Employee Classification Policy
Amid the evolution of work models and increasing workforce diversity, the employee classification policy acts as a roadmap, guiding both the company and its workers in understanding rights and responsibilities. It is also considered a starting point for setting up your employment policies. It mentions employee classification levels (Full-time, Part-time, Temporary, Freelancers), contractual requirements, benefits & entitlements, termination, and final settlement.
Created by
Naif O. Alawbathani
|
Human Resources Adviser
Written by HR expertsFully customizableSaudi labor law ComplaintShare the calculator with an HR college
What’s included in the employee classification policy?
The employee classification policy comprehensively outlines the rules for all employee categories within the company. It details aspects such as contract types and durations, renewal procedures, weekly working hours, average length of service, salary calculation methodologies, and eligibility criteria for benefits.
Furthermore, the policy specifies the conditions governing the contracting process, essential contractual clauses, and requirements for labor law compliance. It also defines the probationary period and its permissible extensions, alongside clearly stating the entitlements due to employees based on their employees classification levels.
Recognizing the critical importance of legally sound service termination, the policy references the legal frameworks for calculating end-of-service benefits, scenarios leading to automatic contract termination, and other situations requiring termination by mutual agreement or lawful notice.
Employee Classification Policy - Table of contents
1. Overview
2. Objectives
3. Full-time Employment
4. Part-time Employment
5. Temporary Employment
6. Freelancers
7. Contractual Requirements
8. Benefits & Entitlements
9. Termination & Final Settlement
10. Legal Compliance
11. Implementation & Review
Why do you need an employee classification policy?
Clarify eligibility for benefits based on classification.
Promote transparency and fairness in employment practices.
An equitable and transparent workplace that ensures fair treatment for all.
Consistency in HR practices, including hiring, termination and discipline procedures, across different classifications.
How do you use the model?
Download the template and review the content.
Customize it with name, logo and specific rules using clear definitions.
Ensure all employees, managers, and HR personnel have access, and upload it to Jisr HRMS.
Ensure compliance by getting the employee classification policy reviewed by a legal/HR expert.
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FAQ
What is employee classification?
Employee classification is the process of categorizing the members of a company on the basis of their responsibilities, job duties, legal status, compensation, entitlements, etc.
Based on this classification, employees are classified under several different categories, such as part-time, full-time, temporary, and freelancers. Each one has its own terms of employment, working hours, compensation, benefits.
Another model of employee classification exists, which is based on factors like performance, but it is not widely used.
Why is employee classification essential?
Here are some of the reasons why employee classification is important:
- Saudi labor law governs how employees must be classified, failing to do it can result in penalties, fines, and lawsuits.
- It ensures that employees receive the appropriate legal benefits they are entitled to.
- It helps manage resources more efficiently by ensuring that businesses are only paying for the labor they actually need.
What to include in an employee classification policy?
An employee classification policy should include these key components:
- Policy overview and objectives: Clarifying what it is and why it is designed.
- Employment categories: Such as full-time, part-time, temporary and freelancers.
- Contractual Requirements: Such as job title, hours, wage, and benefits.
- Benefits & Entitlements: e.g. annual leave, health coverage, end-of-service, etc.
- Compliance and legal considerations: Emphasizing the importance of adhering to the Saudi Labor Law, its executive regulations.
For more details, download the employee classification policy pdf above.
What are employees classification levels?
Based on responsibilities and legal status, employees classification levels are 4 as shown below:
- Full time Employment: 40–48 hours per week,covered by indefinite or fixed-term contracts ,and Entitled to full statutory benefits.
- Part-time Employment: 20–30 hours per week, entitlements are calculated based on actual hours.
- Temporary Employment: Engaged for specific tasks up to 90 days and usually no end-of-service benefit.
- Freelancers: Contracted on a project or task basis, deliverables based pay, and not entitled to standard employee benefits.
What are the risks of misclassifying employees?
Misclassifying employees can result in many risks including:
- legal action, including penalties, fines, and lawsuits.
- Damaging a business’s reputation and undermining employee morale.
- Wasting company resources. For example, categorizing a part-time employee as full-time gives him more pay and benefits than he should receive for fewer working hours.