Saudi Arabia is a large country in the Middle East with a powerful economy. In 2025, the country’s GDP is $1.08 trillion and is expected to grow by 3.0% this year. Though the Saudi population has grown steadily for decades, there are still only 36.01 million people who call the country home.

When you divide this top-20 GDP by its moderate population, you get a country with a per capita GDP of $30,100, ranking Saudi Arabia 35th in the world for income levels. This makes Saudi Arabia a high-income country and sets its citizens up for relatively wealthy lives. The discovery of oil here in 1938 completely changed the economic status and social structure of this country, already producing nearly a century of wealth.

Export CategoryExport Value (USD)
Crude Petroleum$217 billion
Refined Petroleum$39.2 billion
Ethylene Polymers$10.6 billion
Propylene Polymers$6.4 billion
Acyclic Alcohols$4.8 billion

There are more than 16.46 million workers in Saudi Arabia’s labor force, though it’s important to recognize that over three-quarters of these workers are foreigners. They largely come from Bangladesh, India, Pakistan, Yemen, and Egypt. Agriculture employs less than 7% of workers, while industry employs about 21% in activities like mining, construction, manufacturing, and utilities.

Services employ the remaining 72% of workers in Saudi Arabia, especially trade, financial services, hospitality, and transportation. The country’s main exports are petroleum products, chemical products, plastics, rubber, machines, and transportation equipment, and its biggest export markets are China, India, Japan, the UAE, and Malaysia.

Saudi Arabia’s oil and gas wealth reserves are some of the largest in the world, but it is also diversifying its economy to protect its wealth for the future. If you want to start doing business here, working with a Saudi Arabian PEO can be one of the best ways to employ workers quickly and compliantly.

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What is a Saudi Arabia PEO?

A PEO, or Professional Employment Organization, is a service provider that helps you manage employees when you want to expand into another state or country. A PEO in Saudi Arabia will help you outsource your HR functions to it so that you can focus on other things, like building value for your business. PEOs also help you stay compliant with local laws and ensure that you’re treating workers correctly, so that your risk is greatly reduced.

Instead of hiring an HR team and consulting with legal professionals, engaging a PEO is normally a more efficient and affordable alternative. When you work with a PEO, you split the responsibilities of looking after your workers. You take on the role of the worksite employer, fixing their work schedules, setting tasks, and monitoring their production.

The PEO, as your co-employer, takes over essentially all of your HR functions and provides services and support to your employees. It takes care of general admin, payroll, benefits administration, and leave management on your behalf. It also follows changes in Saudi law to help ensure that you’re always compliant with labor regulations.

PEOs provide their services through modern, cloud-based platforms that automate as many functions as possible for increased efficiency and accuracy. They also employ experts in HR and law in Saudi Arabia to make sure that their services are provided correctly. You may also be familiar with a similar type of service provider called an EOR or Employer of Record.

An EOR also helps clients manage HR functions and compliance in much the same way as a PEO. PEOs work with clients who already own entities in Saudi Arabia with which they can hire employees directly. EORs, however, work with clients who don’t own entities.

Instead, they use their local entities in Saudi Arabia to hire employees on behalf of their clients, becoming their legal employers in the country. Aside from this main difference, PEOs and EORs are quite similar, and these terms are used interchangeably in many cases.

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Why Hire Through a Peo in Saudi Arabia?

The Saudi economy is strongly linked to global oil prices and faced a downturn in the past few years. However, growth is back and expected to continue, and this means there are more opportunities for foreign investors in the country. At the same time, it can be difficult to employ workers in this country without the help of a knowledgeable and experienced partner. A Saudi Arabian PEO can help you interpret and correctly follow local labor laws, including such rules as:

  • Regular hours: Normal work in Saudi Arabia lasts eight hours a day and 48 hours a week. During Ramadan, these hours are reduced to six hours a day and 36 hours a week. Employees must receive an hour’s break for rest, meals, and prayer after working for five hours, and their schedules should not require them to be at their workplace for more than 12 hours a day.
  • Overtime: Workers in Saudi Arabia must be paid at least 150% of their normal wages when they work overtime hours. They cannot be required to work overtime by their employers. Employees can work a maximum of 60 hours of overtime per month or 720 hours per year, unless they enter into written agreements to provide more hours.
  • Annual Leave: After completing a year of work for their employers, employees become entitled to 21 working days of annual leave. After five years of service, their annual leave is increased to 30 working days.
  • Maternity and paternity leave: Expecting mothers in Saudi Arabia are entitled to 12 weeks of maternity leave, divided equally before and after delivery. This maternity leave is not paid if the employee hasn’t completed one year of work for the employer. For between one and three years of work, their employers pay them half their wages, while they receive full wages if they’ve worked for over three years. New fathers are entitled to three days of paternity leave paid for by their employers.

Foreign investors can start businesses in Saudi Arabia that include limited liability companies (LLCs), joint-stock companies (JSCs), regional headquarters, subsidiaries of foreign-owned companies, or Technical and Scientific Services Offices (TSSOs). According to the World Bank, it can be very easy to register an entity, and as it takes three steps and around ten days to do so, Saudi Arabia is ranked 38th in the world for ease.

But this doesn’t mean that it’s easy to manage HR for your local workers, unless you partner with a PEO. Your provider can manage payroll, benefits, and leaves for your workers, help with contracts and onboarding, and support your workers throughout their employment. Some PEOs will also help you recruit the skilled workers you need for your business in Saudi Arabia.

