The Social Insurance Law in the Kingdom of Saudi Arabia is a set of rules and regulations governing the insurance rights, compensations, and responsibilities of all workers in both the private sector and government entities. Its purpose is to provide financial support upon the end of their employment, aiming to ensure insurance protection based on the principle of social solidarity.
The law was issued by a resolution of the Council of Ministers on November 29, 2000. The approval to implement amendments to the Civil Pension Law and the Social Insurance Law was made on July 2, 2024. The General Organization for Social Insurance (GOSI) undertakes the implementation of the law.
The Social Insurance Law and its Implementing Regulations
Role of GOSI in the Social Insurance Law
GOSI administers and implements the provisions of this Social Insurance Law. It is a legal entity that enjoys administrative and financial independence and is guaranteed and controlled by the state.
Role of the Minister of Finance in the Social Insurance Law
The Minister of Finance may issue rules that permit employers, individually or collectively, to set up private welfare institutions for granting their workers and their workers’ families additional benefits over and above those provided for in this law. The provisions of this law do not prejudice such other social insurance cash benefits as may have already been payable to the contributor or his family members by private institutions.
Branches of the Social Insurance Law
The Social Insurance Law comprises two branches: (a) Occupational Hazards Branch: This branch focuses on workers in the private sector or government entities covered by the Labor Law. It provides compensation, as outlined in the law and its regulations, for injuries sustained due to work-related incidents.
(b) Annuities Branch: This branch addresses Saudi workers in the private sector, government entities under the Labor Law, and Saudi self-employed professionals. It ensures pension benefits are provided upon retirement, disability, or other eligible circumstances in accordance with pension disbursement rules. In the event of death, benefits are extended to eligible dependents.
Application of the branches of the Social Insurance Law
The Occupational Hazards Branch is compulsorily applied to all workers without any discrimination as to gender, nationality, or age. The Annuities Branch is compulsorily applied to all Saudi workers without any discrimination as to gender, provided that the covered worker is under sixty years of age upon his initial coverage under the law. Where a worker, who has been previously covered by the Social Insurance Law, has re-engaged in an employment subject to the Law at age sixty or over, he is treated as per provisions specified in the law.
Requirements of the application of the branches of the Social Insurance Law
For the purposes of application of the provisions of paragraphs one and two of Article Four, the worker must have been employed by virtue of an employment contract for the benefit of one or more employers regardless of the duration, nature, or form of the contract or the amount or kind of the wage paid, provided that his employment is mainly performed within the Kingdom, or that the worker is a Saudi national if he works abroad for an employer whose head office is within the Kingdom.
As per the regulations, the Annuities Branch voluntarily applies to Saudi citizens who are engaged in liberal professions or who conduct, for themselves or in partnership with others, a commercial, industrial, agricultural, or service activity. The Occupational Hazards Branch may be applied to Saudi nationals employed abroad and who have no employment relation with an employer whose head office is within the Kingdom.
Excepted from coverage by the Social Insurance Law
Excepted from coverage by the Social Insurance Law are civil servants and members of the armed forces and the police; foreign employees working in foreign international, political, or military missions; domestic servants; foreign workers who come to the Kingdom to engage in works which usually take no more than three months to complete; artisans (workers working in their homes); employer’s family members (who work in the family firms) where no workers other than these are employed; workers employed in agricultural, forestry, or pastoral works; and sea-men including the sea-fishermen. This exception does not include those subject to the Labor Law.
Application of the Social Insurance Law by employers
The employers employing workers are liable to apply the law and its regulations, and the regulations specify the method for registering in GOSI for employers and contributors.
Discontinuation of contribution to the Annuities Branch under the Social Insurance Law
Any contributing worker whose contribution to the Annuities Branch is discontinued and who is no longer satisfying the conditions provided for in the law may continue his contribution to this branch, provided that he submits, within the time limit prescribed by the regulations, a request whereby he undertakes to pay the prescribed contributions payable by both the employer and the worker for insurance under the Annuities Branch. If the contribution period ends and the contributor or their family members do not qualify for a pension, the contributions are terminated, and the amounts paid during that period are refunded to the contributor or their family. The Implementing Regulations specify the rules and procedures for the implementation of this article.
Contributions for the Occupational Hazards Branch
The contributions for the Occupational Hazards Branch are fixed at 2 percent of the contributory wages of the contributor and are payable by the employer. This rate of contribution may be increased to double the amount for employers who refuse to abide by the instructions issued by the competent authorities in regard to the safety and health of workers. Each of the contributors from other categories, such as Saudi citizens who are engaged in liberal professions or who conduct, for themselves or in partnership with others, a commercial, industrial, agricultural, or service activity, undertakes paying the contribution.
