Social Security in Saudi Arabia

1. Legal framework

GOSI administers a social security system for KSA nationals including a number of benefits such as old age retirement pensions, disability allowance, survivor’s pensions, and incapacity benefit. The Human Development Fund provides unemployment allowance for KSA nationals who are university graduates for a period of 1 year from graduation, providing SAR 2,000 a month. It has also been announced that there will be new legislation providing for unemployment benefit. Non-KSA nationals are not entitled to social security – except compensation for workplace injury or disease under the GOSI workplace injury scheme.

2. Contributions

The most recent social security reforms in KSA came into force in September 2002, entitling all KSA employees to an old-age social security pension (previously employees in companies with fewer than 10 employees were excluded from social security coverage). The scheme is applicable to all KSA nationals, including those employed abroad not covered by the local social security system. Monthly earnings, for the purpose of social security contributions, are capped at SAR 45 000. Retirement (as well as survivors and disability) benefits are funded by employer and employee contributions of 9% each. The minimum and maximum monthly earnings for the purposes of contributions and benefits are SAR 1 500 and SAR 45 000, respectively.
Individuals with at least 120 months of paid or credited contributions are eligible for an old-age pension. Individuals must retire to receive the pension. Individuals who do not meet the minimum qualifying standards for an old-age pension are entitled to a lump sum settlement. Where an employee does not have 120 months of paid contributions, but has at least 60 months of paid contributions, they may elect to pay the remaining contributions either in one lump sum or in monthly instalments and thereby still become eligible for an old age pension. Such “credited contributions” cannot exceed 60 months. Both in case of normal and early retirement, the retirement pension is calculated as follows: 2.5% of average monthly salary over the last two years multiplied by the number of years of social security contributions up to 100% of the pension calculation base.

Covered average monthly earnings cannot exceed 150% of monthly earnings subject to social security contributions at the beginning of the last five-year contribution period. Special provisions apply if the insured’s monthly earnings decrease during the two years prior to retirement. The minimum monthly retirement pension is SAR 1500. The lump sum settlement is equal to 10% of the insured’s average monthly earnings in the last two years for each of the first 60 months of contributions plus 12% for each additional month.

If an individual receiving an old-age pension resumes covered employment, the pension will be suspended until retirement resumes. Based on the more favourable outcome for the pensioner, the benefit will be adjusted to reflect either the prior and additional periods of contributions or only the final period of contributions.
There are specific rules on survivor pensions, which are payable provided the deceased individual, at the time of death, has paid at least three consecutive or six non-consecutive months of contributions to the social security system

3. Insurances

It is mandatory for an employer to provide private medical insurance for non KSA employees. KSA employees are provided free medical care by the Government.

4. Maternity Leave

The KSA Labour Law entitles female employees to 4 weeks’ maternity leave preceding the expected date of delivery and 6 weeks after delivery. Such leave is paid at 50% of remuneration if the employee has accrued only 12 months’ continuous service. Employees with three or more years’ service (as at the start of leave) are entitled to full pay. The employee cannot legally work during the six week period following delivery. Employees are not entitled to pay during annual leave in the same year they received fully paid maternity leave. Similarly, employees who took maternity leave at 50% pay are entitled to only 50% pay during annual leave in the same year.

A male employee is entitled to one day’s paid leave on the birth of his child.

For more information, please contact L&E Global.
This information was contributed by Abdulaziz A. Al-Bosaily Law Office in association with Clyde & Co.
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