Zakat, Retirement & Overtime Under the Saudi Labor Law in 2025– What You Need to Know

As it looks to the future, Saudi Arabia continues to reshape economic and labor laws as part of its innovative Vision 2030 reforms. For individuals living and working in the Kingdom, or for those planning to in the near future, you may have heard about the most recent overhaul to Zakat, retirement, and overtime pay. With unique laws and regulations, it can prove overwhelming trying to navigate the lay of the land. In this article, we’ll break it down into language you can understand, so you know what’s changing and why it matters.

What is Zakat and Why is it Important?

Zakat, is one of the five pillars of Islam. A type of annual charitable contribution based on personal and/or business income, Zakat plays a significant role in the financial system within the Kingdom. If you own a business or operate as a freelancer, it’s important to understand how Zakat law is applied.

 If your business is 100% Saudi- or GCC-owned, you’re required to file and pay Zakat annually. Under the new 2025 regulations, the Zakat, Tax and Customs Authority (ZATCA) Zakat isn’t just for businesses, it also applies to individuals earning outside traditional employment (such as freelancers, consultants, etc.).

Zakat is typically calculated as 2.5% of your net worth, including things like cash, inventory, receivables, and other qualifying assets. Zakat base is not assessed at the end of the Gregorian calendar year, but rather at the end of the Hijri (lunar) year, 

To stay on the right side of the rules, businesses and eligible individuals need to file their returns through the ZATCA portal and keep proper financial records. Those records should clearly show assets, debts, income, and expenses. If you file late or make mistakes, you could be hit with fines, and if you don’t register or file at all, you risk problems with your business license or even a full ZATCA audit.

Understanding Saudi Retirement Contributions

As the government continues to promote greater financial independence and long-term security for Saudi nationals, understanding your retirement options is more important than ever. One of the key updates in 2025 is a change to Saudi retirement contribution policies under the General Organization for Social Insurance (GOSI). Whether you’re a Saudi employee or a company managing payroll, these new rules affect how pensions are calculated and contributed to in the private sector.

As of this year, Saudi employees contribute 9% of their salary toward retirement, matched by an additional 9% from their employer. These robust contributions help to ensure workers will have access to long-term pension support once they retire or in the event of disability.

If you’re an expat working in Saudi Arabia, you won’t contribute to GOSI for retirement the same way Saudi nationals do. Instead, you’re typically entitled to an end-of-service gratuity—a lump sum paid out when you leave your job, calculated based on your years of service and final salary.

Understanding Saudi Overtime Pay Regulations

Working extra hours? You’ll want to know about the Kingdom’s updated Saudi overtime pay rules. The 2025 labor law clearly defines what qualifies as overtime and who’s entitled to it. Across most of Saudi Arabia, the standard workweek remains 48 hours, or 8 hours per day, with Friday as the official weekly day off. During Ramadan, the workday is shortened to 6 hours for Muslim employees.

If you’re working beyond those daily or weekly limits, you’re entitled to 1.5 times your regular hourly wage in overtime. However, an employee can not legally work more than 11 hours on any given work day, for a maximum of 18 hours in overtime per week.

It’s also worth noting the 2025 updates go beyond just hours and pay rates. Several new rules and protections are now in place to ensure overtime is applied fairly and consistently:

• In the past, employers looking to avoid overtime wages used titles such as “manager” or “supervisor” to justify not following the labor laws. Under the new regulations, employers must justify in writing why an employee is exempt from overtime pay.
• Employees are legally entitled to a break for rest, meals, or prayer every 5 consecutive hours of work. These breaks do not count as working hours.
• Saudi employers are now expected to maintain clear records of any extra hours worked.
• Employees have the right to refuse overtime. In most cases, overtime exemptions apply only in genuine emergencies—unless your employment contract says otherwise.
• During Ramadan, Muslim employees working more than six hours in a day must be paid for the extra time at the standard overtime rate.

These updates aim to make pay practices fairer and reduce the misuse of job classifications. For employees, it means more clarity and protection around their hours and wages—a big relief for those in private-sector jobs where overtime is common but not always compensated.

Why These Labor Law In KSA Changes Matter