On July 3, 2025, Saudi Arabia’s new Social Insurance Law came into force under Royal Decree No. M/273. If you employ Saudi nationals hired after July 3, 2024, your payroll is already running under the new system. The next rate increase lands on July 3, 2026.
Two Systems Running in Parallel
The reform does not replace the existing system. It creates a second one, running alongside it.
GOSI (the General Organization for Social Insurance) is the government body that registers private sector employees, collects contributions, and enforces compliance. Under the new law, which system applies to each employee comes down to one date. Saudi nationals with any contribution history under the Civil Pension Law or the previous Social Insurance Law before July 3, 2024 remain on the old system. Their rates do not change. Saudi nationals who entered the workforce for the first time on or after July 3, 2024, with no prior GOSI contribution history, fall under the new system, with rates that increase every July through 2028.
The distinction matters because the two groups require different contribution rates. Applying the wrong rate means either under-contributing, which triggers penalties, or over-deducting from the employee’s salary, which creates complaints and corrections.
Contribution Rates: The Full Picture
Old System — Saudi nationals enrolled before July 3, 2024
These rates are fixed and have not changed:
| Branch | Employee | Employer |
|---|---|---|
| Annuities | 9.75% | 11.75% |
| SANED | 1.00% | 1.00% |
| Occupational Hazards | — | ~2.00% |
| Approximate Total | ~10.75% | ~14.75% |
New System — Saudi nationals enrolled from July 3, 2024 onward
The annuities contribution rate increases by 0.5% (employee) and 0.5% (employer) every July until 2028:
| Period | Employee (Annuities) | Employer (Annuities) |
|---|---|---|
| July 2024 – June 2025 | 9.75% | 11.75% |
| July 2025 – June 2026 | 10.25% | 12.25% |
| July 2026 – June 2027 | 10.75% | 12.75% |
| July 2027 – June 2028 | 11.25% | 13.25% |
| From July 2028 | 11.75% | 13.75% |
Add SANED (1% each) and Occupational Hazards (~2% employer only) on top of the annuities rate. These branches are unchanged across both systems.
The July 3, 2026 increase. Payroll systems that have not been updated to reflect 10.75% (employee) and 12.75% (employer) for annuities on new-system employees will be non-compliant from that date.
What Counts as the Contributory Salary
Contributions are calculated on basic salary plus housing allowance only. Transport allowances, phone allowances, commissions, and other variable elements are excluded. The maximum contributory salary is SAR 45,000 per month; contributions are not calculated on earnings above that cap.
If the employer provides accommodation directly rather than paying a cash housing allowance, that arrangement is generally excluded from the contribution base unless the value appears as a monetary amount on the payslip or employment contract.
A Practical Example
A Saudi national hired in October 2024 (new system) with a basic salary of SAR 8,000 and a housing allowance of SAR 2,000:
Contributory salary: SAR 10,000
Current rates (July 2025 – June 2026):
| Item | Rate | Monthly Amount |
|---|---|---|
| Employee — Annuities | 10.25% | SAR 1,025 |
| Employer — Annuities | 12.25% | SAR 1,225 |
| Employee — SANED | 1.00% | SAR 100 |
| Employer — SANED | 1.00% | SAR 100 |
| Employer — Occupational Hazards | ~2.00% | SAR 200 |
| Total employer cost | SAR 1,525 | |
| Total employee deduction | SAR 1,125 |
From July 3, 2026, the annuities rows change to 10.75% (employee, SAR 1,075) and 12.75% (employer, SAR 1,275).
Key Changes Under the New System
Beyond the rate schedule, the new system introduces structural changes for new workforce entrants:
Retirement age. Set at 65 for all new-system members. Under the old system, retirement age varied between 58 and 65 depending on the contributor’s age when the law was enacted.
Sector mobility. The old system penalized Saudi nationals who moved between the public and private sectors, often causing them to lose accrued pension entitlements. Under the new law, contribution history transfers between sectors without the gaps that came with the previous framework.
Pension accrual. Pensions accrue at 2.25% for every year of contribution. The calculation is based on the average of the highest 180 months’ wages (15 years of peak earnings), capped at 100% of the average salary.
Maternity leave funding. Under the new system, three months of fully paid maternity leave for Saudi female employees is funded by GOSI rather than directly by the employer. An additional month may apply in cases of medical complications, subject to contribution eligibility. This reduces the direct cost on employers for Saudi female hires.
Expatriate Employees
Non-Saudi employees are covered under the Occupational Hazards branch only. No salary deduction applies to the expatriate employee. The employer pays approximately 2% of the contributory salary (basic plus housing, capped at SAR 45,000) for occupational hazards coverage.
This covers work injuries, occupational diseases, disability, and death compensation for the employee’s family. It applies to all nationalities without exception.
