Managing HR & Payroll Functions in Saudi Arabia | Marko Taylor | Mercans | Recruitment | Payroll...

MERCANS – SAUDI ARABIA PAYROLL & HR MERCANS – SAUDI ARABIA PAYROLL & HR

© Mercans -‐ www.mercans.com

HR & PAYROLL IN SAUDI ARABIAHR & PAYROLL IN SAUDI ARABIA


HR & Payroll Functions FrameworkSetup of HR & Payroll functions in Saudi Arabia is affected by various legal and operational considerations.

External factors

Internal factors

Labor Law

Employee Relations

HR & PayrollHR & Payroll

Immigration Procedures

CCHI & GOSI

Resources Systems § Regulatory environment is changing and confusing.

§ Saudization and immigration requirements are rigid.

§ Early mistakes are very hard or nearly impossible to fix later.

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§ No personal income tax.

§ Social Security (GOSI) taxes are low and fairly simple.

§ Implementation of efficient HR & Payroll systems provide operational efficiencies.

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© Mercans -‐ www.mercans.com 3

Saudi Arabia Labor LawLabor Law has the central role in defining the relationships between employers and employees.

Key Observations Key Observations • Both limited and unlimited term contracts can be used for

employment of Saudi nationals. Expatriate employees can only be issued limited term contracts.

• Maximum period of probation is 90 days. Employee can be terminated for any reason and without EOS benefits during the probation period.

• Labor Law must be followed very closely when terminating a contract. Only specific reasons defined in the Labor Law can be used for terminating limited term contracts.

• Maximum weekly working hours 48 (36 hours during Ramadan for Muslims). Friday is the only statutory weekend day.

• Statutory Leaves: Annual Leave, Sick Leave, Child Birth Leave, Marriage Leave, Hajj, Examination Leave, Maternity Leave and Unpaid Leave.

• Overtime -‐ 1.5x Basic Salary.

• Special seating arrangements must be made for Saudi female workers. Approval from the Ministry of Labor is also required.

Contract Types

Leaves

Labor LawLabor Law

TerminationFemale Employees

Overtime Working Hours


Immigration ProceduresMajority of the Saudi Arabia’s workforce is composed of expatriate employees –knowledge of immigration procedures is critical.

Key Observations Key Observations • Expatriate staff can be hired locally or from outside the Saudi

Arabia.

• Each company is allocated a certain number of expat work visas (categorized by nationalities and positions). It is extremely important that the work visa request includes most suitable nationalities and positions – subsequent changes are almost impossible.

• Each company must meet certain Saudization targets, which are established based on the company size and industry. Company will not be able to hire any expatriate employees if the Saudization targets are not met.

• Transfer of an expatriate employee from one employer to another requires acceptances by both companies. The local Iqama transfers do not count against the visas granted to the company under the “Block Visa”.

• Expatriate employees must obtain an exit-‐re-‐entry visa every time they wish to leave the country.

Block Visa

Family Visas

Immi-‐grationImmi-‐gration

SaudizationIndustry

Exit –Re-‐entry

Local Transfers


Social Security & Medical InsuranceAll employees must be covered under a mandatory private medical insurance and registered with the General Organization of Social Insurance (GOSI).

Key Observations Key Observations • All employees must be registered with GOSI. All expatriate

and Saudi employees are subject to the Occupational Hazards Branch (2% employer contribution) of GOSI. Saudi employees are also covered by the Annuities and Unemployment (SAND) Branches (10% employee and 10% employer contribution).

• Only Basic Salary and Housing Allowance are subject to GOSI deductions and contributions (up to SAR 45,000 per month).

• All employees and their families residing in Saudi Arabia must be covered by the employer under private medical insurance program, which meets the minimum CCHI* requirements.

• Benefits under Occupational Hazards Branch include: medical care, permanent disability benefits or lump-‐sum benefits for expatriates. Annuities Branch benefits include: retirement benefits, death pension, non-‐occupational disability and lump-‐sum compensation.

• Compliance with GOSI & CCHI rules is enforced heavily.

Registration

Family Coverage

CCHI & GOSI

CCHI & GOSI

Contri-‐butions

Enforce-‐ment

Benefits Deregis-‐tration

*CCHI –Council of Cooperative Health Insurance


HR & Payroll SystemsHR & Payroll functions must be supported by agile and flexible systems that support the local requirements.

Key Observations Key Observations • Implementation of a robust HR & Payroll system is critical for

managing an HR operation in Saudi Arabia. Implemented systems must have the following key modules: Leave and Leave Tickets, Employee Letters, Employee Documents, etc.

• Automated tracking and recording employee attendance and presence is critical to prove employees’ presence/absences to the Labor Office and courts.

• HR systems must be able to automatically track the expiry of employee documents (i.e. passports, Iqamas, etc.) in order to ensure compliance with the immigration rules.

• All salaries must be reported to the Ministry of Labor by uploading an electronic WPS file to the MOL’s web-‐site for each payroll.

