Salary Scale Template for Saudi Private Sector Companies

At the start of every month, HR teams in Saudi companies face the same question: why does employee “A” earn more than employee “B” with the same job title? Why did “C” get a raise while “D” did not? And why does half the team feel their actual contribution is not reflected in their monthly payslip?

The answers do not come from an individual decision or a line manager’s discretion. They come from one structured document known as the salary scale. A salary scale is not a static table of numbers HR pins to the wall. It is a complete system that ties together the organizational chart, the Saudi Labor Law, GOSI contributions, and the requirements of your bank’s Wage Protection System (WPS) file. Any flaw in this scale shows up immediately on three fronts: the budget, compliance, and the company’s ability to retain talent.

In this practical guide, we build a salary scale from zero to live operation: definition and importance, components in detail under the Saudi regulatory framework, the difference between staff and labor salary scales, grade structure and how it is built, annual raises and promotions, linking the scale to performance indicators, a full numerical example for a 50-employee company, then the requirements of Qiwa and Mudad and how Qoyod turns all of this into an automated monthly cycle.

What is a salary scale, and why can no serious company do without one?

A salary scale is an official document that defines, for each role, the minimum and maximum pay, spread across consecutive grades, with a clear mechanism for movement between them. The core idea: no one sits on a salary set by personal decision. Every salary is derived from a documented rule that can be reviewed and explained.

A company without a salary scale runs on individual negotiation: the assertive employee wins, the patient one loses, and line managers pay according to their mood. The result is a layer of unjustified gaps between similar employees and a wave of silent resignations the moment a competing offer arrives. A company that adopts a clear scale moves from managing individual cases to managing a system, and turns the salary conversation from “what will I give you” into “where do you sit on the scale”.

In practice, the scale serves four functions you will not find combined in any other tool:

• Internal fairness: two employees in the same grade should not have a large gap in their base salary.
• External competitiveness: benchmarking against the market is easy when your numbers move within known ranges.
• Regulatory compliance: GOSI contributions, wage protection, and Saudization are all easier when the pay structure is standardized.
• Financial planning: calculating the impact of a new hire on cash flow becomes automatic instead of a monthly manual guess.

Before going into detail, it is worth separating the salary scale from the payroll run. The scale is the fixed theoretical structure (grades, ranges, standard allowances). The payroll run is the monthly execution (who attended, who was absent, who earned overtime, who had deductions). The scale changes annually or semi-annually; payroll runs monthly. Confusing the two is a common mistake that disrupts financial management.

Monthly salary components in Saudi Arabia

Regulations and prevailing practice state that a private sector employee’s monthly salary consists of two main elements: the base salary and allowances. These are offset by deductions taken before net pay. Precise understanding of each element determines how GOSI contributions, end-of-service benefits (EOSB), and the transfer cap in the monthly WPS file are calculated.

1. Base salary

The base salary is the fixed amount the employee receives for the agreed working hours, with no allowances or bonuses. Under the Saudi Labor Law, it is the foundation on which several legal outcomes are calculated: EOSB, cashed-out annual leave, overtime hourly rate, and the minimum base for the wage subject to GOSI. Setting a low base salary against high allowances as an “accounting trick” may cut GOSI contributions in the short term, but it backfires in any labor dispute or official audit. The golden rule: base salary should not fall below 60% of the total in most sectors.

2. The most common allowances

• Housing allowance: 20% to 30% of base salary. Included in the wage subject to GOSI contributions whether paid in cash or in kind (housing provided by the employer). If the company provides furnished housing, its monthly market value is treated as a housing allowance for GOSI purposes.
• Transport allowance: 8% to 12% of base salary. Not included in the wage subject to GOSI and not counted toward EOSB unless company policy explicitly states otherwise.
• Communications allowance: a fixed amount (200 to 800 SAR per month) for employees whose roles require constant contact. Outside GOSI contributions by default.
• Nature-of-work allowance: granted for field, hazardous, or evening roles (maintenance staff, security, factory operations). Ranges from 5% to 20% depending on risk level.
• Remote-site travel allowance: paid to employees working outside major cities, typically with a minimum of 500 SAR per month.
• Other allowances: annual flight tickets, family medical insurance (treated as an in-kind benefit), child allowances in some sectors, and bonuses for professional certifications.

When designing the scale, allowance policy is standardized per grade. Leave it open to individual negotiation and you lose the point of building the scale in the first place.

