Compensatory Rest and the Basis for Computing Overtime under the Saudi Labor Law

Overtime under the Saudi Labor Law is governed by Article 107. Its wording in the text is short, but it is composite: it brings together two elements, each with its own reference point.

For that reason the error here usually falls not in the rate, but in determining what it is applied to.

1. What the text provides

Article 107 provides that the employer shall pay for overtime hours the hourly wage plus 50% of the basic wage.

So what is due for a single overtime hour is made up of two parts:

• The hourly wage
• 50% of the basic wage

The wording as it appears attributes the first part to the hourly wage, and attributes the uplift to the basic wage. These are two distinct reference points in the text.

2. What this guide has not settled

What goes into the “basic wage” referred to in this article, whether it is basic pay alone or includes allowances, and how the hourly wage is derived from it: this guide has not established any of that in an express text.

For that reason no numerical example computing the amount due in riyals is presented here, because any example of that kind requires settling this question first, and settling it is not in this guide.

Refer to the statutory text and the competent authority on that.

This reservation is deliberate: a formula that brings together two different reference points in a single sentence is exactly the formula in which the two parts are easily computed on one basis without anyone noticing.

Why this place is left open

Refraining from presenting a numerical example may look like a shortcoming, and it is the opposite. A numerical example in this area does not clarify the rule; it settles one of the possibilities and presents it as the rule.

Whoever reads a worked example does not see the assumption it was built on, only a final figure. They carry it into their internal policy, and the example writer’s assumption becomes a rule in an establishment that had no part in setting it.

The difference between this place and the numerical examples in other areas is that those rest on figures stated in the text, while this one requires settling a meaning that was not stated.

3. The alternative: compensatory rest days

Article 107 provides that paid compensatory rest days may take the place of the overtime allowance, with the worker’s consent.

There are three descriptors in this alternative: that they are rest days, that they are paid, and that they are with the worker’s consent.

The third descriptor is the governing restriction: the alternative is not an option the establishment decides on its own, but one that rests on consent. A policy that makes compensatory rest the default without consent drops a condition laid down in the text.

As for the form of this consent and its timing, and whether it is general in the contract or given for each instance, that is a matter to be referred to the statutory text and the competent authority.

Note that in the text the alternative stands in place of the allowance, not in place of the hours themselves. The hours occurred in any case; what differs is the form of what corresponds to them.

4. Actual hours before any calculation

No overtime calculation is possible until actual working hours have been determined, and that is a matter governed by other articles:

• Article 98 lays down a maximum for working hours: 8 hours a day on the daily standard, or 48 hours a week on the weekly standard. In Ramadan, for Muslim workers: 6 hours a day or 36 hours a week.
• Article 102 provides that rest, prayer and meal periods are not counted within actual working hours.

What follows is that the span between arrival and departure is not actual working hours. Anyone computing overtime on the basis of that span is building on a figure larger than the correct one.

This is an error that occurs before any rate is applied: a wrong figure entering a correct formula produces a wrong result.

The effect of the applicable standard on determining the excess

Article 98 states two standards: a daily one of 8 hours, and a weekly one of 48 hours. Determining what is in excess differs according to the standard followed.

An establishment operating on the daily standard measures each day separately, and one operating on the weekly standard measures the week’s total. These are two different measurements that may give two different results for the same week.

For that reason, recording the applicable standard is not an identifying datum but an input into the calculation. As for determining which standard applies to a particular establishment, that is a matter to be referred to the statutory text and the competent authority.

5. The order of the steps

It is clear from the above that computing overtime rests on an order:

1. Determining actual working hours after excluding rest periods, under Articles 98 and 102.
2. Determining by how much the actual hours exceed what Article 98 lays down. As for characterising that excess and its relationship to the Article 107 allowance, that is a matter this guide has not established in an express text; refer to the statutory text and the competent authority on that.
3. Computing what is due for them under Article 107, or agreeing on compensatory rest days with the worker’s consent.

The first step is the only one that needs data recorded moment by moment. The second and third are calculations that rest on it.

This order has a practical effect in diagnosing any disagreement over an overtime amount: the first question is not about the formula, but about the number of hours. If the two parties differ on the number, there is no point discussing the rate.

A disagreement over the number is settled by the record alone, and a disagreement over the formula is settled by the text. These are two different reference points for two questions that are usually raised together.

