensuring that payroll operations remain both lawful and efficient in the Kingdom’s evolving labour landscape.