Saudi Arabia’s new Social Insurance Law (Royal Decree M/273) entered into force on July 3, 2024. It applies to Saudi nationals who entered the workforce on or after that date with no prior GOSI contribution history. Everyone else stays on the old system at fixed rates.
The pension rate rises by 0.5% on each side every July through 2028. From July 3, 2026, the rate is 10% on each side for new-system employees — the third annual step in the transitional schedule.
Use the Saudi employment calculators to estimate your GOSI contributions and end of service gratuity based on current rates.
Two systems running in parallel
The reform did not replace the existing system. It created a second one.
GOSI (the General Organization for Social Insurance) registers private sector employees, collects contributions, and enforces compliance. Which system applies comes down to one date: July 3, 2024. Any Saudi national with prior contribution history under the Civil Pension Law or the previous Social Insurance Law stays on the old system — rates unchanged. Anyone who first entered the workforce on or after that date, with no prior GOSI history, falls under the new system, with rates rising every July through 2028.
The split matters in practice. Applying the wrong rate to the wrong group means either under-contributing — which triggers penalties — or over-deducting from the employee’s salary, which creates its own problems.
Contribution rates: 2026
GOSI contributions for Saudi nationals cover three branches: pension (annuities), SANED unemployment insurance, and occupational hazards. Only the pension branch changes under the reform. SANED and occupational hazards rates are the same on both systems.
Old system — Saudi nationals enrolled before July 3, 2024
These rates are fixed and have not changed:
| Branch | Employer | Employee | Total |
|---|---|---|---|
| Pension (annuities) | 9% | 9% | 18% |
| SANED (unemployment) | 0.75% | 0.75% | 1.5% |
| Occupational hazards | 2% | — | 2% |
| Total | 11.75% | 9.75% | 21.5% |
New system — Saudi nationals enrolled from July 3, 2024 onward
The pension rate increases by 0.5% on each side every July until 2028. SANED (0.75% each side) and occupational hazards (2% employer only) are unchanged. The figures below are the all-in totals, with both fixed branches already included:
| Period | Employer | Employee | Total |
|---|---|---|---|
| July 2024 – June 2025 (past) | 11.75% | 9.75% | 21.5% |
| July 2025 – June 2026 (past) | 12.25% | 10.25% | 22.5% |
| July 2026 – June 2027 — current | 12.75% | 10.75% | 23.5% |
| July 2027 – June 2028 | 13.25% | 11.25% | 24.5% |
| From July 2028 | 13.75% | 11.75% | 25.5% |
The July 3, 2026 increase. Payroll systems that are not updated to reflect a pension rate of 10% on each side — taking the all-in employee rate to 10.75% and the employer rate to 12.75% — are non-compliant from that date and should be corrected immediately.
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
Rates from July 3, 2026, with the pension branch at 10% on each side:
| Item | Rate | Monthly amount |
|---|---|---|
| Employer — pension | 10% | SAR 1,000 |
| Employer — SANED | 0.75% | SAR 75 |
| Employer — occupational hazards | 2% | SAR 200 |
| Total employer cost | 12.75% | SAR 1,275 |
| Employee — pension | 10% | SAR 1,000 |
| Employee — SANED | 0.75% | SAR 75 |
| Total employee deduction | 10.75% | SAR 1,075 |
Before July 3, 2026, the pension branch was 9.5% on each side, putting the employer cost at SAR 1,225 (12.25%) and the employee deduction at SAR 1,025 (10.25%).
Key changes under the new system
The rate schedule is the most visible change. Several structural reforms came with it:
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 often cost Saudi nationals their pension entitlements when they moved between public and private employment. Under the new law, contribution history follows the employee between sectors.
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. The new system moves the cost of maternity pay from employers to GOSI. For insured female employees who qualify, GOSI funds three months of maternity compensation based on the average contributory wage. The benefit is not limited to Saudi nationals; non-Saudi insured women who meet the conditions are covered as well. Eligibility requires 12 months of contributions within the 36 months before the birth, and the three-month period extends by one month if the child is born sick or with a disability that requires continuous care.
Expatriate employees
Non-Saudi employees fall under the occupational hazards branch only. No deduction from their salary. The employer pays 2% of the contributory salary (basic plus housing, capped at SAR 45,000).
That 2% covers work injuries, occupational diseases, disability, and death benefits for the employee’s family. All nationalities, no exceptions.
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, so 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.
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. Unregistered employees or unpaid contributions damage the Saudization score — and a damaged score restricts expatriate visa sponsorship.
Payroll update checklist
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 change each July.
Second, confirm the pension rate in your payroll system is set to 10% on each side as of July 3, 2026. This takes the all-in employee deduction to 10.75% and the employer cost to 12.75%.
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 the pension rate by mistake.
The July 2028 endpoint, when the pension branch reaches 11% on each side (an all-in 11.75% employee and 13.75% employer), is worth building into payroll budget projections now rather than adjusting year by year.
GOSI compliance for a Saudi workforce means two separate rate schedules that need updating every July through 2028. Silberson’s payroll and HR compliance team handles that classification, the annual rate updates, and the filing for foreign employers in the Kingdom. Contact us to review your 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 follows the employee between sectors. The old framework often left Saudi nationals with gaps or lost entitlements when they moved from public to private employment — that is what the new law was designed to fix.
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 the pension branch increasing by 0.5% on each side every July through 2028.
From July 3, 2026, the pension branch is 10% on each side, an all-in 10.75% (employee) and 12.75% (employer). July 2027 and 2028 follow the same pattern.
For payroll teams, it comes down to three checks: which employees fall under which system, whether the July 2026 rates are in effect, and whether the contribution base is basic salary plus housing allowance only.
For employers managing SIO obligations through an EOR structure, see our Bahrain EOR services page.
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 — verify current requirements directly with GOSI or a qualified HR and compliance professional before making payroll or employment decisions.
