Total Rewards

Total rewards: a definition

Total rewards (المكافآت الشاملة) are everything an employee receives in return for their work, whether in cash or in another form, viewed as one package instead of as separate items.

The definition has two parts. The first sets its scope: everything the employee receives for the work. That scope covers what is paid in money, such as the wage and the allowances, and what is not paid in money, such as insurance cover, flexibility in working time and the chance to train. Nothing the employee receives for the work falls outside it because of the form in which it is given.

The second part sets the way of looking at that scope. Total rewards view the items as a single package. The view they replace takes each item separately: the wage on its own line, an allowance on another, a benefit on a third. Under total rewards, the items are put together, and the package that results is what is described and compared.

The components of a total rewards package

A total rewards package is made up of four groups of items.

• Direct pay. It includes the basic wage, commissions and bonuses linked to performance. These are the amounts paid to the employee in cash in return for the work.
• Allowances. They include items that the law requires. Article 61 of the Saudi Labor Law (نظام العمل), among the duties of employers, requires the employer to provide suitable housing for its workers, and allows the employer to replace that housing with a suitable cash allowance paid to them with the wage. Article 61 of the Labor Law also requires the employer to provide suitable transport for its workers from their place of residence to the workplace, and allows the employer, here too, to replace that transport with a suitable cash allowance paid with the wage. The choice between the two forms is the employer’s, and it is made for each duty independently of the other. An employer may therefore provide one of the two in kind and pay the other in cash, provide both in kind, or pay both in cash. Royal Decree No. M/44 dated 8/2/1446H, in force from 19 February 2025, added both of these items to Article 61 of the Labor Law.
• Benefits. They include medical insurance, coverage under social insurance (التأمينات الاجتماعية) and end of service benefits. Which branches of social insurance apply to an employee, and at what rates, are set by the social insurance law that governs that employee. How the end of service award is worked out is covered under end of service calculation.
• Rewards that are not financial. They include flexible working hours, remote work, and opportunities for training and promotion. Flexible working hours in this sense are an arrangement within the package. They are not the flexible work (العمل المرن) that Article 27 of the Implementing Regulation (اللائحة التنفيذية) sets out as a distinct arrangement for a worker who is not full time and is paid by the hour.

Why total rewards are presented as a package

Total rewards are presented as a package because an employee compares the figure shown in a job offer, not the real cost of what is on offer. The figure shown is the one the employee sees and repeats. The real cost includes that figure and every other item the package holds.

Two offers with the same basic wage of SAR 10,000 can differ by thousands of riyals a month once their allowances, their insurance and their development benefits differ. Set side by side on the basic wage alone, the two offers look identical. Set side by side as packages, they can be some distance apart, and the basic wage does not show that distance.

Presenting total rewards as a package moves the comparison from the single figure to the whole. The employee then compares what each offer holds in full, and the items that the figure in the offer leaves out are counted with it.

An example of the total rewards gap

Take an employee whose basic wage is SAR 10,000, with a housing allowance of SAR 2,500, a transport allowance of SAR 500, family medical insurance and an annual training budget. The figure this employee gives friends is 10,000. The actual package is clearly higher than that.

The items paid in cash show part of the gap. The basic wage and the two allowances come to SAR 13,000 a month, which is SAR 3,000 above the figure the employee quotes. The family medical insurance and the annual training budget come on top of that sum. The example gives no figure for either of them, so it does not put a number on the full package; what it shows is that the package is larger than the cash total, which is itself larger than the basic wage.

For this reason an organisation may issue a total rewards statement to each employee every year: a single page that shows the whole package in figures. Its value is that the employee sees the package as the organisation sees it, instead of comparing one number with one other number.

How total rewards differ from a salary structure

A salary structure arranges cash pay into grades and ranges in order to secure internal fairness. Its subject is the cash wage, and it orders that wage by grade and range.

Total rewards are wider. They take in what does not appear in a salary structure at all, such as benefits, flexibility and opportunities for development. A salary structure covers the cash pay that sits inside the package, while total rewards cover the package as a whole, including the items that a salary structure has no grade or range for.

The provision relied on is that of the Saudi Labor Law as published by the Ministry of Human Resources and Social Development: Article 61 (the employer’s duties to provide suitable housing and suitable transport, each replaceable by a suitable cash allowance paid with the wage). The reference to flexible work is to Article 27 of the Implementing Regulation, cited only to distinguish that arrangement from flexible working hours within a package.

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