What green circled pay is
Green circled pay, also called a green circle rate, describes an employee whose pay is below the minimum of the range for their grade, that is, below the lowest amount the organisation has set for someone doing work at that level. The Arabic term is الأجر دون حد الدرجة. As a label, it records a gap between an amount being paid and an internal document, and nothing more than that.
The opposite case, pay above the maximum of the grade, is known as red circled pay. The two sit at opposite ends of the same range, and the range spread sets how far apart those ends are.
Green circled pay and the wage definition in Article 2 of the Labor Law
Keeping the label that narrow is not a matter of wording. A pay range is a management tool that the organisation has set for itself, and it is not a source of entitlement. Article 2 of the Saudi Labor Law (نظام العمل) defines the basic wage (الأجر الأساسي) as everything given to the worker in return for their work under a written or unwritten contract, whatever the kind of wage or the method of payment, plus periodic increments. The source of the wage is therefore the contract, and the minimum of a range is not a contract. Describing green circled pay as an underpayment, or as a wage short of what is due, attributes to the Labor Law a ruling whose source is an internal table.
Where an obligation does arise, its source is the contract and the establishment’s work regulation (لائحة تنظيم العمل), which is covered in our guide to the work regulation. In the sources we reviewed, we found nothing that attaches to the mere fact of pay sitting below an internal minimum either an obligation to correct it or a period within which to correct it.
A statutory minimum wage is a separate question. Article 89 of the Labor Law allows the Council of Ministers, where needed and on the Minister’s proposal, to set a minimum wage. In the sources we reviewed, we found no decision under Article 89 of the Labor Law setting a minimum wage for private sector establishments, and we do not claim that the question is closed. Whatever the answer, it is not the minimum of a pay range, which remains an internal figure in every case.
How green circled pay arises
- Hiring below the minimum. A candidate is accepted at a figure negotiated before the pay structure was built, or outside it with an exceptional approval.
- Raising the ranges. The organisation moves its ranges with the market but does not move the pay of those at the bottom with them, so they fall below the minimum on the day the new table is approved.
- A promotion without a pay increase. The employee moves to a higher grade, with its title and its range, while the increase is deferred to a later cycle, so they enter the new range from below.
- An internal transfer priced on the old grade. It is the hardest of the four to see, because every step in it looked correct when it was taken.
Three of the four occur at a moment of transition: a hire, a promotion or a transfer. Red circled pay at the top of the range can build up as years pass or follow a rebuilt classification, and it can also follow a decision, as when an employee moves to a lower grade and keeps their pay, a route described under demotion. With green circled pay, the moment of transition accounts for three of the four causes, and that is what allows an organisation to prevent them with a single check: no decision about a person is approved until someone has confirmed where the figure sits within the range of the grade the person is moving to.
The cost of correcting green circled pay recurs every year
Take twelve employees in a grade whose minimum is SAR 10,000, each paid below it by an average of SAR 800:
- Monthly effect: 12 × 800 = SAR 9,600.
- Annual effect: 9,600 × 12 = SAR 115,200.
- The cost recurs every year, because the correction raises the base rather than making a single payment.
A second effect can be overlooked. A higher base carries with it everything calculated on it. On an assumed annual increase of 4%, applied to SAR 115,200, the following year carries an extra SAR 4,608 that would not otherwise have existed, and that amount builds up from one cycle to the next. A cost of correction presented as one figure is therefore only its first year.
The figures in this example are calculations on rates assumed for the explanation. They describe no market, and they are not meant to be carried over to one.
Correcting green circled pay at once or in stages
The two options differ in cost and in risk, and they are compared over the whole period rather than on the first month. Here are the same twelve cases over three years:
| Approach | Year 1 (SAR) | Year 2 (SAR) | Year 3 (SAR) | Total (SAR) |
|---|---|---|---|---|
| Full correction at once | 115,200 | 115,200 | 115,200 | 345,600 |
| One third of the gap each year | 38,400 | 76,800 | 115,200 | 230,400 |
Phasing saves SAR 115,200 over three years, and it pays for that saving with a cost the table does not show: twelve employees who know, for two years, that their pay is below the lowest figure their organisation sets for their work. If one of them leaves, the cost of replacing them and training a successor comes out of the saving, and more than one departure could wipe it out.
So the choice is not made on money alone. The practical criterion is the size of the gap. An employee slightly below the minimum can bear a phased correction, but one well below it cannot, because their wait is longer and they have less reason to stay.
Correcting green circled pay can compress the bottom of the range
Compression after a correction does not arise at the top end of the range, and it is an effect that can be forgotten when the cost is worked out. Raising those below the minimum up to the minimum places them close to colleagues just above it, whose pay has not moved.
| Employee | Time in the role | Pay before (SAR) | Pay after (SAR) |
|---|---|---|---|
| Recent hire below the minimum | 7 months | 9,200 | 10,000 |
| Longer serving colleague above the minimum | 3 years | 10,200 | 10,200 |
The gap between the two was SAR 1,000 and becomes SAR 200, so the difference between three years and seven months in the role is now worth two hundred riyals. That is pay compression at the bottom of the range, and it prompts a question from the longer serving colleague whose only answer is that the newer colleague had been below the table. The answer is correct, but it does not persuade.
