Essential HR Guidelines for Startups: 5 Rules You Can’t Afford to Ignore

Human Resources Consulting Services in Saudi Arabia

Starting a business in Saudi Arabia brings immense opportunities—but it also requires navigating a complex regulatory landscape. Implementing the right HR policies is crucial for ensuring compliance with Saudi labour laws and creating a productive work environment. From Saudization requirements to termination procedures, every startup must adhere to key HR regulations to avoid legal complications.

In this article, we explore five essential HR guidelines for startups in Saudi Arabia, focusing on compliance, employment contracts, working hours, health and safety regulations, and termination procedures.

1. Saudization Compliance: Hiring Local Talent

One of the most critical HR policies in Saudi Arabia is Saudization (Nitaqat), a government initiative designed to increase the employment of Saudi nationals in the private sector. The Ministry of Human Resources and Social Development (HRSD) has set specific Saudization quotas that businesses must meet, depending on their industry and size.

Key Requirements of Saudization:

• Hiring Saudi Nationals: Companies must ensure a minimum percentage of Saudi employees in their workforce—the required percentage varies by sector and company size.
• Job Categories: Certain roles (e.g. HR specialists and accountants) are reserved exclusively for Saudi nationals.
• Saudization Tiers: Businesses are categorised into tiers (Platinum, Green, Yellow, and Red) based on their compliance level; non-compliance can lead to penalties, including restrictions on hiring expatriates.
• Employer Support: The Saudi government offers salary subsidies and training programmes to encourage the hiring and retention of Saudi talent.

Failure to comply with Saudization policies can result in fines, work permit restrictions, and difficulties in business expansion. Startups must develop a hiring strategy that aligns with Saudization guidelines while supporting growth.

2. Employment Contracts: Legal Requirements for Expatriates

Saudi Arabia has strict regulations regarding employment contracts, particularly for expatriate employees. Every non-Saudi worker must have a written contract that clearly outlines the terms of employment.

Essential Elements of an Employment Contract:

• Job Title & Responsibilities: A clear description of the employee’s role and duties.
• Salary & Benefits: Detailed information on wages, bonuses, and additional benefits such as housing and transportation allowances.
• Work Permit & Residency Visa (Iqama): Employers are responsible for obtaining valid work permits and residency visas for expatriates.
• Contract Duration: Most expatriate contracts are fixed-term and require renewal upon expiry.
• Termination Clause: The contract should detail termination provisions, notice periods, and end-of-service benefits.

Employers must register contracts with the HRSD and ensure full compliance with Saudi labour laws to avoid disputes, penalties, or visa cancellations.

3. Working Hours and Leave Entitlements

Understanding Saudi labour laws regarding working hours and leave entitlements is essential for startups. The government sets clear guidelines to ensure fair working conditions for employees.

Standard Working Hours:

• Regular Hours: Typically, employees work 8 hours per day or 48 hours per week.
• Ramadan Schedule: During Ramadan, working hours reduce to 6 hours per day or 36 hours per week for Muslim employees.
• Overtime: Employees working beyond standard hours must be paid overtime at 150% of their hourly wage.

Leave Policies:

• Annual Leave: Employees are entitled to 21 days of paid leave per year, increasing to 30 days after 5 years of service.
• Public Holidays: Paid leave is granted on official public holidays, such as Eid and National Day.
• Sick Leave: Up to 30 days of full-paid sick leave, followed by additional days at half or no pay if required.
• Maternity & Paternity Leave: Female employees receive 10 weeks of paid maternity leave, while male employees are entitled to 3 days of paternity leave.

Startups must establish clear HR policies that comply with these labour laws to maintain employee satisfaction and legal compliance.

4. Health and Safety Regulations: Ensuring a Safe Work Environment

Saudi labour laws mandate that employers provide a safe and healthy work environment for their employees. Compliance with health and safety regulations is monitored by the HRSD and the General Organization for Social Insurance (GOSI).

Key Health & Safety Requirements:

• Workplace Safety: Implement safety protocols to prevent accidents.
• Employee Training: Provide regular safety training and emergency preparedness programmes.
• Health Insurance: Ensure comprehensive health insurance coverage for all employees.
• GOSI Registration: Register all employees with GOSI to secure social security benefits.

Non-compliance can result in fines, business restrictions, or legal action. Startups should work closely with HR consulting experts to ensure adherence to these regulations.

5. Termination Procedures: Legal Compliance & Employee Rights

Handling employee termination correctly is crucial to avoid legal disputes. Employers must follow the proper procedures and provide the necessary compensation in accordance with Saudi labour laws.

Key Guidelines for Termination:

• Notice Period: Provide at least a 30-day notice before terminating an employee, unless otherwise stated in the contract.
• End-of-Service Benefits (EOSB): Employees are entitled to severance pay—typically half a month’s salary for the first 5 years and one month’s salary for each additional year.
• Final Settlements: Ensure all outstanding salaries, benefits, and visa cancellations are processed prior to the employee’s departure.

By adhering to proper termination procedures, startups can avoid costly legal complications and maintain positive employee relations.

Innovation-SA: Your Trusted Partner for Business Setup & HR Consulting in Saudi Arabia

At Innovation-SA, we offer integrated business solutions designed to help startups and multinational companies navigate the complexities of setting up and operating in Saudi Arabia. With over 20 years of industry experience, we specialise in:

• Foreign Company Registration & Commercial Licensing
• HR & Payroll Services
• PRO & Immigration Services
• Serviced Offices & Business Centres
• Accounting & Bookkeeping

Our experts possess in-depth knowledge of Saudi labour laws, startup HR policies, and regulatory requirements. Whether you need assistance with business setup, HR compliance, or workforce management, we provide tailored solutions to ensure seamless operations.

Get Expert HR Consulting Services

Looking for the best HR consultancy in Saudi Arabia? Contact Innovation-SA today and let us handle your HR and business support needs while you focus on growing your startup.