• Access to high-‐speed internet is widely available. Implementation of an online Employee Self-‐Service is strongly encouraged in order to reduce administrative overheads and improve employees access to HR resources.

HR

Compliance

SystemsSystems

PayrollEmployee Self-‐Service

WPS Time & Attendance


Employee Relations ManagementEmployee Relations must be carefully managed to avoid costly labor disputes and improve employee retention rates.

Key Observations Key Observations

• Typical cash compensation consists of Basic Salary, Housing and Transportation allowances. Any other allowances can be paid at the discretion of the employer.

• Other employee benefits typically include mandatory medical insurance and annual leave ticket.

• Employers can offer either single or family status employment contracts. Family status contracts include typically annual leave tickets for family members and support with family immigration procedures. All family members residing in Saudi Arabia must also be covered under company’s medical insurance policy.

• Company must develop and publish workplace regulations, which should also be approved by the Ministry of Labor.

• Any major actions; e.g. bank account opening, obtaining of driving license, etc., by the employees require written authorization (NOC’s) from the employer. Administrative efforts related to the issuance of NOC’s can be quite significant.

• Employers are encouraged to implement electronic employee self-‐service platforms in order to facilitate numerous employee request.

Compen-‐sation

Policies & Procedures

Employee RelationsEmployee Relations

BenefitsEmployee Self-‐Service

NOC’s Family Status


Support ResourcesA team of both internal and external experts is required for setting up and operating a world-‐class HR & Payroll department in Saudi Arabia.

Key Observations Key Observations

• All HR positions must be formally staffed by Saudi nationals. Additional team of either external or internal expat staff is required to provide support and guidance to the Saudi national staff. Outsourcing of time sensitive and critical functions (i.e. payroll, etc.) is highly recommended.

• Early engagement of an immigration expert is critical for avoiding costly mistakes with the “block visa” request. Labor disputes are frequent and common in Saudi Arabia and employers are encouraged to engage an external legal advisor to represent them during the related proceedings.

• Clear and time-‐tested HR & Payroll procedures should be developed and introduced to manage all critical aspects of the employee life-‐cycle related events and other employee relations matters. An external expert should be engaged to guide the policies & procedures development process.

• HR & Payroll function requires a robust and flexible reporting tool, which enables extracting data in various formats for management and statutory reporting purposes.

• All HR & Payroll related communication should be issued both in Arabic and English.

Staff

Policies & Procedures

ResourcesResources

ImmigrationLanguages

Reporting Legal Advice


ABOUT MERCANSABOUT MERCANS


Mercans’ ProfileLeading Business Setup & Support Services provider in the Middle East

Services • Recruitment • Payroll Outsourcing• Employee Outsourcing• Government Relations• HR Advisory• Software Solutions

Locations • Regional offices in Dubai, Riyadh, Milano, London and Wilmington

• Representative offices in 14 countries in the Middle East and North Africa*

Industry Focuses • Construction & Engineering• Healthcare & Pharmaceutical• Education• Oil & Gas• IT & Telecommunications• Consumer Products• Finance & Banking

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* GCC, Algeria, Egypt, Jordan, Lebanon, Sudan, Pakistan, Iran and Iraq


Mercans in Key FiguresOur results speak volumes

Countries SupportedCountries Supported

14

Payslips GeneratedPayslips Generated

10,000+

Consultants Consultants

25

Candidates Placed Candidates Placed

2,500+

Clients Clients

100+

Average Time-‐to-‐Fill Average Time-‐to-‐Fill

15 days

Transactions ProcessedTransactions Processed

1,000,000+

Immigrations Cases Immigrations Cases

1,000+

Average Hit RateAverage Hit Rate

25%

12© Mercans -‐ www.mercans.com

Mercans is a regional partner of the leading global payroll and employee outsourcing companies

§ activpayroll is a leading global professional service organisation, providing integrated global and domestic payroll solutions; expatriate taxation services and online HR people management tools to over 1,000 companies in more than 80 countries worldwide.

§ SGWI is one the leading payroll outsourcing companies in the world. SGWI processes over half a million pay slips per year and have a long-‐standing relationships with high-‐quality in-‐country partners in over 165 international markets and have established four global Management Centers in the US, Mexico, the UK and India.


Our Partners

Geographical PresenceOur consultants are located in the major locations throughout Asia and Europe

§ Mercans’ regional support offices are located in London, Milano, Dubai, Riyadh and Wilmington.

§ Our highly qualified consultants located throughout 14 countries in MENA and APAC.


Our Middle East Presence

UAESaudi Arabia

Egypt

Oman

Iraq

Kuwait

QatarBahrain

Jordan

Lebanon

Pakistan

Sudan


Managing HR & Payroll Functions in Saudi Arabia | Marko Taylor | Mercans | Recruitment | Payroll...

Recruiting & HR

Transcript of Managing HR & Payroll Functions in Saudi Arabia | Marko Taylor | Mercans | Recruitment | Payroll...