Overtime

What is overtime pay?

Overtime pay is the financial compensation an employee receives for working hours that exceed the schedule specified in the employment contract, the company’s internal policies, or the official working hours established in accordance with applicable regulations and laws. Overtime pay serves as a means to motivate employees and compensate them for the extra effort expended during non-standard working hours, whether after regular working hours, on weekends, or during holidays and special occasions.

Why is it important to calculate overtime pay for employees?

Overtime pay plays a vital role in ensuring fairness between employers and employees; it serves as fair financial compensation for employees for the extra effort they put in outside of official working hours. Its importance to both employees and employers is highlighted in the following points:

• Protecting workers’ rights: The implementation of overtime pay protects workers’ rights from exploitation, particularly in sectors that require long working hours or during critical periods. It ensures they receive compensation that covers their financial entitlements and guarantees that their contracts are fulfilled fairly and equitably.
• Increased Motivation and Productivity: Overtime pay serves as a direct incentive that motivates employees to work diligently and with dedication, enhances their commitment to their duties, and gives them a sense of appreciation that drives them to work more effectively and productively.
• Enhancing Employee Loyalty: Employees who feel that their extra efforts are valued and rewarded with appropriate compensation experience a greater sense of belonging and loyalty to the organization. Their job satisfaction increases, and turnover, resignation, and absenteeism rates decrease, contributing to workforce stability and improving the company’s overall performance.
• Improving the Work Environment: A fair and transparent overtime pay system helps build a healthy and comfortable work environment, boosts morale, and reduces tension within the team. It also enhances the quality of work life, reduces physical and psychological stress on employees, and improves their overall health.
• Ensuring Legal Compliance: Companies’ commitment to implementing an overtime pay system ensures compliance with laws and regulations, protects them from legal penalties, and builds a positive reputation in the labor market. It also strengthens trust between employers and employees and contributes to improved professional relationships.
• Increased Income and Improved Standard of Living: Overtime pay serves as a source of income for employees, helping them improve their standard of living and meet their financial needs, while also giving them the opportunity to allocate additional funds toward investment or lifestyle improvements.
• Reducing Additional Hiring Costs: Increasing working hours during peak times and seasons and providing overtime pay for those hours reduces the need to hire new employees, thereby lowering hiring costs and operating expenses and ensuring that available human resources are utilized more effectively and efficiently.

What are the overtime hours under Saudi labor law?

Overtime provisions in the Saudi Labor Law reflect a commitment to balancing workers’ rights with corporate objectives. Overtime is defined as the hours an employee spends working beyond the official working hours specified by the Saudi Labor Law. These hours result either from a direct request by the employer based on specific circumstances requiring additional work.

The Saudi Labor Law defines regular and overtime hours as follows:

• The standard workday is eight hours per day if the employer adopts the daily standard, and 48 hours per week if the weekly standard is adopted. During the month of Ramadan, hours are reduced to six hours per day or 36 hours per week.
• Working hours may be increased to nine hours per day for certain categories of workers or certain industries or jobs that require continuous operation, and they may also be reduced to seven hours per day for certain hazardous or harmful jobs.
• With the Ministry’s approval, an employer may, in jobs requiring shifts or rotations, increase working hours beyond eight hours per day or forty-eight hours per week, provided that the average over a three-week period does not exceed the aforementioned upper limit.
• An employer may deviate from the aforementioned official working hours in the following cases, in which hours exceeding the official limit are considered overtime and are entitled to additional pay:
• Annual inventory, budget preparation, liquidation, closing of accounts, preparation for clearance sales, and preparation for seasonal sales, provided that the number of working days does not exceed thirty days per year.
• If the work is to prevent a dangerous incident, repair damage resulting from it, or avoid certain loss of perishable goods.If the work is performed to address an unusual workload.
• Holidays, seasons, other occasions, and seasonal work as determined by a decision of the Minister.
• In all cases, actual working hours may not exceed ten hours per day or sixty hours per week; however, the number of overtime hours permitted per year, as specified in the regulations, shall not exceed seven hundred twenty hours annually, subject to increase with the employee’s consent.
• All hours worked by an employee on holidays and public holidays shall be considered overtime.
• The prescribed working hours of eight hours per day or forty-eight hours per week do not apply to the following cases:
  • Persons holding high-level positions of responsibility in management and supervision, who exercise the employer’s authority over workers.
  • Preparatory work that must be completed before the start of the workday, or supplementary work performed by the employee at the end of the workday, provided that the total time for preparatory and supplementary work does not exceed thirty minutes per day, which is added to the working hours.
  • Work that is necessarily intermittent—that is, not continuous in nature and includes periods during which the worker is not engaged in any activity—such as porters who are called upon to work as needed, which is set at ten hours per day, reduced to eight hours during Ramadan, provided that the weekly total does not exceed forty-eight hours, or thirty-six hours during Ramadan; any hours worked beyond these limits are considered overtime and require additional pay.
  • Workers assigned to security and cleaning duties, whether day or night, without being tasked with any other work—excluding civil and industrial security guards—shall have their working hours set at ten hours per day and eight hours during Ramadan; any hours worked beyond these limits shall be considered overtime and shall be compensated accordingly.

