Salaries

What Are Salaries?

Salaries are the monetary amounts that employees receive periodically in exchange for their work for a specific entity, whether government or private. They represent the compensation an individual receives in return for their efforts and the services they provide, and they reflect the financial obligations the employer undertakes toward the employee, as well as the market value of the employee’s work.

How does the Saudi Labor Law classify salaries?

According to the definition provided in Article 2 of the Saudi Labor Law, salaries are classified as follows:

• Base Salary: The monetary compensation for the work performed by the employee, excluding any allowances or additional incentives. The base salary cannot be replaced with in-kind compensation, as it serves as the basis for calculating all other components of the total salary and is an essential part of the contract between the employee and the employer that must be clearly defined. 
• Net Salary: The net amount received by the employee, consisting of the base salary plus cash allowances, bonuses, commissions, overtime pay, and other amounts to which the employee is entitled, minus deductions such as unpaid leave, social insurance, taxes, and other deductions that the employee is required to pay.

Amounts deducted from the salary may not exceed fifty percent, in accordance with Article 93 of the Saudi Labor Law, unless the labor courts determine that this percentage may be increased, or reduced if it is proven that the worker needs more than half of his salary, provided that under no circumstances may more than three-quarters of the salary be withheld.

When are salaries paid in Saudi Arabia?

Pay dates vary from company to company based on their internal policies and the contracts signed with employees, whether these salaries are paid monthly, biweekly, or weekly. According to Article 90 of the Saudi Labor Law, daily-wage workers are paid once a week, and piece-rate workers who require more than two weeks to complete their work receive a weekly payment proportional to the work they have completed, with the remainder paid the following week upon completion of the work. As for those on monthly salaries, their wages are paid once a month. The Ministry of Finance has set the payment dates for public sector salaries as the 27th of each Gregorian month, or the day preceding or following it if it falls on a holiday.

Employers are required to pay wages into employees’ accounts by depositing salaries at banks authorized in the Kingdom, without exceeding the specified due dates.

On special occasions such as holidays and official holidays, salary payments are advanced to meet employees’ needs; this includes bonuses and grants, which are paid immediately upon approval. Salary payment dates may also be affected by changes in tax and labor laws. In the event of settling an employee’s entitlements upon departure, a special payroll run is prepared to disburse their entitlements before they leave.

Government employees can check their payroll information online using the Etimad platform, which provides details on salary entitlements and any increases, if applicable.

What are salary scales in Saudi Arabia?

Pay scales are a systematic tool used to determine wages based on job rank or grade. Salaries on these scales are typically divided into several levels, starting with the lowest salaries and increasing as skills, experience, and responsibilities grow.

The purpose of salary scales is to:

• Ensuring fairness and equality among employees in the same job grade.
• Providing transparency in explaining how salaries and allowances are calculated, thereby preventing ambiguity or unfair discrepancies.
• Motivating employees to improve their skills and increase productivity in order to earn promotions and salary increases.

Saudi Arabia has a well-defined salary scale system that precisely regulates the wages of employees in the government sector, whether civilian or military. In the government sector, the scales are divided into levels based on fixed, institutional criteria for determining the salaries and allowances due for each grade, in addition to establishing specific scales for doctors, engineers, teachers, and other public sector employees.

In the private sector, the pay scale includes a set of job grades, each with a specific salary range—whether a minimum or maximum salary—and salaries vary among employees based on their level of experience, the nature of their field, and their job grade.

Laws and regulations set the minimum and maximum salaries in the public sector, while they also set the minimum wage in the private sector—a level below which a company is not permitted to pay.

Currently, the minimum wage in Saudi Arabia for Saudi nationals—which is factored into the Natakhat program for calculating the mandatory Saudization rate imposed on an establishment—is 4,000 Saudi riyals. Those earning 3,000 riyals count as only half toward the Saudization quota, while Saudi nationals earning less than 3,000 Saudi riyals do not count at all toward the Saudization quota under the Nitaqat program.

Meanwhile, the minimum wage in Saudi Arabia for foreign workers is 2,000 Saudi riyals.

What are salary differences, and how are they paid to employees?

