What the contributory wage is
The contributory wage (الأجر الخاضع للاشتراك), also called the GOSI contribution wage, is the base on which contributions to social insurance in Saudi Arabia are calculated. The General Organization for Social Insurance (GOSI) collects contributions as a percentage of it, so the rates of the system are applied to this figure.
The base is defined by an exhaustive list in the Implementing Regulation of the Social Insurance Law (اللائحة التنفيذية لنظام التأمينات الاجتماعية), not by a general description and not by the practice of a particular establishment. What the list names is inside the contributory wage; what it does not name is outside it.
Two systems run in parallel, and the contributory wage is set out under each. The Implementing Regulation cited below is the regulation issued under the Social Insurance Law of Royal Decree M/273 of 1445H. 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. Clause Fourth of Council of Ministers Decision No. 1022 keeps the earlier laws in force for those two groups: the 1421H Social Insurance Law (M/33), the Civil Retirement Law (M/41) and the Unemployment Insurance Law (M/18), subject to the exceptions in Clauses Fifth and Sixth. Which system governs an employee therefore depends on their contribution record from before 3 July 2024, and the dated rates for each are kept under GOSI contributions.
The components of the contributory wage in Article 17 of the Implementing Regulation
Article 17 of the Implementing Regulation of the Social Insurance Law lists the components of the contributory wage one by one:
- The basic wage or salary. Commission, a percentage of sales and a percentage of profits are treated as part of it.
- The cash housing allowance. It enters at the value agreed between the parties.
- Housing provided in kind. It is valued, for the purpose of the contribution, at an amount equal to two months of the basic wage or salary.
The contributory wage is therefore the basic wage plus housing, whether housing is paid in cash or provided in kind. A transport allowance, a food allowance and every other allowance fall outside it.
For subscribers who remain under the existing system, GOSI describes the same shape of base in its published guidance for employers: basic salary plus housing, paid or in kind, with transport, food and bonuses excluded. That guidance is a GOSI help page, not the text of a law, and it is the source for the existing system figures given further down.
A fourth item in the contributory wage that the text does not contain
One error comes from a fourth item that does not exist. An internal payroll policy adds a phrase such as “and any fixed allowances” to the base, and an exhaustive list becomes an open one, with a closing phrase that swallows everything listed before it. Article 17 of the Implementing Regulation of the Social Insurance Law does not allow that reading. An allowance the article does not name is outside the contributory wage; the article is not silent about it.
The name an allowance carries on the payslip does not change the result either. A fixed monthly transport allowance is still a transport allowance, and the fact that it is paid every month with the wage does not bring it into a list that names only the basic wage and housing.
Why overstating the contributory wage is not the safe side
Declaring a higher contributory wage can look like a precaution that costs nothing. Article 21 of the Implementing Regulation of the Social Insurance Law points the other way. It provides that a correction of the contributory wage may not be considered once the period set for submitting wage data has passed, and it makes a single exception, decided by the Governor, for the case in which GOSI itself discovers that wages were declared below their true level.
The route to a correction is therefore open in one direction only. GOSI may come back to an understated wage after the deadline; the employer has no route under Article 21 of the Implementing Regulation of the Social Insurance Law to come back to an overstated one. An employer that declares more than the statutory base pays contributions on the excess, and the employee’s share, deducted from salary, rises with it. In the sources we reviewed, we found no provision on refunding contributions paid on an overstated contributory wage, so the figure to declare is the statutory base, not a higher one.
The contributory wage when pay is not a fixed monthly figure
Article 18 of the Implementing Regulation of the Social Insurance Law sets the monthly figure where the wage is not paid as a fixed monthly amount:
- A subscriber paid by the day. The monthly contributory wage is the daily wage multiplied by 30.
- A subscriber paid by the piece, by a percentage of profits, by a percentage of sales volume or by production. The monthly wage is the monthly average of what the subscriber was paid for the period actually worked in the previous year. The piece rate case is set out under piece rate pay.
- A new subscriber. The base is the average wage of a comparable subscriber in the same establishment or in a similar one.
- A subscriber paid by the hour. The wage and the contribution follow the rules and controls set by the Governor, and those rules were not among the sources we reviewed.
Commission does not appear in the second item of that list but in Article 17 of the Implementing Regulation of the Social Insurance Law, which counts it as part of the basic wage together with a percentage of sales and a percentage of profits. Those two percentages also appear in the second item of Article 18 of the Implementing Regulation of the Social Insurance Law. Article 17 of the Implementing Regulation of the Social Insurance Law lists what enters the contributory wage, and Article 18 of the Implementing Regulation of the Social Insurance Law sets the monthly figure when pay is not a fixed monthly amount. In the sources we reviewed, we found no rule on how a commission that changes from month to month is brought to a monthly figure.
The new subscriber standard is a social insurance standard and serves the contribution base alone. It should not be confused with a comparable wage drawn from labour law: in the sources we reviewed, we found no definition of a comparable wage in the Labor Law, and no rule is carried from either text to the other.
Because Article 18 of the Implementing Regulation of the Social Insurance Law belongs to the regulation issued under the M/273 law, it reaches only the subscribers that law covers. For the groups excluded by Clause Second of Council of Ministers Decision No. 1022, the earlier laws continue to apply, and the equivalent rule for a worker paid by the piece under them was not among the sources we reviewed.
More than one employer. Article 8 of the Social Insurance Law and Article 19 of the Implementing Regulation of the Social Insurance Law require each employer to pay the full contribution on the wage that it pays itself. The total is capped at the ceiling, and where it exceeds the ceiling it is reduced proportionately.