3. Statutory deductions

Deductions from the employee’s gross pay are not optional, and failing to withhold them exposes the company to penalties from the Ministry of Human Resources and Social Development (MHRSD) and GOSI. For a detailed review of withholding mechanics, refer to the guide on social insurance deductions in Saudi Arabia. Key points:

• General Organization for Social Insurance (GOSI) contributions: 9.75% withheld monthly from a Saudi employee’s salary, plus 11.75% borne by the employer. Contribution base = base salary + housing allowance, with a minimum of 1,500 SAR and a maximum of 45,000 SAR per month.
• Health insurance: not a payroll deduction. It is a separate employer obligation to contract with an insurer approved by the Council of Cooperative Health Insurance. Recorded in the books as a separate expense.
• Advances and internal loans: deductible provided total deductions do not exceed half of the monthly salary, per Article 92 of the Saudi Labor Law.
• Disciplinary fines: capped under the penalty schedule approved by the labor office, and may not exceed five days’ wages per month.

For deeper coverage of the contribution system and the wage base subject to GOSI, also review the Saudi Unified Classification of Occupations, which defines how jobs map to GOSI contributions and Saudization.

The difference between staff and labor salary scales

Many companies confuse the two scales, then discover the gap late, on the day they run their first WPS transfer. The difference is not only about “how much is paid”. It extends to the nature of the employment relationship, the payment mechanism, and the documents tied to each category.

Staff salary scale

Serves administrative and technical employees on permanent full-time contracts. The salary is a fixed monthly amount, independent of the actual hours worked in a given month (within reason). Allowances form a large share of total compensation, and annual raises are tied to performance. Differences within a single grade come from seniority, certifications, and the annual review.

Labor/Workers salary scale

Serves direct labor in factories, construction sites, operations, and maintenance. Many of these roles are calculated by the hour or by the day, with a minimum monthly base. Additional components matter more here: overtime, night work, work on official holidays, and nature-of-work allowances. To understand how overtime hours are calculated precisely, see the overtime calculation guide for Saudi Arabia.

Wage Protection System (WPS): the backbone of payouts

The Wage Protection System is a regulatory mandate on every private sector company to disburse employee salaries through an approved bank. Each month, the company sends a standardized file to the bank containing: national ID, base salary, allowances, deductions, and net pay. The bank in turn forwards the data to MHRSD, and the employee is automatically flagged as “paid” or “late”.

Delays in submitting the WPS file, or submitting a file with discrepancies between the registered scale and the transferred amount, generates automatic warnings that, after a period, escalate to suspended services on Qiwa. A scale on paper is not enough. It must be reflected accurately in the monthly WPS file, which is why the WPS file should be derived directly from the payroll system, not from a separate spreadsheet.

Scale grades and levels: how are they designed?

A grade in the salary scale is a standard unit that groups roles with similar responsibility, skills, and financial impact. Each grade has a closed pay range: minimum, midpoint, and maximum. A new hire enters at the minimum of the grade matching their experience, moves within the range over time and with performance, then jumps to a higher grade on promotion.

How many grades are appropriate?

There is no single answer, but as a practical rule: a small company (under 50 employees) needs 5 to 7 grades, a mid-size company (50 to 300) needs 8 to 12, and a large company (over 300) may need up to 15. Too many grades make movement slow and frustrate employees; too few force dissimilar roles into the same grade, killing fairness.

The gap between grades

The typical gap between the midpoint of one grade and the next is 15% to 25% at lower and mid levels, rising to 30% or 40% at senior management. The wider the hierarchy, the wider the gap. This mirrors the market: the difference between an entry-level employee and an experienced one may be 30%, while the gap between a department manager and an executive director may be twice that.

The width of a single grade

Grade width (the gap between Min and Max within the same grade) typically ranges from 30% to 60%. A narrow grade (30%) means the employee burns through the range quickly and needs a promotion. A wide grade (60%) gives the company flexibility to reward performance without cosmetic promotions, but requires a real performance review system.

Annual raises and promotions: how do you move an employee within the scale?

A scale without movement is a rigid table. The company needs a clear policy linking performance, seniority, and skill acquisition on one side, with movement within the scale on the other. The most effective model separates three types of movement:

• Annual increment: a fixed or variable percentage (typically 4% to 8%) added to the base salary once a year, tied to overall performance and the employee’s position in their grade range.
• Merit increase: an extra jump for top performers, capped at a limited share of the workforce (5% to 10% of the company).
• Promotion: a move to a higher grade with a change in job title and responsibilities. Granted under written conditions: years in the current grade, an open slot, a specific performance rating, and additional certifications or qualifications.

Common mistake: granting a “promotion” without a real change in responsibilities, just to raise pay. This erodes the scale gradually. Three years on, you find half the team in the top grade with no real expansion in the organizational structure. The fix: use the merit increase to reward performance, and reserve promotion for an actual change in role.