The cost of correction is therefore calculated across the whole grade, not only for the cases below the minimum. Either the compression is accepted and its reason is made known, or those at the bottom of the range are moved too, by enough to keep the gap. That is a third cost, and no calculation limited to those below the minimum shows it.
The order for correcting green circled pay is written down before it starts
Where the correction cannot be made at once, the order becomes a decision, and it needs a written criterion. Three criteria are available, and each has a different effect:
- Furthest below the minimum first. It closes the largest gaps and leaves those near the minimum waiting, and it is the clearest of the three to defend.
- Longest service first. It addresses the employees who have been in post longest, but it may leave a case with a large gap at the end of the queue.
- Highest flight risk first. It addresses those the organisation fears losing, but it is the hardest to defend, because it rewards a signal of leaving rather than the facts of the case.
Whichever criterion is chosen, it has to be single, announced and applied to every case. An order decided case by case can, after two cycles, leave a list with no common criterion behind it. That is the very pattern a pay equity review looks for: differences with no explanation other than the order in which they were handled.
Green circled pay as a question about the pay structure
The minimum of a range is a figure the organisation set, and a number of employees below it allows two explanations. Either their pay is behind, or the minimum is set above the level at which the organisation actually pays. Telling the two apart comes before any correction, because the remedy differs.
Three indicators suggest that the problem lies in the structure:
- The proportion. A third or more of a grade’s incumbents below its minimum are not isolated cases.
- New hires. If the organisation is hiring below the minimum today and finding people who accept, the minimum does not describe its market.
- The source of the figure. A minimum taken from an external pay survey in which jobs were matched by title rather than by content inherits the matching error in full.
An organisation that corrects a third of a grade to match a wrong minimum buys an error at a recurring annual price, and it can then find the cases returning in the next cycle, because their cause has not been touched.
Where green circled pay can be caught before it arises
Green circled pay arises at a limited number of moments, and each of them passes through a decision that someone signs. The check needs no system and no periodic report, only one line in three documents that already exist:
- The offer letter. It states the minimum of the range for the grade on offer next to the figure offered, so that no offer below it is signed without a visible acknowledgement.
- The promotion decision. It records a promotion to a grade without a pay increase as a case below the minimum from the day it takes effect, instead of leaving it to be discovered a year later.
- The internal transfer decision. It is where the error can pass with nobody noticing, because the figure has not changed while the grade has.
The check costs one line at each decision. Leaving it out costs a recurring annual amount plus compression at the bottom of the range. Where two organisations differ here, the difference does not lie in the quality of their tables. It lies in whether the table is checked when the decision is made or only when the review comes round.
How green circled pay differs from the Wage Protection System, the comparable wage and low performance
- The Wage Protection System. It is the programme of the Ministry of Human Resources and Social Development for checking that private sector establishments pay wages on time and in the amount previously agreed. Green circled pay concerns a contractual figure paid in full and on time, and where that figure sits against an internal table. The two are separate questions, and confusing them makes an administrative matter look like a compliance matter.
- The comparable wage (أجر المثل). It is the gap filling rule in Article 95 of the Labor Law, which applies where neither the contract nor the work regulation states the wage at all. With green circled pay the wage is stated and known, and the question is its position in an internal table.
- Low performance. A range describes the job, and performance is addressed through the employee’s position within the range, not below it. An employee whose performance is weak can sit at the bottom of the range, not under it, and using pay below the minimum to express a low rating puts a tool to a purpose it was not designed for.
The provisions relied on are those of the Saudi Labor Law as published by the Ministry of Human Resources and Social Development: Article 2 (the definition of the basic wage), Article 89 (the power to set a minimum wage) and Article 95 (a wage that neither the contract nor the work regulation states). Royal Decree M/44 of 1446H, in force since 19 February 2025, amended Article 2 of the Labor Law by adding new definitions to it. That decree did not change the definitions of the basic wage and the actual wage in Article 2 of the Labor Law, and it did not amend Article 89 or Article 95 of the Labor Law.
Before green circled pay is corrected
An organisation that finds cases of this kind can ask two questions, in this order: what proportion of the grade’s incumbents those cases make up, and where the figure they fall below came from. The first answer shows whether the remedy lies with the people or with the structure. The second shows whether the structure deserves to have anyone corrected against it at all.
This is an explanation of the concept and of the statutory provisions cited, not legal advice.
A standalone Saudi HR system
One employee file holding the contract, the documents and their expiry dates, the attendance record, leave, salary and end-of-service entitlements. End-of-service, overtime and leave-balance calculations are built into the system.
A standalone system on its own subscription. The connection to Qoyod Accounting is now available.