Salary differences are amounts owed to employees retroactively as a result of wage discrepancies arising from adjustments to the pay scale or base salaries, or for any other reasons, such as:

• Adjustments to the pay scale: The government or the employer may update or adjust the pay scale based on inflation or new economic policies, entitling employees to the difference in pay between the old and new scales.
• Delays in the payment or adjustment of compensation: This includes allowances, bonuses, or any other financial compensation, whether due to financial or administrative reasons, or due to changes, additions, or adjustments to these entitlements pursuant to laws and regulations.
• Promotions: If an employee is promoted after the date on which they became eligible for promotion, they are entitled to salary differences covering the period between the promotion eligibility date and the actual promotion date.
• Pay Dates: Due to the difference between the Gregorian and Hijri calendars and the Kingdom’s established pay dates on the 27th of each Gregorian month, discrepancies may occur between what an employee receives and what they are entitled to.
• Salary Calculation Errors: An employee may be entitled to salary adjustments because they previously received less than they were due due to an error in their salary calculation. Upon discovering this, they should notify the Human Resources Department to arrange a special payroll run for the adjustments or to add them to the following month’s salary.

Salary adjustments are paid retroactively after official decisions are issued by the relevant authorities specifying the payment date, whether in the government or private sector. Employees are also entitled to claim salary adjustments by submitting formal requests to their employers or through the organization’s human resources department, especially if the discrepancy resulted from errors in salary calculations.

In some cases, the differences are paid proactively following decisions to adjust pay scales or implement wage increases or bonuses, as the Ministry of Finance or the company determines and disburses the amounts owed to employees.

What is a payroll system, and what benefits does it offer companies?

A payroll system is an advanced software tool that enables companies to manage payroll more efficiently and accurately through a set of computerized processes that help organize everything related to employee salaries—from collecting data such as working hours and leave to calculating entitlements, taxes, and deductions, preparing payroll runs, to payroll posting and disbursement. The program serves as the ideal bridge for human resources management, including payroll management and payroll processing.

Among the most notable benefits of the payroll system are:

• Reducing errors by automating repetitive tasks such as payroll calculation and distribution to employees’ accounts, thereby avoiding reliance on manual processes that may lead to errors, such as entering incorrect data or omitting certain deductions.
• Reducing operating costs through cloud computing, particularly expenses related to server maintenance and in-house software.
• Save time spent on payroll preparation, allowing management to focus on more important tasks, such as improving performance and developing human resources strategies.
• Ensure compliance with local tax and insurance laws, as the system automatically updates its databases in line with legal changes, protecting the company from any legal issues.
• Providing flexibility, as the software can be modified and customized to suit different business needs, in addition to integrating with other systems such as accounting and human resources systems.

What is payroll posting, and what are its types?

Payroll posting is one of the fundamental accounting processes that organizations rely on to accurately and transparently calculate and document salaries owed to employees. Through this process, all financial transactions related to payroll are recorded, with the aim of organizing financial accounts and ensuring that salaries are paid regularly in accordance with approved accounting regulations.

There are various types of payroll entries used in accounting processes to cover all payroll-related operations, such as:

• Accrual Entry: Used to record employees’ salary accruals, where the wages owed to each employee are recorded.
• Deduction Entry: Records payroll-related deductions such as social insurance and taxes, as well as any other deductions included in this entry.
• Advance Entries: Amounts received by employees in advance and later deducted from their salaries; these amounts are recorded in financial entries and documented as part of monthly operations.

These processes can be effectively automated using Jisr, which ensures accuracy and transparency in payroll calculations and guarantees compliance with applicable financial laws, as the software performs the following operations:

• Collecting basic employee data such as clock-in and clock-out times, working hours, shifts, and leave, and organizing and storing this information.
• Detailed determination of each employee’s payroll components, including base salary, allowances, and bonuses, and accurate calculation of financial entitlements.
• Automatically process deductions and entitlements of all types and rates, calculate them accurately, and record them in the corresponding accounting entries.
• Automatically generate accounting entries for each employee, ensuring accuracy and speed in payroll processing.
• Submit payroll files directly through integration with various government systems and applications, ensuring compliance with local laws and guaranteeing that all salaries are paid properly and in an organized manner.