Employer Obligations
Company registration. Your GOSI employer registration must be current before any Saudi national starts work. Outdated contact details or trade licence information on your GOSI file creates audit risk — verify the record before onboarding.
Employee registration. Each Saudi employee must be registered with GOSI on or before their start date. The penalty for late registration is SAR 10,000 per employee. There is no grace window.
Rate classification. Every Saudi national on your payroll needs to be assigned to either the old system or the new system based on their GOSI contribution history before July 3, 2024. These two groups require different rate schedules. Mixing them is one of the most common errors GOSI audits find.
Contribution base. Check the contributory salary for each employee. Transport and phone allowances are excluded from the base but appear in error regularly, inflating contributions and creating overpayment or audit exposure.
Payment deadline. Contributions fall due by the last day of each Gregorian calendar month. Late payment attracts a 2% monthly penalty on the outstanding amount, and it compounds.
Penalties
| Violation | Penalty |
|---|---|
| Late monthly contribution | 2% per month on outstanding amounts |
| Late employee registration | SAR 10,000 per unregistered employee |
| Serious or repeated violations | Up to SAR 100,000 per incident |
| Nitaqat-linked non-compliance | Saudization classification downgrade; visa and work permit services suspended |
GOSI compliance feeds directly into Nitaqat status. A company with unregistered Saudi employees or unpaid contributions can find its Saudization score damaged, which restricts its ability to sponsor expatriate work visas.
What to Do Before July 3, 2026
The rate increase in four weeks is a payroll action, not a policy note.
First, confirm which of your Saudi employees fall under the new system (hired after July 3, 2024 with no prior GOSI contribution history). These are the employees whose rates are changing.
Second, update the annuities contribution rates in your payroll system to 10.75% (employee deduction) and 12.75% (employer contribution), effective from the July payroll cycle.
Third, check the contributory salary for each affected employee to confirm it includes only basic salary and housing allowance, and does not exceed SAR 45,000.
Fourth, verify that SANED and Occupational Hazards are being calculated separately and have not been rolled into a single combined rate by mistake.
The July 2028 endpoint, when rates reach 11.75% (employee) and 13.75% (employer) for new-system employees, is worth building into payroll budget projections now rather than adjusting year by year.
Managing GOSI compliance across a Saudi workforce means maintaining separate rate schedules for two employee groups, updated annually through 2028. Silberson’s payroll and HR compliance team handles that setup and the annual rate updates for foreign employers operating in the Kingdom. Contact us to review your current payroll structure.
Frequently Asked Questions
What is GOSI and who must register?
GOSI, the General Organization for Social Insurance, is the Saudi government body that administers social insurance for the private sector. All private sector employers must register with GOSI before their first Saudi employee starts work. There is no minimum headcount threshold. Late enrollment carries a penalty of SAR 10,000 per employee.
Does the new system affect Saudi employees who were already contributing before July 2024?
No. Anyone with prior GOSI contribution history before July 3, 2024, under either the Civil Pension Law or the previous Social Insurance Law, stays on the old system with no rate changes.
What if a Saudi employee transfers from the public sector to a private sector company?
Under the new system, contribution history transfers between sectors without the gaps that existed under the old framework. This is one of the practical improvements the law was designed to fix. The old system often caused Saudi nationals to lose pension entitlements when changing sectors.
Is employer-provided accommodation included in the contributory salary?
Only if it appears as a monetary housing allowance on the payslip or employment contract. Accommodation provided directly by the employer, with no corresponding monetary value on the contract, is generally excluded from the contribution base.
Can a company apply the same GOSI rate to all Saudi employees regardless of when they joined?
No. Old-system and new-system employees require different rate schedules applied independently. Applying the new-system rates to old-system employees (or vice versa) is an error and one of the most common issues GOSI audits identify.
What happens if the July 2026 rate change is missed?
Contributions paid at the pre-July rate are treated as underpayment. The 2% monthly penalty applies to the shortfall from July 3, 2026 onward, compounding each month until the deficit is cleared.
At a Glance
The law creates two contribution tracks based on a single cutoff: July 3, 2024. Employees with contribution history before that date stay on fixed rates. Everyone who entered the workforce from that date onward is on the new schedule, with annuities increasing by 0.5% each July through 2028.
The next step, on July 3, 2026, moves annuities to 10.75% (employee) and 12.75% (employer). July 2027 and 2028 follow the same pattern.
For payroll teams, the task is concrete: identify which employees fall under which system, update the July 2026 rates before the cycle runs, and confirm the contribution base covers only basic salary and housing allowance.
If you have questions about GOSI compliance, payroll setup, or managing Saudi and expatriate workforce obligations across the GCC, contact Silberson.
This article is for general guidance only. Saudi Arabia’s regulatory framework changes frequently. Always verify current requirements with GOSI or a qualified HR and compliance professional before making payroll or employment decisions.
