Working hours and overtime in the indefinite employment contract: what does a Saudi employer write, how is the overtime hour paid, and when may paid compensatory leave replace it?

The standard the contract adopts: eight hours a day or forty-eight hours a week

The Labor Law does not allow a worker to be actually employed for more than eight hours a day if the employer adopts the daily standard, or more than forty-eight hours a week if it adopts the weekly standard. Choosing between the two standards is the employer's decision, and it is wise to state it expressly in the contract or in the internal work regulation the contract refers to, because it directly affects how overtime is counted: where work is organised on the weekly standard, the hours beyond that standard count as overtime hours under the text of the Law.

During the month of Ramadan, actual working hours for Muslims are reduced so that they do not exceed six hours a day or thirty-six hours a week. The text limits this reduction to Muslim workers, so where the business also employs non-Muslim workers, the contract or the regulation should state the Ramadan schedule for each group clearly, without adding any condition the Law does not contain.

The Law allows two adjustments that are set by a decision of the Minister, not by the contract: raising the hours to nine a day for some categories of workers or in some industries and work in which the worker does not work continuously, and reducing them to seven a day for some categories or in some hazardous or harmful industries and work. It also allows the employer, with the Ministry's approval, in establishments whose nature of work requires shift work, to raise the hours above eight a day or forty-eight a week, provided that the average working hours, calculated over three weeks or less, do not exceed eight a day or forty-eight a week. We therefore leave these cases in the contract as fill-in fields that are completed only where they apply, and the lawyer confirms the decision or approval exists before signing.

• The standard adopted: daily at eight hours, or weekly at forty-eight hours.
• The Ramadan schedule for Muslim workers: six hours a day or thirty-six hours a week.
• Optional field: the nine or seven hour adjustment, naming the ministerial decision it relies on.
• Optional field: shift work averaged over three weeks or less, naming the Ministry's approval.

Daily rest breaks and the weekly rest day

Working hours and rest breaks during the day are organised so that the worker does not work more than five consecutive hours without a break for rest, prayer and meals of at least half an hour each time, and so that the worker does not remain at the workplace for more than twelve hours in a single day. The second limit is independent of the first: actual working hours may not exceed eight, yet long breaks or a split shift with a wide gap may keep the worker at the establishment longer than the text allows.

Breaks for rest, prayer and meals are not part of actual working hours, the worker is not under the employer's authority during them, and the employer may not require the worker to stay at the workplace during them. In practice, a break during which the employee is asked to answer customers or stay at the desk is not treated as a break. The Minister may set by decision the cases and work in which work must continue without a rest break for technical reasons or operating conditions, and in those cases the employer must give a period for prayer, meals and rest in a way the establishment's management organises during work.

The weekly rest day is Friday for all workers, on full pay and of at least twenty-four consecutive hours. The employer may, after notifying the competent labour office, replace this day for some of its workers with any other day of the week, and must enable them to perform their religious duties. The weekly rest day may not be compensated with a cash payment, so offering the employee money in exchange for giving up the rest day is not a lawful substitute for the day itself. The text names Friday alone, so any second rest day the business grants is a contractual benefit written into the contract or the internal work regulation.

When the limits may be exceeded, the ceiling, and how the employee is assigned

The Law allows the employer not to observe the daily and weekly hours limit, the rest break rule and the time-at-workplace limit, and Friday as the weekly rest day, in the following cases as the text reads:

• Annual inventory, budget preparation, liquidation, closing accounts, preparing for sales at reduced prices and preparing for seasons, provided the days on which workers are so employed do not exceed thirty days a year.
• Work to prevent a serious accident, repair what resulted from one, or avoid a certain loss of perishable materials.
• Employment to meet unusual work pressure.
• Eids, seasons, other occasions and seasonal work set by a decision of the Minister.

In all these cases, actual working hours may not exceed ten hours a day or sixty hours a week, and the Minister sets by decision the maximum overtime hours permitted in a year. The Labor Law Executive Regulation, as published by the Ministry, provides that overtime hours in a year may not exceed seven hundred and twenty hours, and allows that number to be exceeded with the worker's consent. If an employee is close to that limit, recording the consent in writing preserves the business's evidence.

The Executive Regulation also provides that a worker is assigned overtime by a written or electronic assignment addressed to the worker, issued by the responsible party in the establishment, stating the number of overtime hours assigned and the number of days needed. That assignment is the first piece of evidence when overtime pay or compensatory leave is calculated, so a verbal request from the line manager is not enough.

1. Check that the reason for the overtime falls within one of the cases in which the Law allows the daily and weekly limits to be exceeded.
2. Issue a written or electronic assignment addressed to the employee stating the number of overtime hours and the number of days.
3. Check the ceiling: ten hours a day and sixty hours a week, and thirty days a year for inventory, budget and season preparation work.
4. Check the employee's annual overtime balance, and obtain the employee's consent if the assignment will go beyond seven hundred and twenty hours.
5. Offer the employee the choice of overtime pay or paid compensatory leave, and record the choice.
6. Record the actual hours worked and keep them with the assignment and the consent in the employee's file.