Linking the salary scale to performance indicators (KPI)

A scale that does not link raises to performance turns, over a few years, into a pure seniority table, paying the longer-tenured employee more regardless of actual contribution. The fix is to build a “raise matrix” that cross-references the performance review with the employee’s position in their range:

• Employee in the lower quartile of the range + excellent rating → 8% raise.
• Employee at the midpoint of the range + good rating → 4% raise.
• Employee at the maximum of the range + any rating → no raise (needs a promotion or a merit increase).

This approach sends a clear message: the scale is not an automatic machine handing out raises. It is a tool for rewarding real performance. And it helps reduce the employee turnover rate that drains the budget through repeated hiring and training costs.

A practical example: salary scale for a 50-employee company

To see the idea in action: a tech startup in Riyadh, 50 employees, building software for the commercial sector. The org structure splits into three groups: engineering (25 employees), sales and customer service (15 employees), and admin and support (10 employees). We build a single scale with 6 grades, with a pay range per grade.

Proposed structure

We use the scale in the table above. Calculating the total monthly cost for the full team (assuming employees are distributed: 12 in D1, 14 in D2, 12 in D3, 7 in D4, 3 in D5, 2 in D6):

• D1 (12 employees × 6,075) = 72,900 SAR.
• D2 (14 employees × 8,725) = 122,150 SAR.
• D3 (12 employees × 12,050) = 144,600 SAR.
• D4 (7 employees × 17,250) = 120,750 SAR.
• D5 (3 employees × 23,700) = 71,100 SAR.
• D6 (2 employees × 34,000) = 68,000 SAR.

Total monthly payroll: 599,500 SAR. This is before the employer’s GOSI share (assume 80% of the team is Saudi, so 40 employees).

Calculating the GOSI impact

The wage subject to GOSI = base salary + housing allowance. Assuming that ratio of total payroll, the total contribution base for Saudi employees is around 380,000 SAR per month. The employer’s share (11.75%) = 44,650 SAR per month, added to payroll cost. For non-Saudi employees (10 employees), the employer’s occupational hazards share (2%) is around 1,800 SAR per month.

Total monthly payroll cost: 599,500 + 44,650 + 1,800 = around 645,950 SAR. Annualized, around 7.75 million SAR. This number lets finance plan cash flows precisely, and decide when the company can absorb 5 new hires, or whether it should wait.

This methodology is derived from the practice of staff salary scales in the public and private sectors in Saudi Arabia, adapted for a mid-size private sector company.

Qiwa and Mudad requirements

Any salary scale designed today in Saudi Arabia must connect to the official HR platforms. The government framework rests on three bodies: the Ministry of Human Resources and Social Development (MHRSD) via Qiwa, the General Organization for Social Insurance (GOSI) via its e-portal, and Mudad, which links the two and oversees the Wage Protection System.

Qiwa

Qiwa is the main gateway for HR services in the private sector. Through it, contracts are registered, official raises are approved, salaries are updated, and Saudization is monitored. When an employee’s salary changes on the internal scale, the contract in Qiwa must be updated too. Otherwise a gap opens between the internally approved scale and the officially documented contract, and that gap is enough to nullify the company’s position in any dispute.

Mudad

Mudad runs the Wage Protection System. Each month, the company submits a WPS file via its approved bank, containing employee data drawn from the salary scale and the monthly payroll run. Mudad compares this data with what is on file in Qiwa and GOSI. Any mismatch triggers a warning. A scale maintained only in Excel, with no link to Mudad, generates monthly variances.

GOSI

Any change to the base salary or housing allowance of a Saudi employee must be registered in the GOSI portal within 15 days of the change date. Late registration exposes the company to a penalty, and denies the employee credit for that period at the new salary when their retirement pension is calculated.

How Qoyod helps manage the salary scale and payroll run

Drafting a salary scale on paper is easy. Turning that scale into a precise monthly run, compliant with GOSI and WPS, and tied to the accounting ledger with no monthly manual intervention, is the real challenge. Qoyod’s accounting platform is designed to close this gap in three integrated layers:

• Unified employee database: each employee has a file holding grade, base salary, allowances, hire date, national ID, and GOSI subscription number. Any change to the scale flows directly into the next payroll run, with no manual rekeying.
• Automated monthly payroll run: calculation of gross pay, deductions, net pay, and employer GOSI share, with a detailed monthly report ready for approval before transfer.
• Bank-ready WPS file: generate the WPS file in the format your bank accepts directly from the monthly payroll, with no rekeying in Excel or shuffling data between platforms.