The contribution for the Annuities Branch in respect of Saudi workers without any discrimination as to gender, provided that the covered worker is under sixty years of age upon his initial coverage under the law, is fixed at 18 percent of the contributory wage, of which 9 percent is payable by the employer and 9 percent is payable by the contributor.
The contribution for the Annuities Branch, with respect to the contributors who are engaged in liberal professions or who conduct, for themselves or in partnership with others, is fixed at 18 percent of the assumed wage chosen by the contributor. The contribution is fully paid by the contributor.
The rate of contribution may be modified by a decision of the Council of Ministers issued on the recommendation of the minister after the Board of Directors expresses a justified opinion based on an actuarial study.
Calculation of contributions as per the Social Insurance Law
Employer contributions under the Social Insurance Law are calculated based on the basic monthly wage of the contributor. The regulations also allow for the inclusion of allowances and in-kind benefits in the wage when calculating contributions. Additionally, the regulations define the contribution wages for workers whose earnings are production-based and specify the required contributions for trainee workers. Contributions for increases in a worker’s contribution wage are not payable once the worker reaches the age of fifty, except within specific limits set by the regulations.
The maximum contributory wage is SAR45,000 per month. This limit may be raised by the regulations by revising wage levels to be made from time to time.
According to the regulations, contributions are based on the monthly wages received, accounting for any increases or reductions. They may also be calculated on a monthly basis without being influenced by sudden wage reductions, or for the entire insurance year using the contributory wages agreed upon for the first month. Contributions can also be paid as a lump sum or based on wage brackets for specific contributor categories. In all cases, benefits are determined based on the wages used to calculate the required contributions.
Amendments of the Social Insurance Law
On July 2, 2024, the Council of Ministers approved amendments to the Civil Pension Law and the Social Insurance Law, aiming to create a unified law for workers in both the public and private sectors. The amendments to the Social Insurance Law apply to employees under fifty Hijri years of age who have accumulated less than twenty years (240 months) of contributions at the time the amendments take effect. This includes periods covered under either the Civil Pension Law, the Social Insurance Law, or a combination of both.
Statutory retirement age after the amendment to the Social Insurance Law
The statutory retirement age for employees, following the amendment to the Social Insurance Law, is expected to range from fifty-eight to sixty-five years. The increase is phased in gradually, starting with an initial four-month increment based on the employee's age at the time the amendments take effect.
For early retirement, the required contribution period is between twenty-five to thirty years, with a gradual increase beginning with an additional twelve months from the current requirement for early retirement eligibility.
Excepted from amendments of the Social Insurance Law
Individuals who are fifty Hijri years old or older, or those who have twenty years (240 months) or more of contributions as of the amendments' effective date, are exempt from the changes to the Social Insurance Law. This exemption applies regardless of whether their contribution periods are under the Civil Pension Law, the Social Insurance Law, or a combination of both.
Current contributors (at the time of the new law's issuance) or those with previous contributions to either the Civil Pension Law or the Social Insurance Law are also exempt from the new Social Insurance Law.
Regulations of the new Social Insurance Law
The new Social Insurance Law is implemented as a unified law for all civil servants and employees joining after its effective date, regardless of whether they work in the public or private sector. The regulations are as follows: The standard retirement age for new employees is set at sixty-five years. However, employees may opt for retirement as early as ten years prior to this age, provided they have completed 360 months of contributions. Additionally, the contribution rate for the pension scheme increases gradually, starting at 0.5 percent each year from the second year until the fifth year, resulting in a total increase of approximately 2 percent, bringing the total contribution rate to 22 percent. Both the employer and the employee each contribute 11 percent.
Application of maternity compensation under the new Social Insurance Law
The new Social Insurance Law allows social insurance to provide maternity compensation to working women on behalf of their employers during periods of absence due to childbirth. This benefit is applicable to contributors in both the current and new Social Insurance Law, regardless of whether they are Saudi or non-Saudi.
Under the new Social Insurance Law, a working woman is entitled to maternity compensation starting from the first month following her childbirth. To qualify, she must have a contribution period of at least twelve consecutive months or an intermittent contribution during the last thirty-six months leading up to the birth, provided the birth occurs while she is employed under this law. Additionally, the birth must take place at least six months after the start of her pregnancy, regardless of whether the child is born alive or not. Maternity compensation is calculated as the average wage registered for the contribution and is paid for three months. If a woman gives birth to a sick or disabled child, an additional month of compensation is provided. It is important to note that maternity compensation cannot be combined with regular wages; however, a woman may receive both occupational hazard compensation and maternity compensation concurrently. Contribution to the law remains active during the maternity compensation period, similar to the current benefits provided under the Occupational Hazards branch.
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