Overtime pay in Saudi Arabia: formula + 3 examples

Overtime in Saudi Arabia is calculated with the formula in Article 107 of the Labor Law: the employee's actual hourly wage plus 50% of the basic hourly wage. An employee with a basic salary of SAR 4,000 and SAR 1,400 in allowances earns about SAR 30.83 for each overtime hour, or SAR 616.67 for 20 hours in a month. Overtime is every hour beyond 8 a day or 48 a week, depending on which standard your business uses, and every hour worked on official holidays and Eid is overtime. Below is the formula step by step, three examples in riyals, and the two most common mistakes.

How do I calculate overtime pay for my employee?

Article 107 of the Labor Law (the version published by the Ministry of Human Resources and Social Development) requires the employer to pay for overtime hours a wage equal to the hourly wage plus 50% of the basic wage. So the formula has two parts: the full hourly wage, then half of the basic hourly wage on top. In practice there are four steps:

1. Identify the actual wage and the basic wage: Article 2 of the law defines the actual wage as the basic wage plus all other increments due, such as housing and transport allowances. The basic wage is the amount fixed in the contract, without allowances.
2. Convert the monthly wage into an hourly wage: the common method divides the monthly wage by 30 days and then by 8 hours, which means dividing by 240 hours. If your contract or your internal work regulations set another basis, follow it.
3. Calculate the overtime hourly rate: actual hourly wage + (basic hourly wage × 0.5).
4. Multiply by the number of overtime hours: after you count them precisely under the daily or weekly standard, as explained in the next section.

Since its amendment by Royal Decree M/44 dated 8/2/1446 AH, the same article also allows the employer to give paid compensatory leave days instead of overtime pay, provided the employee agrees. The Implementing Regulations set out the details.

Which hours count as overtime?

Before you calculate anything, you need to know which hours count as overtime at all. Articles 98, 101, 102 and 107 set the framework:

Under Article 102, breaks for rest, prayer and meals are not part of actual working hours, so do not count them. Article 101 also says an employee may not work more than 5 consecutive hours without a break of at least half an hour, and may not stay at the workplace for more than 12 hours a day. An employee present from 8 am to 7 pm with a one-hour lunch has worked 10 actual hours, two of them overtime under the daily standard.

Examples in riyals: three common cases

Example 1: 20 overtime hours in a month

Basic salary SAR 4,000, housing allowance SAR 1,000 and transport allowance SAR 400, so the actual wage is SAR 5,400. Actual hourly wage: 5,400 ÷ 240 = SAR 22.50. Basic hourly wage: 4,000 ÷ 240 = SAR 16.67, and half of it is SAR 8.33. Overtime hourly rate: 22.50 + 8.33 = SAR 30.83. For 20 hours: SAR 616.67.

Example 2: an irregular week, and the gap between the two standards

The same employee worked 10, 10, 7, 7, 8 and 6 hours in one week, 48 hours in total. If your business uses the daily standard, he has 4 overtime hours (two on each of the first two days), worth SAR 123.33. If it uses the weekly standard, there is no overtime, because the total did not exceed 48 hours. So set the standard in writing and tell your staff before a dispute starts.

Example 3: working on an Eid holiday

You ask the employee to work 6 hours on one of the Eid holiday days to prepare orders. Under paragraph 3 of Article 107, all of these hours are overtime, so he is owed 6 × 30.83 = SAR 185, or a compensatory leave day instead if he agrees.

What mistakes make the calculation wrong?

• Multiplying the actual wage by 1.5: in Example 1 this gives SAR 33.75 an hour and SAR 675 for 20 hours, SAR 58.33 more each month per employee than the law requires. With 10 employees the gap reaches about SAR 7,000 a year.
• Multiplying the basic wage alone by 1.5: this gives SAR 25 an hour and SAR 500 for 20 hours, SAR 116.67 less than the employee is owed. This is the mistake that turns into a complaint.
• Counting break time: lunch and prayer breaks are not actual working hours, so they stay out of the total.
• Not recording hours: if hours are not logged day by day, at the end of the month you rely on memory, and it is your word against the employee's.

In the exceptional cases listed in Article 106, such as the annual stock count, closing the accounts and unusual work pressure, actual working hours may not exceed 10 a day or 60 a week, and stock count and closing work itself may not exceed 30 days a year. The minister sets the annual cap on overtime hours by decision, so check it in the Implementing Regulations before planning a long busy season.

How do I record overtime from my phone instead of Excel?

For a small business the hard part is not the formula; it is recording the hour on the day it happens. In Excel a supervisor writes it down late or forgets it, and payroll ends up based on estimates.

In Fahim's HR and payroll software, overtime is recorded as it happens from WhatsApp with an ordinary message such as "Ahmed worked two extra hours today after his shift". The manager approves it with a reply, and it feeds the payroll run directly alongside allowances, absences and advances. If you agree with an employee on compensatory leave, the leave request and its approval also go through WhatsApp. Permissions keep payroll data visible only to the people it concerns. If you are also working out what is owed when a contract ends, see how to calculate the end-of-service benefit.

Frequently asked questions

Is overtime calculated on the basic salary or the full salary?

On both. Article 107 sets overtime pay as the hourly wage plus 50% of the basic wage, so the first part uses the actual wage including allowances and only the premium uses the basic wage. That is why multiplying either the total or the basic salary alone by 1.5 is wrong.

Can I give the employee leave instead of paying overtime?

Yes. Since Article 107 was amended by Royal Decree M/44, paid compensatory leave days can replace overtime pay. The condition is the employee's consent, so you cannot impose it. Document that consent in writing, even as a message.

Does a manager get overtime for staying late?

Article 108 exempts from the working-hours rules people in senior management positions who hold the employer's authority over workers. So a general manager or a branch manager with real authority may not be subject to the 8-hour limit. A supervisor without that authority is treated like any other employee, and in unclear cases you should consult a specialist.

How many overtime hours can an employee work in a day?

In the exceptional cases listed in Article 106, total actual working hours may not exceed 10 a day or 60 a week. In all cases, Article 101 says the employee may not stay at the workplace for more than 12 hours a day. The annual cap is set by ministerial decision, so check it on the ministry's website.