Hire Contractors in Saudi Arabia

The Vision 2030 agenda is ushering in a major revamp of the employment landscape in the Kingdom of Saudi Arabia (KSA). 

This is reflected in the establishment of Qiwa to streamline business expansion and hiring contractors, the BAHR portal to facilitate freelancing in Saudi Arabia, and so much more. 

However, managing multiple contractors and freelancers in-house can become challenging. 

This guide will equip you with the knowledge and resources needed to hire contractors in Saudi Arabia and freelancers. It focuses on agent-of-record (AOR) solutions for a successful and compliant experience.

How to Hire Independent Contractors in Saudi Arabia

You can hire in Saudi Arabia based on your desired degree of control over recruitment. 

The traditional way of hiring contractors is through an established local entity. It involves significant upfront costs, time, and legal complexities. 

Additionally, you must assume full responsibility for compliance with contractor laws in Saudi Arabia. 

MHRSD has streamlined employment services using a centralized platform called Qiwa. Here are some key benefits:

• Digital management of contracts, renewals, and employee transfers.
• Real-time tracking of work permits and approvals.
• Integrated with the Nitaqat program to monitor Saudization percentages.
• Local and international candidate sourcing tools.
• Supports employee mobility between employers without sponsor approval.

However, you would still need an expert solution to automate and track payments— converting from contractor to employee salary, compliance, and more. 

You may rely on Agent of Record in Saudi Arabia (AOR) providers like Skuad for efficient and risk-free contractor management.

Hiring contractors through Skuad AOR

You can hire contractors in Saudi Arabia without setting up a legal entity using Skuad’s Agent of Record (AOR) solution. 

Further, you can use Skuad to:

• Ensure correct worker classification to avoid legal issues
• Draft contracts that clearly outline the independent contractor relationship and protect your company's interests
• Get a comprehensive dashboard to track contractor activities, handle payroll in Saudi Arabia, local compliance management, and more. 

Now that you’re clear about how to hire overseas contractors, let’s look at how to pay them.

How to pay contractors in Saudi Arabia

Contractor payments in Saudi Arabia may involve pay stubs, contractor invoices, or independent contractor payment receipts. 

You can choose from the below payment methods to process contractor payments:

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here’s a quick comparison between hiring contractors directly vs using Skuad AOR:

How Much Does it Cost to Hire a Contractor in Saudi Arabia

The minimum wage in Saudi Arabia is SAR 4,000 per month for Saudi nationals working in the private sector. There is no minimum wage for expatriates in the private sector. 

You can determine contractor payments based on the current minimum wage standards. 

How to Convert a Contractor into an Employee in Saudi Arabia

You can gain better control over contractors’ work schedules by converting them into an employee in Saudi Arabia. It is similar to switching workers from 1099 to W2 tax status in the US. 

You can choose either of two ways to convert a contractor into an employee. The first approach requires you to set up a local legal entity. You can use Qiwa to streamline business formation and employment processes in Saudi Arabia. 

Following this, you can draft the necessary employment contracts to comply with statutory labor rights related to work timings, overtime pay, leave, holidays, benefits, and termination. 

The second approach is to partner with an EOR (employer of record in Saudi Arabia) service provider to help you manage contractors as your full-time employee. An EOR takes control of contract drafting, payroll, benefits management, termination, and more.

Challenges of Hiring Contractors in Saudi Arabia

Onboarding contractors is a crucial hiring process that often goes unaccounted for. Here are some challenges of hiring contractors in Saudi Arabia that you should account for:  

1) Classification and compliance

• Saudi labor law does not explicitly define contractors, so clear agreements must outline the independent nature of their work to avoid legal issues. You can get started with a standard freelance contract template in Saudi Arabia.
• Misclassification of contractors as employees can lead to retroactive GOSI (General Organization for Social Insurance) payments, Zakat, and VAT implications. 
• Foreign contractors often need a valid Iqama (residency permit) tied to an employer. You must ensure contractors working under a business relationship do not violate visa terms, leading to a fine of up to SAR 10,000. 

If you are looking to hire contractors in Saudi Arabia from the US to manage your business interests, don’t miss the 20-point hiring checklist, 

2) Saudi Arabia payroll system for contractors

• You are not obliged to withhold tax and GOSI (General Organization for Social Insurance) for contractor payments in Saudi Arabia. However, it could result in additional paperwork for record-keeping. 
  For instance, when engaging with 1099 US contractors in Saudi Arabia, you must support them with the necessary documents so they can report annual income exceeding $600 to the IRS in the US. 

• Traditional systems for payroll in Saudi Arabia can complicate contractor management, as they need to handle the unique requirements. 
  It includes tracking multiple invoices, adjusting for different payment structures, workweek variations per local custom, Zakat and VAT implications, currency conversion, and so on. 

3) Saudization of workforce policy

• The government's Nitaqat program can indirectly impact hiring international workers in Saudi Arabia.
• When employing over 100 workers, you must maintain a Saudization rate of almost 30%. If you have to give up employed workers, at least one must be a Saudi national.
• You must ensure zero wrongful misclassification in Saudi Arabia, often done to circumvent Saudization rules. 
• Further, the Minister of Human Resources and Social Development (MHRSD) may impose a fine between SAR 2,000-6,000 for violating the Nitaqat workforce policy. 

Alternatively, you can deploy specialized contractor software like Skuad to overcome hiring challenges, onboard independent contractors, automate payments, and more.

Hire Contractors in Saudi Arabia with Skuad

Hiring contractors directly can be resource-draining as it involves various local compliance related to workforce management. 

Skuad can be your Agent of Record in Saudi Arabia. Using Skuad, you can establish successful working relationships with your contractors while mitigating compliance risks and administrative burdens. 

Moreover, our contractor management platform handles all the complexities of onboarding and paying contractors, ensuring adherence to KSA labor regulations. 

Partner with Skuad to seamlessly hire global contractors in over 160+ countries, including Saudi Arabia, without needing a local entity. 

Book your demo today to learn more about global talent acquisition compliantly.

FAQs

1. Can I hire a foreign contractor?

Yes, you can hire a foreign contractor in Saudi Arabia. However, before they begin work, you must ensure proper Saudization policy and proper work authorization. 

2. Does Saudi Arabia employ foreigners?

Yes, Saudi Arabia allows you to employ foreigners. However, you must maintain a certain quota of local employees before you plan to employ any foreigners. 

3. Can I hire a freelancer from another country?

Yes, Saudi Arabia allows you to hire a freelancer from another country to work on short-term projects. By the end of Q1 2023, Saudi Arabia registered more than 1.674 million freelance workers practicing in approved professions.

4. How do I pay a foreign contractor?

You can pay a foreign contractor from Saudi Arabia using bank transfers or international wallets like Payoneer. However, using an AOR payroll system like Skuad allows you to automate payment based on invoice and workhour tracking, mitigate currency conversion risks, and ensure compliant tax withholding and deductions in case of retroactive penalties for misclassification.