The biggest gain shows up in the accounting entries. Each payroll cycle is posted to the general ledger as a balanced entry: payroll expense debit, net amounts due to employees credit, GOSI payable credit, and any other deductions. This removes the need to retype entries by hand, and shortens the month-end close from days to hours. To understand the double-entry mechanics in the payroll context, see the golden rule of debits and credits.

If you run a small business and do not yet have a full HR department, bookkeeping for small businesses inside Qoyod provides the minimum needed to run payroll professionally even with a team of just 5 employees.

The most common mistakes in salary scale design

Before using the template, watch out for the mistakes that recur in most Saudi companies:

• Very low base salary against very high allowances: it may look like a clever payroll move, but it weakens GOSI contributions (and therefore the employee’s future pension) and raises the odds of a dispute when EOSB is calculated.
• Ignoring housing allowance in the wage subject to GOSI: a common error that costs the company late penalties at a GOSI audit.
• A scale without job descriptions: grades with names but no explanation of responsibilities and qualifications produce internal disputes and indefensible promotion decisions.
• Neglecting the annual review: the market moves, inflation shifts, and competitors raise pay. A scale that has not been reviewed in three years has lost its competitive edge.
• Lack of sync between Excel, Qiwa, Mudad, and the accounting system: four copies, differences between them, and monthly penalties. The fix: one source of truth that flows to the other systems automatically.
• Verbal promises of undocumented raises: the employee comes back a year later asking for the raise you promised verbally, and management cannot recall the details. Every change must be issued in a formal letter and reflected immediately in the scale.

When should you review the salary scale?

The minimum is one annual review, typically in the last quarter of the financial year so changes take effect with the new year. But there are events that trigger an exceptional review:

A good review takes 4 to 6 weeks: start by collecting market data, run an internal comparison against current performance, then financially model the impact of the changes on next year’s budget, and end with a formal decision approved by leadership. For anyone running a full accounting cycle, this review intersects with the accounting period close and with building next year’s budget.

The salary scale and zakat and tax compliance

Salaries are one of the largest expense lines on any company’s financial statements. Recording them accurately serves not only the employee, it protects the company at a Zakat, Tax and Customs Authority (ZATCA) audit. In annual reviews, ZATCA asks for:

• Total salaries and allowances per employee, broken down monthly.
• A declaration that GOSI contributions have been paid, with compliance certificates from GOSI.
• A register of Saudi employees vs. non-Saudis (for zakat calculation purposes).
• A list of annual bonuses and EOSB paid during the year.

Any mismatch between what appears on the financial statements and what is registered in Qiwa or GOSI generates audit notes. So building a documented salary scale synced with the government systems becomes a tax protection layer, not just an HR tool. And when zakat is calculated, salaries fall under the expenses that reduce the zakat base. See the zakat calculation guide for the applied details.

Frequently asked questions about the salary scale

Is a salary scale legally required in the Saudi private sector?

There is no explicit text in the Saudi Labor Law requiring the private sector to maintain a salary scale in a specific format. However, the internal work regulation (approved by the labor office) must include wage provisions, and without a unified scale those provisions are hard to honor. In practice, any company with more than 20 employees needs a clear scale to avoid administrative chaos.

Does housing allowance count toward end-of-service benefits?

Per Article 86 of the Saudi Labor Law, EOSB is calculated on the last wage, which includes the base salary and the fixed portion of allowances. A regular housing allowance counts as part of the “fixed allowances”. Transport allowance and variable performance allowances are not included in the calculation base.

How do we handle an employee who has reached the maximum of their grade?

You have three options: (1) a real promotion to the next grade with a job title change, (2) a merit increase that temporarily exceeds the grade maximum (known as a Red Circle Salary), or (3) freeze the raise and shift incentives to the annual bonus and non-cash benefits.

Can we cut an employee’s salary when the scale is reviewed?

No, cutting pay is a breach of the employment contract and gives the employee the right to terminate with full entitlements. A scale review applies to new hires and to future raise rates, not to existing salaries.

How often should the scale be reviewed?

Once a year at a minimum, with a quick check every 6 months to track market movement. A review does not require a change. It may end with a decision to keep the scale as is.

Is the labor salary scale legally different from the staff scale?

In terms of basic rights, no. Both are governed by the Saudi Labor Law and GOSI. The difference is operational: direct labor needs an hourly or daily pay structure with detailed overtime and night-work allowances, while staff are paid a fixed monthly salary with standard allowances. The attached template includes both sheets.

Start running the scale today

Designing the scale on paper takes weeks. Turning it into a live monthly cycle, compliant with GOSI and WPS, and tied to your accounting system, is what makes the difference. Download the attached template, apply it to your current team, then connect it to Qoyod to run the monthly cycle in minutes instead of days.