As a global business leader, you’re well aware of the many advantages that come with having a strong presence in KSA. From access to unparalleled resources to endless business opportunities, this country offers opportunities for everyone.
However, there may be many legal and administrative hurdles businesses need to address when hiring employees in Saudi Arabia. Choosing the right global employment solution could be key to helping your organization secure long-term success and remain competitive within the KSA market.
This is where global employment solutions like Employer of Record (EOR) and Professional Employer Organizations (PEO) come into play. Read on to find out about the two common types of global employment solutions and what to look for when selecting a global hiring solution for your company in Saudi Arabia.
An EOR is a solutions provider that takes up all employer-related activities for smaller to larger-sized companies in locations where they do not own physical entities. Thus, EOR is the legal employer of your workforce on paper.
If you want to hire top talent quickly and legally, no matter where they are, an EOR partner gives you the freedom to enter nearly any market—no business registration required.
Working with an employer of record also provides you with the peace of mind that experts will handle all HR and employer-related responsibilities in a compliant manner, allowing your teams to focus on their core responsibilities. Managing HR activities compliantly can be a time-consuming and challenging task if you were to set up a foreign subsidiary in the Kingdom.
Confused about whether setting up a subsidiary or partnering with an EOR is the right move for you? Check out our blog here to find out how to decide your next big strategic move!
A professional employer organization (PEO) is a company that works with small and medium-sized businesses to provide comprehensive HR services. Businesses that need assistance hiring employees on a full-time and permanent basis in their local area frequently turn to PEO partners to offload tasks such as:
Offloading labour-intensive processes like HR functions will always allow you to reap the benefits of outsourcing, but for PEOs in Saudi Arabia, compliance is truly the key value proposition.
Ensuring Compliance With KSA Labour Laws
Saudi labour laws go into great detail about employment practices in the Kingdom with two main sources:
Outsourcing it to a PEO provider like TASC in KSA helps businesses ensure careful consideration and strict adherence to the mandatory guidelines outlined in these laws, which cover everything from onboarding to payment, as well as more complex issues like intellectual property (IP) protections.
Mitigation of Risks In KSA
Risk reduction is one of the primary competitive advantages of guaranteed local labour law compliance. Because PEOs guarantee that your HR functions will always follow strict local legislation guidelines, you are protected from potential penalties and fines that would result from non-compliance across the Kingdom.
For instance, if ZATCA continues to detect non-compliance after giving an initial warning, the taxpayer will be fined 1,000 Riyals, which is approximately USD 267. If the taxpayer fails to comply with the rules and does not make the necessary changes within three months of receiving the notice, the penalty charges gradually increase.
Efficient Payroll Processing Tax Filing In KSA
Employers in Saudi Arabia are required to withhold taxes and make social security contributions during the payroll process. While there is no income tax on employee wages in Saudi Arabia, social security contributions and non-resident withholding taxes (WHT) are required to be paid.
PEOs with in-country legal expertise make time-consuming tasks like payroll and tax filing more efficient for clients. Even better, they ensure strict adherence to statutory components detailed by local labour laws, and there's a lot of work that goes into it between compensation standards, taxation legislation, deductions and benefits administration.
A PEO is a co-employer, a third-party vendor that manages the HR duties for your company. EORs, on the other hand, are independent businesses that employ your distributed workforce in places where you do not have a physical presence.
In the case of a PEO partner, your business serves as the on-site employer and is in charge of all HR-related decisions. You give up some control over HR-related choices when you use an EOR, but you do so with a dependable partner who gives you access to top-notch benefit plans and local knowledge.
Because a PEO is a co-employer, your company will be subject to employment laws around workplace safety (termination, severance pay, paid and sick leaves) in Saudi Arabia. The PEO can most likely assist you in managing those risks, but the PEO does not bear full responsibility for workplace risks.
An EOR has the benefit of acting as your workforce's actual employer, taking on all employment risks and liabilities related to the services it offers throughout the Kingdom.
PEOs may be more valuable to businesses that have more full-time employees rather than temporary workers. To provide access to certain benefit packages in KSA that include childcare and education allowances, relocation support may require PEOs to have a minimum number of employees.
An EOR, on the other hand, provides greater flexibility for businesses that rely on temporary workers or require access to talent in other locations such as in KSA where recent megaprojects have increased the demand for exceptional talent from across the world. EORs are also less likely to have employee minimums, which means that you can hire just one employee.
A PEO partner provides HR services in locations where your company already has a presence. Because a PEO does not employ your employees, your company is still responsible for adhering to Saudi labour laws.
An EOR partner is well-versed in local hiring practices and laws, taking the guesswork out for companies that are looking for a speedy expansion across Saudi Arabia.
Now that we have clarified the differences between an EOR and a PEO, let's look at a couple of factors that will aid you in deciding which solution is best for your company expanding into Saudi Arabia.
Scaling costs a lot of money for small businesses and start-ups, especially when expanding and hiring in new locations. The minimum amount required for setting up an LLC in KSA is SAR 100,000 with SAR 10 million for a PLC. Consider a PEO to join as a co-employer and manage HR-related tasks in your new location if your company is already planning to open a new entity in a new state or country.
If your company wants to hire in a new location or multiple countries at once, an EOR speeds up the onboarding process and assumes responsibility for local labour law compliance.
If you don't have separate entities in cities or countries where you want to hire new talent, the costs of establishing new entities and laying the groundwork to comply with local Saudi laws and regulations will be prohibitively expensive. Rather than creating new entities or avoiding hiring talent in the Kingdom, invest in an EOR partner who will act as an entity on your behalf and provide the foundation for compliant employment.
If you already own or plan to establish an entity in KSA, a local PEO partner will offload your HR services in that location, allowing you to focus on managing your team.
Compliance with the local labour laws of the markets in which you want to operate is the foundation of any successful business. To legally run the HR and payroll processes required to hire remote teams in the Kingdom, you must understand and comply with the statutory guidelines and standards set out in Saudi Arabian legislation.
Finding the right partner is essential to accomplishing this.
What you require is a reliable PEO EOR partner like TASC in Saudi Arabia to assist you with your goals. With over 15+ years of local and international HR and recruitment experience, our knowledge of Saudi labour laws is second to none ensuring compliance with local legislation and allowing you to reallocate valuable in-house business resources to pursue other objectives.
Contact us today to learn more about how we can assist you with your next big move.
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