Labor Agreement Template for Saudi Arabia

A Labor Agreement in Saudi Arabia is the cornerstone document that legally defines the employment relationship between you and your employee. Under Saudi Labor Law (Royal Decree No. M/51), this written contract is mandatory for all employment arrangements and serves as the foundation for compliance with local labor regulations, social insurance requirements, and Saudization policies.

When do you need this document?

You need a Labor Agreement whenever you hire an employee in Saudi Arabia, whether they are Saudi nationals or foreign workers. This applies to all employment types including full-time, part-time, and fixed-term positions. The agreement is essential for obtaining work permits for foreign employees, registering workers with the General Organization for Social Insurance (GOSI), and meeting Ministry of Human Resources and Social Development requirements. Companies must have compliant Labor Agreements to participate in the Wage Protection System (WPS) and maintain good standing under Nitaqat classification systems.

Key legal considerations

Your Labor Agreement must include several mandatory elements under Saudi law. The contract must specify the employment term (definite or indefinite), working hours (maximum 8 hours daily, 48 hours weekly), annual leave entitlements (minimum 21 days), and end-of-service benefit calculations. You must clearly define job duties, workplace location, and probationary periods (maximum 90 days for most positions). The agreement should address overtime compensation, sick leave provisions, and termination procedures including notice periods and severance calculations. Social insurance contributions for both employer and employee must be outlined, along with any housing, transportation, or other benefits provided.

Legal requirements in Saudi Arabia

Saudi Labor Law mandates that all Labor Agreements be written primarily in Arabic, though additional language versions may be included. You must register the contract with the Ministry of Human Resources and Social Development through their electronic platform within 60 days of employment commencement. The agreement must comply with minimum wage requirements set by royal decree and include provisions for the Wage Protection System requiring electronic salary transfers. For companies subject to Saudization quotas, the contract must reflect compliance with Nitaqat requirements and specify the employee's nationality. Foreign employee contracts must align with their work permit conditions and visa classifications. All agreements must include clauses protecting worker rights as outlined in the Labor Law, including provisions for workplace safety, discrimination protection, and dispute resolution procedures through labor courts.