The Legal Risks of Salary Discrepancies in Saudi Arabia: What Employers Must Know (2025 Guide)

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In Saudi Arabia, transparency and compliance in employment practices are not just ethical obligations—they are legal requirements. One area where businesses often face scrutiny is in the reporting and payment of employee salaries.

⚠️ The Issue: Discrepancy Between Contracted and Actual Salary

Some companies attempt to reduce costs by stating a higher salary in the employment contract (e.g., SAR 4,000) to meet Saudization or GOSI requirements, while actually paying a lower amount (e.g., SAR 1,500) and reclaiming the difference in cash. This practice is illegal and can lead to severe penalties.

🚫 Why This Practice Is Illegal

  1. Violation of Labor Law
    According to the Saudi Labor Law, the wage stated in the employment contract must be the actual wage paid to the employee. Any discrepancy is considered fraudulent and a violation of the employee’s rights.

  2. GOSI Fraud
    Reporting inflated salaries to the General Organization for Social Insurance (GOSI) while paying less is considered insurance fraud.

  3. ZATCA Non-Compliance
    Misreporting salaries can lead to tax evasion charges and incorrect zakat or tax filings, which are punishable under ZATCA regulations.

  4. Criminal Liability
    If discovered, such practices can result in:

    • Heavy financial penalties
    • Suspension of business licenses
    • Blacklistings from government contracts
    • Criminal prosecution for fraud

✅ Legal and Transparent Alternatives

If your company is facing financial constraints or trying to meet Saudization quotas, consider these legal alternatives:

1. Hire Part-Time Saudis Legally

Use the “Flexible Work” (Marn) platform approved by HRSD to hire Saudis on part-time or hourly contracts, which are fully compliant and count toward Saudization.

2. Use Government Support Programs

Leverage programs like:

  • Hafiz

  • Tamheer

  • HRDF wage subsidies

    These programs help subsidize Saudi salaries legally.

3. Adjust Contracts Transparently

If you need to reduce salaries, do so with employee consent and update the contract officially through the Qiwa platform.

4. Outsource Through Licensed Providers

Use licensed outsourcing or labor supply companies that can provide Saudi employees under legal arrangements.

📌 Best Practices for Audit-Proof Payroll

  • Always pay salaries through bank transfers (WPS-compliant).
  • Ensure the contracted salary matches the actual payment.
  • Maintain accurate payroll records and GOSI declarations.
  • Avoid any cash transactions related to salary adjustments.

🛡️ Conclusion

Attempting to manipulate salary structures to reduce costs or meet quotas may seem tempting, but it exposes your company to serious legal and financial risks. The best approach is to operate transparently, leverage government support, and consult with legal or tax professionals to ensure full compliance.


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