7 Recent Changes to Social Insurance Law in Saudi Arabia

Keep Up-to-Date With Recent Changes to Saudi Arabia’s Social Insurance Law

Saudi Arabia’s Social Insurance Law has undergone key reforms that impact employers, employees, and investors alike. These amendments, effective July 3, 2024, address critical areas such as: 

• Retirement age 
• Contribution rates 
• Maternity benefits 
• Public-private sector transitions 

For businesses operating within Saudi Arabia—or those looking to invest—it’s essential to fully understand these changes to stay compliant and adapt to the new legal landscape. 

The social insurance attorney at Khalaf Bandar Law Firm will analyze the recent updates to Saudi Arabia’s Social Insurance Law, explaining their implications for both enterprises and individuals. 

Overview of Saudi Arabia’s Social Insurance System

Saudi Arabia’s social insurance system, managed by the General Organization for Social Insurance (GOSI), provides financial protection and security for citizens and residents. Initially designed to offer retirement pensions, work injury compensation, and unemployment benefits, the system has gradually expanded to better meet the growing needs of the workforce. 

By ensuring workers are covered under its umbrella, GOSI fosters greater workforce stability and socioeconomic development. 

Key Components and Benefits of Social Insurance

Saudi Arabia’s social insurance system brings a range of benefits to both employees and employers. Employees are entitled to: 

• Retirement pensions 
• Disability benefits 
• Unemployment coverage
• Maternity benefits (under the new reforms) 

For employers, the system strengthens workforce loyalty, boosts employee satisfaction, and helps ensure compliance with regulatory requirements. 

Detailed Analysis of the Recent Changes

1. Retirement Age Increase

One of the key updates involves raising the retirement age from 60 to 65 years old. This reflects global trends in social insurance reform, addressing longer life expectancies and the need for extended economic participation. 

Implications: 

• Retirees will need to wait longer to access full benefits. 
• Employers must prepare for a workforce with a broader age range, paving the way for initiatives like mentoring programs where older employees can guide younger talent. 

2. Change in Contribution Periods

The minimum contribution period required for early retirement will increase from 300 months to 360 months by 2029. 

Who Is Affected: 

• Employees planning early retirement require longer financial contributions to qualify. 
• Companies must account for these changes in long-term workforce planning. 

3. Rise in Contribution Rates

Employee and employer contribution rates will progressively increase from 9% to 11% by 2027. 

Impact: 

• Employers must adjust payroll budgets to accommodate higher contributions. 
• Employees will see slightly lower take-home pay as contribution rates rise. 

4. Reforms to Maternity Benefits

The introduction of a social insurance-based maternity benefit marks a significant shift. Previously, employers bore financial responsibility for maternity benefits. The reforms introduce nationally standardized guidelines, extending maternity leave from 10 weeks to three months. 

Benefits: 

• Employers benefit from reduced direct liability. 
• Employees receive enhanced financial security and longer leave, fostering workplace inclusivity and gender equality. 

5. Applicability to Public and Private Sectors

The new system applies seamlessly to public and private-sector employees, enabling greater mobility between the two sectors. 

Implications: 

• Employees can move between the sectors without forfeiting their benefits, empowering their career decisions. 
• Public-private sector collaborations could deepen, leveraging this newfound flexibility. 

6. Exemptions and Special Categories

Certain categories are exempt from critical reforms, such as the age and contribution period changes. For example, individuals aged 50 or older or those with 20+ years of contributions as of July 2024 are not subject to the updated retirement age or contribution requirements. 

7. Effective Date and Scope

The reforms took full effect on July 3, 2024, and apply to Saudi employees across both sectors, although expatriate workers are largely excluded. 

What do These Changes Mean for Your Business?

Key Takeaways:

• Retirement age increases and contribution adjustments require long-term workforce planning and potential budget revisions. 
• Maternity benefit reforms reduce employer liability while providing enhanced support to employees. 
• Greater flexibility for employees between the public and private sectors improves talent mobility. 

Saudi Arabia’s social insurance reforms indicate a larger trend of legal modernization aimed at improving the nation’s economic readiness while aligning with Vision 2030 goals. Businesses, both domestic and foreign, are encouraged to stay vigilant as further reforms may develop. 

Contact Khalaf Bandar Law Firm For Help Complying With Social Insurance Changes

Ensure that your business adapts proactively to the upcoming changes. Khalaf Bandar Law is here to assist. For legal advice tailored to your business needs, contact our attorneys today to schedule a consultation.