Does an employee have the right to refuse overtime?

The Saudi Labor Law precisely defines regular working hours and the exceptions thereto, and also specifies the circumstances under which an employer may require an employee to work overtime, while emphasizing that the employee is entitled to additional pay for each hour of overtime worked.

Accordingly, an employee may not refuse to work overtime as long as it is within the limits of the law and within the permitted overtime hours; that is, an employee has the right to refuse overtime if the number of overtime hours exceeds the statutory limit of 720 hours per year.

The employee must be officially notified of the dates and hours of overtime work. If the employee is not notified in writing of the overtime work, they have the right to refuse it until such notification is provided; a signed and stamped letter from the employer serves as proof of the assignment of overtime hours and, consequently, of the employee’s entitlement to the overtime pay stipulated by law.

How is overtime pay calculated in Saudi Arabia?

According to Article 107 ( as amended ) of the Saudi Labor Law, which outlines how overtime pay is calculated, the employer must pay the employee overtime pay equal to the hourly wage plus 50% of the base wage. Therefore, overtime pay can be calculated using the following steps:

• Overtime hours are determined precisely.
• The actual hourly wage received by the worker is calculated by dividing the employee’s monthly wage by the number of monthly working hours, which is typically forty-eight hours per week. The monthly wage consists of the base wage plus all allowances and commissions, as defined in Article 2 of the Labor Law.
• The basic hourly wage is calculated by dividing the monthly basic wage by the number of monthly working hours; the basic wage is what is paid to the employee for their work, plus periodic bonuses.
• Overtime pay per hour is calculated by adding the actual hourly wage to half the hourly base wage.
• The hourly overtime pay is multiplied by the number of overtime hours worked to determine the total overtime pay due.

Is it permissible to substitute overtime pay for paid days off?

The Saudi Labor Law, in its recent amendments, clarified the possibility of substituting overtime pay with a paid day off in amended Article 107, which stipulates that the employer, with the employee’s consent, may grant the employee compensatory paid leave in lieu of the wages due to the employee for overtime hours worked.

Therefore, there must be an explicit, formal, and documented agreement with the employee to substitute overtime pay for paid leave, and the employer is not entitled to require the employee to substitute overtime pay for days off without the employee’s consent.

How does the Jisr system help you calculate overtime pay for employees?

The Jisr system provides integrated and effective solutions for all human resources management tasks and functions, including calculating employees’ overtime pay, by streamlining administrative processes and ensuring organizations’ compliance with laws and regulations. The program helps calculate overtime pay accurately thanks to the following features:

• Flexibility in Setting Employee Schedules: The Jisr system offers great flexibility in managing employee schedules, including assigning overtime hours according to the organization’s needs and internal work policies, and notifying employees of changes immediately. Schedules can also be easily adjusted to accommodate each employee’s requirements. This feature helps organizations respond to changing needs and provides a comfortable work environment for employees.
• Accurate Tracking of Work Hours: The Jisr system provides advanced time and attendance tracking technologies to ensure work hours are recorded accurately, allowing for automatic tracking of overtime hours according to the specified schedule.
• Automatic Overtime Pay Calculation: Thanks to the integration between the time and attendance system and the payroll system, the software enables quick and easy calculation of overtime pay without delay, and adds the entitlements to the monthly salary, ensuring confidence in the accuracy of calculations and preventing delays in payroll processing.
• Compliance with Local Laws: The Jisr system is fully compliant with Saudi labor laws, ensuring that overtime calculations are accurate, align with the Saudi labor system, and achieve full compliance with approved regulations.
• Detailed and Comprehensive Reports: The system provides detailed reports on clock-in and clock-out times, overtime hours, and associated costs. These reports can be used to conduct periodic analyses of employee performance and the distribution of overtime hours, enabling informed decisions to improve work efficiency.
• Fast and Transparent Complaint Management: Thanks to the automation of requests, employees can easily and transparently submit any objections or complaints regarding wages, working hours, and overtime pay and track the status of their request until a resolution is reached. This enhances employee trust in management and reduces wage-related disputes.