Salary deduction rules in Saudi Labor Law

Article 67 to Article 73 of Saudi Labor Law covers disciplinary rules which include the provisions related to salary deduction and imposing fines on employees. Here are the details;

6 cases when salary deduction is allowed

An employer cannot deduct salary or impose a fine for an act committed outside the workplace unless it is related to the work, the behavior with other employees, or the employer as per Article 70 of Saudi Labor Law.

The Human Rights Commission in Saudi Arabia has clarified six scenarios in which the employer has the right to deduct the salary of his employee without his approval.

1. To recover the employer’s loans with a maximum deduction of 10% of monthly wages.
2. GOSI contribution for Saudis.
3. Workers who contributed to the saving funds and loans owed to the fund.
4. If the employee owes any funds to the employer.
5. Fine imposed for the damage caused by the employee.
6. Fulfillment of the debt in fulfilling any judicial ruling with a maximum deduction of 25% of monthly wages.

Types of Penalties in Saudi Labor Law

Saudi Labor Law allows an employer to apply the following 6 types of disciplinary penalties on workers as per Article 66.

1. Warning letters.
2. Fine i.e. Salary deduction.
3. Deduction of an allowance.
4. Postponing the promotion.
5. Suspension of work.
6. Dismissal under Article 80 of Saudi Labor Law.

Timing for Salary deduction

The employer can take disciplinary action against an employee within 30 days of the discovery of an offense. There can be no action or salary deduction after 30 days of discovery as per Article 69.

Amount of Salary deduction

• The amount of salary deduction, suspension of work, penalty, or fine cannot exceed 5 days wage of a worker as per Article 70 of Saudi Labor Law. Moreover, in this case, the employer needs to document the allegation letter and employee defense.
• In the case of a minor violation where verbal interrogation is made, the amount of salary deduction cannot be more than 1 day as per Article 71.

The employer cannot impose a penalty on a worker more than once for the same violation or offense as per Article 70.

The amount of penalty or salary deduction will not be increased if the worker has repeated the same offense after 180 days as per Article 68 of Saudi Labor Law.

The procedure to impose fine

• The employer will notify the worker in writing about the allegations made against the employee as per Article 71.
• The employee should be given a fair chance to defend his case and the record must be kept in his file as per Article 71.
• The worker shall be notified in writing of the decision of imposing the penalty on him as per Article 72.
• The worker may object to the decision of salary deduction within 15 days to the labor office as per Article 72.

It is worth mentioning that during special circumstances such as coronavirus pandemic, the government introduced Article 41 in the Saudi Labor Law which allowed a 40% salary deduction for a period of 6 months.