6. What this guide does not address

• The components of the “basic wage” in Article 107 and the way the hourly wage is derived from it. Refer to the statutory text and the competent authority on that.
• The form of the worker’s consent to compensatory rest and its timing. Refer to the statutory text and the competent authority on that.
• The relationship between the limit laid down in Article 98 and what the Article 107 allowance is due for. This guide has not established it in an express text; refer to the statutory text and the competent authority on that.
• Limits on overtime hours and a ceiling for them, if one exists. This guide has not established it; refer to the statutory text and the competent authority on that.
• The treatment of work on the weekly rest day or on holidays. The particular case is to be referred to the statutory text and the competent authority.
• The effect of exceeding the limits laid down. It is not sound to state a figure for a fine; refer to the competent authority on that.

7. What your system should record

• Arrival and departure times for every employee, because they are the basis of everything that follows.
• Rest periods separately, because Article 102 excludes them from actual hours.
• Actual working hours as computed, not the span between arrival and departure.
• Overtime hours computed on the basis of actual hours.
• The applicable standard, daily or weekly, because determining the excess differs with it.
• The worker’s consents to compensatory rest and their dates, where this is in use.
• The compensatory rest days granted and the hours they correspond to.

8. Checklist

• Are overtime hours computed from actual working hours or from the span between arrival and departure?
• Are rest periods excluded before the calculation?
• Is the applicable standard daily or weekly, and is it the same for all employees?
• In determining the excess, have the reduced Ramadan hours been applied to the workers they cover?
• Where compensatory rest has been granted: is it paid, and is there a recorded consent from the worker?
• Does the system distinguish between the hourly wage and the basic wage as two reference points in the text of Article 107?

9. Why this turns into a problem

Overtime is an item computed monthly from data gathered daily. That alone makes it different from most payroll items: basic salary is a fixed figure read from the contract, and overtime is a figure built from hundreds of small events.

Once the source is an attendance record that does not separate rest periods, every subsequent calculation is built on a figure larger than the correct one, regularly and in one direction. It is an error that does not correct itself and does not show up in the monthly review, because the review compares the result with what was expected, and what was expected is built on the same source.

Added to that, the wording of Article 107 brings together two reference points, so the establishment needs to know exactly which figure it used in which part, not merely to know the result.

The difference between two establishments here is not in the accuracy of the calculation, but in how reviewable it is: an establishment that knows the inputs to every figure can review and correct, and an establishment that knows only the output can do nothing but redo the calculation from the start every time it is asked about.

This is where it pays to have an employee’s facts in a single file. That is what Qoyod HR provides: a single employee file holding the contract, the documents and their expiry dates with an alert before them, an attendance record for each employee, and their leave, salary and end-of-service entitlements. End-of-service, overtime and leave-balance calculations are built into the system. It is a standalone HR system with its own subscription, and the link with Qoyod accounting is available now.

For the limits on working hours and rest periods, see Working hours and weekly rest.

The overtime calculator handles the arithmetical side with inputs you determine, and it does not dispense with settling what is set out in section two. For more guides and templates, browse the HR Resource Centre.

Frequently asked questions

How is the overtime allowance computed under the Saudi Labor Law?

Article 107 provides that the employer shall pay for overtime hours the hourly wage plus 50% of the basic wage. So what is due is made up of two parts, the first attributed to the hourly wage and the second to the basic wage.

What goes into the “basic wage” in this article?

This guide has not established an express text defining its components or the way the hourly wage is derived from it, and for that reason no numerical example in riyals is presented here. Refer to the statutory text and the competent authority on that.

May overtime be compensated with rest days?

Article 107 provides that paid compensatory rest days may take the place of the overtime allowance, with the worker’s consent. So consent is a condition in the text, not an option for the establishment on its own.

Which figure are overtime hours computed from?

From actual working hours, not from the span between arrival and departure. Article 102 provides that rest, prayer and meal periods are not counted within actual working hours.

What limits on working hours does Article 98 lay down?

Article 98 lays down a maximum of 8 hours a day on the daily standard, or 48 hours a week on the weekly standard. In Ramadan, for Muslim workers: 6 hours a day or 36 hours a week.

Is there a ceiling on overtime hours?

This guide has not established a text on that, so it is not sound to assert either that a ceiling exists or that it does not; refer to the statutory text and the competent authority on that.

Statutory references

This guide is based on the Saudi Labor Law: Article 107 (the overtime allowance and compensatory rest), with reference to Article 98 (working hours) and Article 102 (excluding rest from actual working hours) in determining what counts as an overtime hour.

On the effect of the amendments made by Royal Decree M/44 of 1446 AH, in force since 19 February 2025: Article 98 was not changed by the 2025 amendments. As for Articles 102 and 107, this guide has not established an express instance of amendment for them, so it is not sound to assert either that they were or were not amended; refer to the updated statutory text on that.

This guide is a regulatory explanation, not legal advice. In an existing dispute or a particular case, the statutory text and the competent authority remain the reference.