Freelancer or employee? When does a services agreement fit, and when does the Saudi Labor Law treat the provider as your worker?

The test the Labor Law applies

The Labor Law defines a worker as every natural person who works for the benefit of an employer and under its management or supervision in return for a wage, even if away from its oversight. The Law applies to every employment contract under which a person undertakes to work for the benefit of an employer and under its management or supervision in return for a wage, and it defines the employment contract as one in which the worker undertakes to work under the employer's management or supervision in return for a wage. So three elements recur in the text: work for the employer's benefit, management or supervision, and a wage.

The phrase even if away from its oversight matters for anyone contracting remotely: working from home or from another city does not take a person outside the definition of a worker if they remain subject to your management or supervision. An employment contract also exists even if it is not written, and in that case the worker alone may prove the contract and their rights by every means of proof. So the decisive question is not what you called the contract, but how the relationship is run day by day.

On the other side, the Civil Transactions Law defines a contract for work as one under which the contractor undertakes to make a thing or perform work in return for a fee without being subordinate to, or an agent of, the party ordering the work. Subordination is therefore the dividing line between the two relationships. The Council of Ministers approved the Commercial Transactions Law on 27 October 2026, and its text has not yet been published, so this guide builds no rule on it.

Practical indicators: when the relationship leans to employment and when to independence

The Law does not lay down a numbered list of tests, and what follows are practical indicators drawn from the elements of the definition, not statutory conditions. No single indicator decides the outcome; the whole picture does. The more employment indicators gather in one relationship, the more likely it is to be treated as an employment relationship.

• Towards employment: fixed daily hours set by the business, with attendance tracked.
• Towards employment: a fixed monthly amount paid like a salary regardless of what is delivered.
• Towards employment: the business sets how the work is done and its steps, not only the result, and gives daily instructions.
• Towards employment: the person works only for you, or is barred from serving other clients.
• Towards employment: an open-ended relationship with no defined project and no known end.
• Towards independence: defined written deliverables against which completion is measured.
• Towards independence: works with their own tools and equipment, at hours they choose.
• Towards independence: a fee per milestone or deliverable, paid against an invoice.
• Towards independence: free to serve other clients at the same time.
• Towards independence: carries on the activity under a commercial register or a valid freelance work document.

The alternatives inside the Labor Law: part-time work, flexible work and secondment

If what you really need is a Saudi working under your supervision for fewer hours, a services agreement may not be the right tool. The Labor Law defines part-time work as work performed by a non-full-time worker for hours fewer than half the establishment's usual daily working hours, whether performed daily or on some days of the week. Under the Executive Regulation of the Labor Law as published by the ministry, a part-time contract must be written, fixed-term and state the working hours, and the regulation also organises flexible work paid by the hour for one or more employers, limits those contracts to Saudis, and requires documenting them on the electronic portal the ministry designates. Template E-03 covers the part-time employment contract.

If you entrust another establishment with part or all of your core work, meaning the work your business was set up to do as stated in its articles or commercial register, the current text of the Labor Law requires that establishment to give its workers all the rights and benefits you give your own workers. Secondment is defined by the Law as the service of providing a worker to work for someone other than the employer through an establishment licensed for that purpose. So if you want a person working for you daily without employing them yourself, the organised route is an establishment licensed for secondment, not an individual services agreement that hides an employment relationship.

The non-Saudi provider

Here the business owner needs more care. The Labor Law provides that a non-Saudi may not practise work, and may not be allowed to, without first obtaining a work permit, one of whose conditions is being contracted with an employer and under its responsibility. An employer may also not, without following the established regulatory rules and procedures, employ another employer's worker, and a worker may not work for another employer or on their own account. So a resident whose iqama and sponsorship belong to another establishment cannot be engaged directly as a freelancer just because they have the skill.

The Labor Law excludes from its provisions non-Saudi workers who come to perform a specific task for a period not exceeding two months, and the minister issues a regulation for this category setting out its rights and duties. This exclusion concerns only the application of the Labor Law and does not mean the visa type or entry procedures are unnecessary. If the provider is a registered company working through its own staff, you contract with the company, not with its individuals. Consult a lawyer before contracting with any non-Saudi individual.

What the services agreement states, section by section

A good contract describes an independent relationship as it really is, so it is not enough to write at the top that the second party is independent and then fill the rest with working hours and daily instructions. These sections keep the paper consistent with reality, and the details of fees, scope, acceptance and liability are explained in the published services agreement guide.

1. Scope and deliverables: a specific description of what will be delivered, in measurable format, quantity and specification.
2. Acceptance: how deliverables are reviewed, the window for comments, and when they are deemed accepted.
3. Fee and invoice: an amount per milestone paid against an invoice issued by the provider, not a monthly salary.
4. No attendance and no exclusivity: no working hours, no time clock and no bar on serving others, only a commitment to deadlines.
5. The provider's tools and staff: works with their own tools and may use their own team at their own responsibility.
6. Intellectual property: transfer to the business on full payment of the fee.
7. Confidentiality: a duty to protect the business's information, and a mutual NDA C-08 can be signed before negotiations start.
8. Term tied to the project: the contract ends on completion of the project or on a set date, not as an open relationship.
9. Termination: the cases of termination for breach or on notice, and settlement for work completed to date.

The pre-signing checklist

Collect this information before work starts, not after the first invoice. The fields below are to be filled in, and any registration threshold, fee, step on Qiwa or with social insurance, visa rule, penalty or deadline must be confirmed with its official source at the time of contracting, because this guide states no figure it has not verified.

1. Commercial register number or freelance work document number and its validity date: [ ]. The freelance work document is issued through the freelance platform of the Ministry of Human Resources and Social Development.
2. VAT registration status: registered [ ] not registered [ ], and the tax number if any: [ ].
3. The name as on the register or document, and the national ID or establishment number: [ ].
4. The IBAN in the provider's own name: [ ].
5. Correspondence address and the email designated for notices: [ ].
6. If non-Saudi: the iqama and sponsoring entity and the basis permitting them to provide the service to you: [ ], and do not sign before this is confirmed.
7. Final test: review the indicators in the second section, and if employment outweighs, move to an employment contract instead of a services agreement.

Mistakes that turn a freelancer into a worker, and when to move to a fixed-term employment contract

Most problems start not in the contract but after it, when day-to-day management slides into treating the freelancer as an employee. These are the most common mistakes on the business side:

• Requiring office attendance at set hours and logging their attendance.
• Turning the fee into a fixed monthly amount unlinked to deliverables.
• Placing them in the org chart and giving them a job title, staff email, employee card and leave.
• Assigning recurring daily tasks outside the written scope without a new annex.
• Renewing the contract automatically year after year until the person becomes a permanent part of the team.

If the need becomes continuous, and the person works only for you under your supervision for a monthly amount, the safer course is to recognise the facts and sign a fixed-term employment contract using template E-01, documented in line with the regulatory provisions, rather than carry the risk of the relationship being reclassified later with retroactive effect. If the need remains a project with a beginning, an end and deliverables, the Services Agreement C-01 is the right tool. In both cases this is general awareness, and the decision in a specific case needs a lawyer's review.

Frequently asked questions