Comparable Wage

What comparable wage is

Comparable wage (أجر المثل) is the wage that applies when no wage has been stated, either in the employment contract or in the establishment’s work regulation (لائحة تنظيم العمل). It is a rule for filling a gap in the Saudi Labor Law (نظام العمل), not a market standard and not a tool for comparing pay.

The rule answers one question: what is the worker owed when the parties never fixed a figure? It does not answer whether a figure the parties did fix is fair, and it does not give either party a way to reopen that figure. Understanding the term depends on keeping those two questions apart.

Where comparable wage sits in the Saudi Labor Law

The rule is Article 95 of the Labor Law. The phrase “comparable wage” is a name for that rule, not a phrase taken from it. The wording of Article 95 of the Labor Law is “the wage assessed for work of the same kind in the establishment” (الأجر المقدر لعمل من النوع ذاته في المنشأة). In the sources we reviewed, which were the consolidated Labor Law, its Implementing Regulation (اللائحة التنفيذية) and the Ministry’s before and after table of the 2025 amendments, we found the expression أجر المثل in none of them. Searching the text for the label therefore finds nothing, and the provision has to be located by its number and its wording.

The order Article 95 of the Labor Law sets for comparable wage

Article 95 of the Labor Law sets a sequence, and each step is used only when the one before it cannot be:

1. The wage assessed for work of the same kind in the establishment, where there is one.
2. Failing that, the wage is assessed according to the custom of the trade in the locality where the work is performed.
3. Failing that, the labour court (المحكمة العمالية) assesses the wage according to the requirements of justice.

The steps are not options from which either party picks the most convenient. The first reference is inside the establishment, the second is outside it but tied to the trade and the place, and the third hands the question to the court. A step further down the list is reached only because the one above it is unavailable, not because a party prefers it.

The second paragraph of Article 95 of the Labor Law applies the same sequence to the kind of service the worker is to perform and its extent. So the provision does not deal with the wage alone. It deals with uncertainty in both obligations, the employer’s obligation to pay and the worker’s obligation to perform, and the second of the two can drop out when the provision is summarised.

When comparable wage comes into play

The trigger in Article 95 of the Labor Law is that neither the contract nor the work regulation states the wage the employer is bound to pay. The work regulation is the second place the Article looks, and its roles are set out in our guide to the work organisation regulation. Where the contract or the regulation states the wage for a post, the rule of comparable wage is not reached, because the wage is no longer unstated.

What comparable wage is not

The rule is called upon when a stated wage is absent, not when a wage has been stated and its fairness is in dispute. That separates it from several ideas that sound close to it:

• Benchmarking. It compares the performance of an organisation, or of one of its processes, with an internal or external reference in order to find a gap and its cause. Comparing salaries with the market in this way is the subject of external pay equity. Its purpose is to locate a gap, not to assess a wage that was never set.
• Equity between existing wages. Internal pay equity is concerned with differences between wages that have already been set. The rule of comparable wage is concerned with a wage that has not.
• Compa ratio. It measures where an existing wage sits within an internal pay range, so what goes into it is a known wage, not an unknown one.
• Market survey figures. A pay survey produces market figures for matched jobs. Presenting such a figure as the comparable wage puts a commercial number in the place of a statutory rule.

So citing Article 95 of the Labor Law to justify changing a wage that is written in a contract applies the provision outside its place.

Comparable wage and Article 96 of the Labor Law: a variable wage, not an unknown one

Article 96 of the Labor Law deals with a different situation that can be confused with this one. Here the wage has been set, but on a variable basis:

• A piece or production wage. Article 96(1) of the Labor Law provides that the average wage the worker received over their actual working days in the last year of service is the basis for calculating any of the entitlements the Law gives them. The structure of such a wage is set out under piece rate pay.
• A wage made up entirely of commissions or percentages of sales, or similar items that by their nature can rise or fall. Article 96(2) of the Labor Law provides that the average daily wage is calculated on what the worker received for the actual working days, divided by those days. That kind of wage is covered under commission pay.

The two Articles divide the ground between them. Article 95 of the Labor Law is for a worker whose wage was never stated. Article 96 of the Labor Law is for a worker whose wage was stated as a variable result. A piece rate worker has a stated wage, even though its amount moves, and the averaging rule in Article 96 of the Labor Law applies to them, not the sequence in Article 95.

Comparable wage and the new subscriber rule in social insurance

Social insurance has a standard with similar wording and a different source. Under the Social Insurance Law issued by Royal Decree M/273, Article 18 of the Implementing Regulation of the Social Insurance Law (اللائحة التنفيذية لنظام التأمينات الاجتماعية) provides that, for new subscribers, the average wage of a comparable subscriber in the same establishment or in a similar establishment is taken as the basis for calculating the contributory wage.

That regulation reaches only those whom the Social Insurance Law of Royal Decree M/273 covers. Council of Ministers Decision No. 1022, in Clause Second, excludes from that law subscribers who have contribution periods from before it took effect for which they were not compensated, and those already entitled to a pension under the earlier laws, and Clause Fourth of Council of Ministers Decision No. 1022 keeps the earlier laws in force for those two groups.

The wording is similar, but the two operations are different. Article 95 of the Labor Law produces a wage owed to the worker when the contract does not state one. Article 18 of the Implementing Regulation of the Social Insurance Law estimates a base on which contributions are calculated, for the purposes of social insurance alone. The two come from different authorities and serve different ends, and they can arrive at different figures for the same person. Carrying an estimate from one into the other produces a number that is correctly calculated but used in the wrong place.

The statutory provisions relied on for comparable wage

The provisions relied on are those of the Saudi Labor Law as published by the Ministry of Human Resources and Social Development: Article 95 (a wage that neither the contract nor the work regulation states, and the kind and extent of service) and Article 96 (piece and production wages, and wages made up entirely of commissions). Royal Decree M/44 of 1446H, in force since 19 February 2025, did not amend Article 95 or Article 96 of the Labor Law. The social insurance provision is Article 18 of the Implementing Regulation of the Social Insurance Law issued by Royal Decree M/273, read with Clauses Second and Fourth of Council of Ministers Decision No. 1022, as published in the Umm Al Qura official gazette.

Why the wage is written into the contract instead of left to comparable wage

The rule of comparable wage passes the assessment to someone other than the two parties: to whatever comparable posts exist in the establishment, to the custom of the trade, or to the court. Each of those references lies outside the will of both parties, and neither of them can know in advance where it will lead.

Stating the wage in the contract is therefore not a formality. It is what keeps the decision with the people who made the agreement.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.