What internal pay equity means
Internal pay equity (العدالة الداخلية للأجور), also called internal equity, is the condition in which the differences between the pay of people in one establishment are consistent with the differences in the work itself: what each job demands, the responsibility it carries and the effect its holder has. The comparison is entirely internal. It sets one job against another, and one employee against a colleague, inside the same establishment.
The reference it is measured against is the establishment’s own ranking of its jobs, not the market rate and not an employee’s ability to negotiate. That limit is what makes the question testable at all. Because the reference is internal, every difference either traces back to where the two jobs stand in that ranking or remains unexplained.
The wider principle of pay equity is not that everyone is paid the same. It is that every difference has a reason that can be stated and checked. Internal pay equity is one of the two places where that principle is tested: the test made by looking inside the establishment. The other looks outside it, at the market, and it is a separate question that the tools described here do not answer.
Job evaluation sets the reference for internal pay equity
Internal pay equity is not measured by job titles, because titles can differ for no reason at all. The reference is created by job evaluation (تقييم الوظائف), which sets the relative value of each job inside the establishment and measures the job, not the person holding it. Accounts of job evaluation describe approaches such as ranking, job classification and points, and the factor comparison method is sometimes added to them. After the evaluation come the pay ranges of the salary structure, and then grade placement (تسكين الموظفين): fixing each employee’s position within those ranges.
The order of those three steps is what locates a fault when one occurs. A fault in the evaluation produces a wrong ranking on which ranges are built with correct arithmetic. A fault in placement produces a wage outside its range while the ranking itself is sound. A review that does not separate the two ends with the finding that “the problem is pay”, and no correction can be built on that.
Internal pay equity in the Saudi rules we reviewed
In the sources we reviewed, we found no general obligation under the name of internal pay equity that sets a method or a threshold. What we did find includes a row of the Schedule of Violations and Penalties (جدول المخالفات والعقوبات), issued by Ministerial Decision No. 112377 dated 21/8/1447H (9 February 2026), and that row compares pay for work of equal value, not pay against the market:
| Violation | Class | 20 workers or fewer | 21 to 49 workers | 50 workers or more | Multiplier |
|---|---|---|---|---|---|
| Discrimination in any form, including discrimination in pay between men and women for work of equal value | Grave | SAR 1,000 | SAR 2,000 | SAR 3,000 | Per case |
Three things in that row bear on internal pay equity. First, its test is work of equal value, a standard that compares one piece of work with another, not a wage with a market rate. Second, the fine is multiplied by the number of cases, so the amount in the column is not the ceiling for an incident. Third, the three columns are quoted together, because the fine is graded by the size of the establishment. The same row also covers discrimination on grounds such as age, and its application to age is set out in our glossary entry on ageism.
The Implementing Regulation (اللائحة التنفيذية) of the Saudi Labor Law (نظام العمل) adds a provision on people with disabilities: its Article 9 prohibits discrimination in pay on the basis of disability and requires the relevant data to be disclosed to labour inspectors on request.
Neither provision says more than that. The Schedule row names work of equal value and does not say how equal value is to be established, and we found no provision that does. We also found no permitted margin between wages, as a percentage or in riyals, below which a gap counts as sound and above which it counts as an imbalance, or a mandatory frequency for reviewing pay. The silence of our sources is not a basis for concluding that none of these exists.
A worked example: what a uniform increase does to internal pay equity
An internal imbalance need not come from a single decision; the arithmetic of pay increases can keep one in place. Take two employees whom the evaluation places at the same level. The first is paid SAR 9,000 a month and the second SAR 11,500. The gap between them is SAR 2,500, which is 27.8% of the lower wage. Both then receive a uniform increase of 5% in each of three consecutive years:
| Year | First employee (SAR) | Second employee (SAR) | Gap (SAR) |
|---|---|---|---|
| Starting point | 9,000.00 | 11,500.00 | 2,500.00 |
| After one year | 9,450.00 | 12,075.00 | 2,625.00 |
| After two years | 9,922.50 | 12,678.75 | 2,756.25 |
| After three years | 10,418.63 | 13,312.69 | 2,894.06 |
The ratio between the two stays at 27.8% in all four years, while the gap in riyals rises from SAR 2,500 to SAR 2,894.06, an increase of SAR 394.06. The uniform increase did not create the gap and did not close it. It enlarged the gap in riyals while holding its ratio steady.
Percentage increases are one of the routes by which an imbalance can seep into pay, because a uniform rate applied to an unequal base widens the gap year after year. The example shows why a review that looks only at percentages does not see it: the percentage is exactly what did not change. A salary review, in which an amount fixed in advance is shared out by a written rule, meets the same arithmetic whenever its rule is a uniform percentage.