How the contributory wage is measured: gross and by the day
Article 20 of the Implementing Regulation of the Social Insurance Law provides that the contributory wage is computed before any deduction made from it, such as taxes, fees, debts, instalments, administrative penalties or fines. A deduction from salary does not reduce the base that is declared, even though it reduces the amount the employee receives.
The months of joining and leaving are prorated by days. Contributions continue during secondment, during statutory leave and during an absence without pay that the employer has authorised, a case set out under unpaid leave.
The ceiling and the minimum of the contributory wage
The ceiling is written into the law. Article 8 of the Social Insurance Law (M/273) provides that the maximum contributory wage is SAR 45,000 a month. GOSI gives the same ceiling of SAR 45,000 a month for the existing system.
The minimum is different. Article 8 of the Social Insurance Law names no figure for it and refers instead to the minimum wage or salary set by the competent authority, and the decision that sets that figure was not among the sources we reviewed. The minimum of SAR 1,500 a month that circulates as the floor of the base appears in GOSI’s employer guidance for the existing system only. It belongs beside the existing system’s rates and should not be printed beside the rates of the M/273 system.
A worked example of the contributory wage
Take a Saudi employee with a basic wage of SAR 8,000, a cash housing allowance of SAR 2,000 and a transport allowance of SAR 800. The gross monthly pay is SAR 10,800, and the contributory wage is SAR 10,000: the basic wage plus the cash housing allowance, with transport left out. The figure is below the SAR 45,000 ceiling and, for an employee under the existing system, above the SAR 1,500 minimum that GOSI gives for that system.
If SAR 500 is deducted from the same employee’s salary that month to repay an advance, the contributory wage stays at SAR 10,000, because Article 20 of the Implementing Regulation of the Social Insurance Law computes it before deductions.
For the unemployment insurance branch, paragraph (6) of Clause Third of Council of Ministers Decision No. 1022 sets the contribution, under the M/273 law, at 1.5% of the contributory wage, borne half by the employer and half by the subscriber. On SAR 10,000 that is SAR 75 from each side. The pensions branch is charged on the same base at rates that step up each 1 July, which is why its figures are kept in the dated table under GOSI contributions.
Now take a worker paid SAR 300 a day. Under Article 18 of the Implementing Regulation of the Social Insurance Law the monthly contributory wage is SAR 9,000, which is 300 multiplied by 30.
Finally, take a subscriber paid SAR 30,000 a month by one employer and SAR 20,000 by another. The total of SAR 50,000 exceeds the ceiling of SAR 45,000, so Article 19 of the Implementing Regulation of the Social Insurance Law reduces the base at each employer in proportion to the wage that employer pays, measured against the total. The two bases become SAR 27,000 and SAR 18,000, and they add up to SAR 45,000.
The contributory wage beside the basic wage and the actual wage
A payroll statement can carry three different bases, each with a different source:
- The contributory wage. It comes from the Social Insurance Law and its Implementing Regulation, and it serves the contribution.
- The basic wage (الأجر الأساسي). It is defined in Article 2 of the Labor Law, and the definition carries no list of excluded allowances.
- The actual wage (الأجر الفعلي). It is also defined in Article 2 of the Labor Law, and it is what the Labor Law means wherever it says the wage without a qualifier.
In a simple pay structure the three can coincide, but in others they can diverge. Carrying a rule from one law to the other produces a figure that is arithmetically correct and legally misplaced. A housing allowance, for example, enters the contributory wage under Article 17 of the Implementing Regulation of the Social Insurance Law; that placement says nothing about where the same allowance sits between the basic wage and the actual wage under Article 2 of the Labor Law.
What the contributory wage decides beyond the contribution
The contributory wage also reaches benefits. Article 48 of the Social Insurance Law computes unemployment insurance compensation for subscribers under the M/273 law on the average of the contributory wages of the last twenty four months, and Articles 11 to 13 of the Unemployment Insurance Law (M/18) do the same for the groups that law still governs. A base declared incorrectly therefore affects a later benefit as well as the monthly contribution, a point taken further under SANED.
The period for submitting wage data is the deadline against which Article 21 of the Implementing Regulation of the Social Insurance Law closes a correction, so it is worth checking against the regulation at each declaration cycle.
The statutory provisions behind the contributory wage
The provisions relied on are those of the Social Insurance Law issued by Royal Decree M/273 of 1445H and its Implementing Regulation, as published in the Umm Al Qura official gazette: Article 8 (the ceiling, the minimum by reference and multiple employers) and Article 48 (the average contributory wage for unemployment compensation) of the Social Insurance Law; Articles 11 to 13 of the Unemployment Insurance Law (the same average for the groups it still governs); Articles 17 (the components of the contributory wage), 18 (daily, piece, new subscriber and hourly bases), 19 (multiple employers), 20 (gross base, prorated months and continued contributions) and 21 (corrections) of the Implementing Regulation of the Social Insurance Law; Clauses Second and Fourth of Council of Ministers Decision No. 1022 (the excluded subscribers and the earlier laws kept in force for them); and paragraph (6) of Clause Third of Council of Ministers Decision No. 1022 (the unemployment insurance rate). The definitions of the basic wage and the actual wage are those of Article 2 of the Labor Law. The existing system figures come from GOSI’s published guidance for employers.
This is an explanation of the concept and of the statutory provisions cited, not legal advice.
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