How the overtime hour is paid, and when compensatory leave takes its place

The Law requires the employer to pay the worker overtime pay for overtime hours equal to the hourly wage plus fifty percent of the worker's basic wage. We set out the wording as it appears in the text without adding a formula: how the hourly wage is derived from the monthly wage, and what is and is not part of the basic wage, are matters the lawyer settles according to the employee's pay structure, which is why the contract leaves them as a fill-in field rather than a pre-printed figure or formula.

All working hours performed on holidays and Eids count as overtime hours, so an employee who works on Eid days or on holidays is owed overtime treatment for every such hour, not an ordinary day's pay. Where the business works on the weekly standard, every hour beyond that standard is an overtime hour.

What the Labor Law amendment applied since 20/08/1446H added is that the employer may, with the worker's consent, credit the worker with days of paid compensatory leave instead of the pay due for overtime hours, with the Regulation setting out the related rules. The Executive Regulation, as published by the Ministry, sets the following rules:

• Compensatory leave follows what the parties agree, and the agreement states the period of the assignment and the amount of compensatory leave for it.
• The leave is not less than an hour and a half of leave for each overtime hour.
• The employer may set when the worker takes the leave within a period not exceeding sixty days from the date the overtime hours began, unless the parties agree otherwise.
• In all cases, compensatory leave may not exceed thirty days a year.
• The worker is entitled to be paid for compensatory leave due if the worker leaves before using it.

An illustration: an employee assigned in writing to four overtime hours during the account-closing week chooses compensatory leave, so the leave due is not less than six hours of paid leave, and the employer may set when it is taken within sixty days from the start of those hours unless they agree otherwise. If the employee leaves before using it, the employee is owed its pay.

In practice, compensatory leave is an option, not something imposed: the text ties it to the worker's consent and to an agreement stating the period of the assignment and the amount of leave. The safer course is for the contract to make the option available, and then to record the consent in each assignment. Whether a general advance consent in the contract is enough, or an agreement is needed for each assignment, is not expressly settled by the Regulation's text, and the lawyer reviews it before the wording is adopted.

Who the hours and break rules do not cover

The Law excludes the following cases, as the text reads, from the daily and weekly hours limit and from the rule on rest breaks and time at the workplace:

• Persons holding senior positions of responsibility in management and direction, if those positions give their holders the employer's powers over the workers.
• Preparatory or complementary work that must be done before work starts or after it ends.
• Work that is necessarily intermittent.
• Workers assigned to guarding and cleaning, other than civil security guards.

The Law leaves it to the Regulation to define preparatory, complementary and intermittent work and guarding and cleaning work, and the maximum working hours in each. The Executive Regulation as published by the Ministry defines this work and sets limits for it, including that the total time for preparatory and complementary work does not exceed thirty minutes added to working hours. We mention these details for awareness, not as a ready conclusion: whether a particular job falls within an exclusion, and which limits apply to it, is a matter the lawyer verifies against the Regulation's text before the contract records it.

A common mistake in small businesses is to describe an employee as a 'manager' in the contract to take the employee outside the hours limits, while the employee does not in fact hold the employer's powers over the workers. The text ties the exclusion to the nature of the position and its powers, not to the job title, so the title alone is not enough.

How the working hours clause reads in the indefinite employment contract: a checklist

With these rules in place, the working hours clause in the indefinite contract becomes short and specific: it fixes what both parties need in a disagreement and refers the changing details to the internal work regulation. This is the checklist we suggest for the HR team before signing:

1. Name the standard adopted expressly: daily at eight hours or weekly at forty-eight hours, with the Ramadan schedule for Muslim workers.
2. State the weekly rest day, and if another day replaces Friday, state that this follows notice to the competent labour office.
3. Refer the working schedule and rest breaks to the establishment's approved internal work regulation (template E-07), instead of fixing times that may change.
4. Leave fill-in fields for the nine or seven hour adjustment by ministerial decision and for averaged shift work with Ministry approval, and complete them only where they apply.
5. Write the overtime route: a written or electronic assignment stating the number of hours and days.
6. State overtime pay in the Law's wording, and leave the hourly wage derivation as a field the employer completes and the lawyer confirms.
7. Add the paid compensatory leave option with the worker's consent, referring to the Executive Regulation's rules.
8. If the job may fall within one of the exclusions, do not write so until the lawyer has verified that it applies.

The same hours and overtime rules apply to the fixed-term contract, and template E-01 sets them out in wording suited to that contract, while the internal work regulation E-07 carries the detailed working schedule both contracts refer to.

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