Rank inversion: the internal pay equity fault a single grade cannot show
A review that compares employees within each level separately can miss a serious form of imbalance: pay that contradicts the order of the levels themselves. Take two levels that came out of the evaluation in order, each with its range:
- Level three: a range from SAR 9,000 to SAR 12,000.
- Level four, the higher of the two: a range from SAR 11,000 to SAR 15,000.
An employee at level three then receives an outside offer, and their pay is raised to SAR 12,800 to keep them. A colleague at level four is paid SAR 12,200. The result is two figures that say what the evaluation did not: the lower level is paid more by SAR 600, and the level three employee sits SAR 800 above the maximum of their range. Where pay above the maximum is then frozen, the condition is known as red circled pay, which our entry on pay compression describes. The width of each range is what range spread measures.
A review that compares each employee with colleagues at the same level will see none of this, because the two people are not at the same level. Internal pay equity is therefore checked within each level and between levels at once, and the check between levels can be overlooked. Exceptional retention offers made without reviewing the pay of others at the beneficiary’s level are one route by which an imbalance can seep in. The example adds that their effect reaches beyond the beneficiary’s level to the level above it.
The cost of a single exception does not lie in the increase that was granted, but in what is needed afterwards to restore the order. Suppose level four has four employees paid SAR 11,400, SAR 11,800, SAR 12,200 and SAR 12,600. Bringing all of them to SAR 12,800 costs SAR 1,400, SAR 1,000, SAR 600 and SAR 200, a total of SAR 3,200 a month and SAR 38,400 a year. That only brings them level with the level three employee. It does not restore the gap that the evaluation set between the two levels, and it does not address the SAR 800 above the range maximum, which can be closed only by revisiting the range or the placement. One decision has opened four cases, and its real cost is the sum of what closes them, not the increase it began with.
This is also where the unit of counting in the Schedule row above matters: the unit is the case, not the decision. A review can count in the same unit. An imbalance whose source is a rule, or an exception applied repeatedly, is then counted by the number of people it touched rather than the number of decisions that produced it. Counting decisions gives a smaller figure than the reality whenever the imbalance repeats within one level.
What undermines an internal pay equity review before it starts
Comparing by title. Two identical titles can cover different work, and two different titles can cover the same work. Relying on the title instead of the content of the job is one of the faults that invalidates a job evaluation, and the description of that content comes from job analysis (تحليل الوظائف).
Mixing the components of pay. Comparing a basic wage with a wage that includes allowances produces a gap whose source is the definition, not the facts. An imbalance can sit in allowances and benefits, not only in basic salary. The component being compared is therefore fixed first and applied to everyone.
Widening the unit of comparison. Internal pay equity is checked inside the establishment. Combining different entities in one review brings in differences whose source is the entity, not the work. A wider unit does not make the review more precise. It adds differences the review has no means of explaining.
What internal pay equity does not measure
Where a wage sits within its range. It is what the compa ratio (نسبة المقارنة الأجرية) measures, and its inputs are a wage and a range, not a wage and a colleague’s wage. Two employees with the same compa ratio can still have an unexplained gap between them if their ranges were set without a sound basis.
The market price of a job. It is a question whose reference lies outside the establishment, and its tool is the benchmark job (الوظيفة المرجعية). A structure that is internally consistent can sit entirely below the market or entirely above it without any internal review showing it, because an internal review compares wages with one another, not with anything outside.
A wage that was never set. The comparable wage rule (أجر المثل) in Article 95 of the Saudi Labor Law applies where neither the contract nor the work regulation (لائحة تنظيم العمل) states the wage. It is a rule for filling a gap, not a market standard or a tool for comparison, while internal pay equity deals with differences between wages that have already been set. Article 95 of the Labor Law is therefore not a basis in this area, and citing it to justify changing a wage written in a contract applies the provision outside its place.
What an internal pay equity review leaves behind
The output of an internal review is not a single figure that describes the state of the establishment. It is a list of cases, and each case carries one of two things: a documented reason connected to the work, written down, or a correction plan with a timescale and an amount. A case that carries neither stays open and is not closed by the end of the review. An establishment that finishes with a list containing open cases is closer to a real review than one that finishes with a single percentage whose contents nobody knows.
The definition does not specify a mandatory frequency for reviewing internal pay equity, or a designated party within the establishment to carry the review out. What makes a review repeatable two years later is three records: the ranking produced by the evaluation, kept with its date; the rule for exceptions and the name of whoever approves them; and the reason for every departure from a range, entered on the day it happens rather than the day someone asks about it. A reason written two years later is written from memory, and memory is not a record.
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.