# Payroll in Saudi Arabia: A Step-by-Step Guide for Employers *No errors, no delays, no headaches* > **In short:** A practical step-by-step guide to running payroll that complies with the Saudi Labor Law, without the mistakes that cost you fines or legal trouble. - **URL:** https://www.snad.io/en/blog/kaifa-tueid-maseer-rawatib-sahih - **Arabic original:** https://www.snad.io/blog/kaifa-tueid-maseer-rawatib-sahih - **Category:** Guides — Human Resources - **Tags:** Salaries, Payroll, Human Resources, Saudi Labor Law, GOSI - **Published:** 2025-11-30 - **Updated:** 2026-08-02 - **Publisher:** Snad (snad.io) The last day of the month arrives and the business owner is sitting in front of Excel, trying to work out the pay of 12 employees — leave, bonuses, deductions, GOSI and income tax for residents. Some pay the wrong amount. Some pay late. And an employee whose salary is late may file a complaint. Payroll is not complicated once you understand what goes into it. This guide walks you through it step by step. ## What is payroll? Payroll is the document that sets out each employee's pay in detail: - What they earned in salary and allowances - What was deducted for social insurance, absences and advances - The net amount they receive at the end of the month Payroll is not just a payment slip. It is a legal record proving you met your obligations toward your employees. In any labor dispute, payroll is the first document the labor office asks for. Wage Protection System (WPS) requirement: Companies with 10 employees or more must pay salaries electronically through the Wage Protection System, on time. Late or non-compliant payment exposes the company to suspension of government services. ## Salary components A salary is usually made up of several items: 1. Basic salary: This is the base used to calculate many entitlements: GOSI, end-of-service gratuity and leave pay. Make sure the basic salary's share of total pay is clearly stated in the contract. 2. Housing allowance: Typically 25% of the basic salary, in line with market practice. Some companies provide housing in kind instead of a cash allowance. 3. Transport allowance: Ranges from SAR 400 to SAR 1,000 per month depending on the sector and the location. 4. Phone and communications allowance: For employees who need to stay in constant contact — between SAR 100 and SAR 500 per month. 5. Overtime: Under the Saudi Labor Law: one overtime hour = monthly basic salary ÷ 240 × 1.5 6. Commissions and bonuses: Tied to performance and calculated under company policy. Critically important: the salary agreed in the contract is the legal minimum. You cannot cut it unilaterally. ## Mandatory salary deductions Deduction one — GOSI (social insurance): For Saudi employees only: - Employee share: 9.75% of basic salary + housing allowance - Employer share: 11.75% of the same base - Total: 21.5% on the salary For non-Saudi employees: - Full GOSI does not apply. Only occupational hazards insurance applies, at 2% of salary, paid by the employer Deduction two — unauthorized absence: One day of absence = monthly salary ÷ 30 If an employee is absent for two days, 2/30 of the salary is deducted Deduction three — advances: Any advance an employee takes is deducted from their salary as agreed. Document every advance with the employee's signature. Deduction four — penalties (where they apply): The law does not allow deducting more than 5 days of monthly salary as a disciplinary penalty, even if several violations occur in the same month. ## GOSI — exactly what you need to know GOSI (the General Organisation for Social Insurance) is one of the most important obligations an employer carries. Who is registered with GOSI? - All Saudi employees, without exception - Foreign employees: registered for occupational hazards insurance only GOSI payment deadlines: - Final deadline: the fifteenth day of the following month - Paying late means fines plus interest The insurable base: - Basic salary + housing allowance (capped at SAR 45,000 per month) - Variable allowances such as commissions are normally excluded from the base What GOSI gives the employee: - Compensation for work injuries - A retirement pension on reaching retirement age or the required years of service - Death benefits for the dependants of an employee who dies in service Registering a new employee: You must register them with GOSI within 10 days of the hire date. Registering late can expose you to a penalty. ## Leave and its effect on pay Employee leave is a legal right, not a favor granted by the employer. Leave entitlements under the Labor Law: Annual leave: - First 5 years: 21 days at full pay - After 5 years: 30 days at full pay Maternity leave: - 10 weeks at full pay (4 weeks before the birth and 6 after) - A woman is entitled to extend it by one additional unpaid month Marriage leave: - 5 days at full pay Bereavement leave: - Death of a parent, a spouse or a child: 5 days How leave affects pay: - Annual leave: full pay (basic salary + housing allowance as a minimum) - Excused absence: full pay, under company policy - Unexcused absence: deducted from the salary ## Common payroll mistakes Mistake one — calculating GOSI on total pay: Many employers calculate GOSI on gross salary, including transport and phone allowances. The correct approach: GOSI is calculated on basic salary + housing allowance only. Mistake two — forgetting Eid and official holidays: Official public holidays are not deducted from the employee's annual leave balance. Record public holidays correctly. Mistake three — calculating end-of-service gratuity incorrectly: End-of-service gratuity is calculated on basic salary only, not on gross pay. The formula: - First 5 years: half a month for each year - Beyond 5 years: a full month for each year Mistake four — ignoring overtime hours: Work beyond 8 hours a day or 48 hours a week is overtime and must be paid at a rate of 1.5. Mistake five — paying late: The Wage Protection System requires salaries to be paid on their due date. Even a single day late is a violation. ## How Snad helps you run payroll Snad provides a full HR module that covers: Employee records: - A complete file for every employee: personal details, job title, salary and allowances - Hire date and length of service calculated automatically Attendance: - Daily check-in and check-out - Absence days calculated automatically - Leave balances tracked for each employee Monthly payroll: - The system calculates gross pay, deductions and net pay automatically - It generates a detailed payroll statement for every employee - It tracks advances and deductions across months HR reports: - Monthly payroll cost report - Salary comparison across branches - Absence and leave report Instead of a tangled Excel file and manual GOSI math, the monthly payroll run takes minutes. ## Frequently asked questions ### Do small companies (fewer than 10 employees) have to register with GOSI? Yes. Every employer, whatever its size, must register its Saudi employees with GOSI. ### Can salary payment be postponed for financial reasons? No. Postponing payment breaches the Wage Protection System. Talk to your employees in advance and find a solution before the due date. ### What happens if I miscalculate an employee's salary? Correct the error in the following month and inform the employee. Keep documentation of the correction. If the error is significant, consult a labor law specialist. ### How do I calculate the pay of an employee who joined mid-month? Monthly salary ÷ 30 × the actual number of working days in the month. ### Do commissions and bonuses count toward the GOSI calculation? Normally no. The insurable base is basic salary and housing allowance only. Confirm with your legal advisor depending on the nature of the bonus. --- ## About the publisher **Snad (سند)** — a private Saudi software company based in Riyadh, founded 2025. Legal form: Sole proprietorship. Commercial registration: 7038154642 VAT number: 310959226500003 Only official domain: snad.io > Snad is a private commercial business-management platform. It is not a > government body, not a bank, and not a government services portal, and it > is not affiliated with any government entity. Any site or app with a > similar name is unrelated to Snad.