Services Offered by Saudi Arabia PEOs

There are dozens of PEOs offering co-employment services in Saudi Arabia. While all providers are different, the key services that most offer include:

Payroll Management

Running your payroll accurately and compliantly requires an intimate knowledge of all rules and regulations related to employment. In a foreign country, it’s very challenging to learn all of these rules and apply them correctly. Luckily, when you work with a Saudi Arabia PEO, it handles this function for you.

Its experts will set up calculations for employees based on local rules and each worker’s salary and benefits entitlement. You’ll need to monitor your employees’ time and attendance and provide this data to the PEO, either using tools built into its platform or additional software. With your data in hand, it will run payroll, calculating your employees’ deductions and paying them their salaries, normally within just a few days after the end of a pay period.

Employee Benefits Administration

Your PEO partner will also take the function of administering mandatory benefits off your hands. Your local workers will be entitled to breaks, public holidays, and various leaves, and the PEO will keep track of these allowances, often letting workers monitor them as well through their platforms’ employee portals. It will also calculate and pay social security contributions to the General Organization for Social Insurance (GOSI) from both you and your employees, according to these rates:

Benefit

Employee Contribution

Employer Contribution

GOSI Social Insurance Tax for Non-Saudi Employees

n/a

2.0% of salary 

GOSI Social Insurance Tax for Saudi Employees

9.75% of salary 

11.75% of salary 

The upper limit for GOSI contributions is 45,000 SAR (Saudi riyals), or roughly 12,000 USD.

Many employers also offer supplementary benefits to help them attract and retain top talent in Saudi Arabia. If you wish to offer private health or life insurance, pensions, or equity plans, many PEOs can connect you with plan providers or offer these plans directly.

Tax Compliance

Saudi Arabia does not impose a tax on income earned from employment. For that reason, you won’t need to withhold pay-as-you-earn taxes from your employees’ paychecks as you would in other countries.

Recruitment and Employment Contracts

If the reason you’re looking at PEOs is that you’ve already found skilled Sudi workers you want to hire, you might not need recruitment services. However, if you want to get into this market and need help sourcing talent, you can look for a PEO that offers recruitment tools and services.

Some PEOs simply provide tools on their platforms, like applicant tracking systems (ATSs) and access to their talent pools to help you recruit efficiently on your own. Others employ recruiters who can use their local knowledge and connections to fill your job openings with high-calibre candidates quickly. They may also help with interviews and selection.

Once you’ve picked successful candidates, your PEO can help you negotiate terms with them and write legally compliant contracts for them to sign. Written contracts are not required in Saudi Arabia, but they’re still a good practice to follow to protect your interests as an employer. If written, they must be in Arabic and follow the form provided by the Saudi Ministry of Labor.

Saudi nationals can be hired on fixed-term contracts, but if they complete three of these contracts or work for four years, their contracts become permanent. Foreign workers must be hired on fixed-term contracts that have no limits on their length or extendibility. Probationary periods are allowed up to 90 days, but can be extended up to 180 days with the employee’s consent. During probation, either party can terminate the contract without notice.

Onboarding

As their worksite employer, you’ll need to give your employees orientations, training, and access to the tools and systems they need to perform their work. Most other onboarding tasks will be handled by your PEO partner. It will collect their personal and banking information, set up their salary payments, and store their important documents like resumes and contracts. It will also register them with the GOSI for their social security benefits and add them to your payroll.

Terminations

There will certainly come a time when you need to terminate workers in Saudi Arabia. Your PEO partner can help guide you through this process. It will help you calculate and provide notice when required.

Workers on permanent contracts must normally be given 60 days’ notice of dismissal, while those on fixed-term contracts must be given 30 days’ notice. Employers are also required to provide an end-of-service bonus to all employees, regardless of the reason for termination. This ESB is half a month’s wages for each of the first five years of service, and a full month’s wages for each additional year.

If a worker resigns, however, they get no ESB if they have worked less than two years. If they’ve worked between two and five years, they receive 33.3% of the ESB; if they’ve worked between five and ten years, they get 66.7% of the ESB; and they receive the full ESB for over ten years of service.

Advantages of Using a PEO in Saudi Arabia

Working with a PEO in Saudi Arabia can produce the following advantages for employers:

  • Speed: With PEOs typically able to onboard workers in just a few days, you can get started in the Saudi market quickly.
  • Cost efficiency: Engaging a PEO can be a very affordable alternative to handling HR and compliance through an internal team or expensive professional consultations. 
  • Risk mitigation: PEOs create fully-compliant contracts and report to government agencies on your behalf, helping to greatly reduce the risk of penalties for non-compliance.
  • Focus on core activities: Instead of handling HR yourself, your time and resources can be freed up to be applied to the core activities that create value for your business.

Steps to Engage a Saudi Arabia PEO

If you want to start working with a PEO in Saudi Arabia, simply follow these easy steps:

Choose a Provider

Look for a PEO that can offer all the services you need at a price that fits your budget. Make sure you also check its reputation for compliant hiring in Saudi Arabia.

Meet the Provider

Book a consultation with the provider you’ve selected to explain your needs and receive a quote for their services.

Enter a Service Agreement

Once you agree on terms, you can sign a service agreement to engage the PEO, then get started onboarding your workers to its platform.

Partner With a PEO in Saudi Arabia To Expand Your Business Successfully

Saudi Arabia is one of the most influential economies in the Middle East, with a high-income population and major investments in economic diversification. However, navigating Saudi labor laws, compliance procedures, and employment regulations can be complex—especially for foreign companies. A PEO can help streamline your market entry.

Looking for a trusted PEO provider in Saudi Arabia? Remote People connects businesses with reliable PEO services that handle HR functions, talent acquisition, and complete payroll management. Contact us today to efficiently establish your business in Saudi Arabia!