Managing Payroll in Saudi Arabia: Accounting Advisory Solutions For Accuracy

In any firm with even the minimum staff count, payroll plays a crucial role not just in processing employees’ accurate salaries, but also maintaining several operations fulfilling the legislation and rules. The payroll management tasks may not seem challenging however in actual it is highly complex and time-consuming endeavor. This is where accounting advisory firms play a role, these firms eradicate the outdated standards of accounting and provides major contribution to streamline the payroll techniques. This blog covers the challenges encountered by businesses in Payroll processing and how the integration of payroll and accounting advisory firms transformed payroll management systems in Saudi Arabia.

The challenges faced by the Informal KSA’s payroll management system in early days

Before the discovery of oil in 1930’s there was no accounting compliance practices or payroll management in KSA, traders used simple methods of keeping ledgers for the track record of payrolls. Countless obstacles were faced with the manual handling of payrolls, such as the hand operated calculations were prone to human errors, they were quite time taking and lacked the standardization. Without a systematized method companies often faced issues in tracking the taxes and employees’ benefits, managing employees record and managing larger workforce. This informal paper-based task used to result in mostly breaking of legal laws, difficulty in getting historical data for auditing and increased security concerns and fraud ratio.  Moreover, the drawn-out techniques also limited the growth of commercial entities in KSA.

Key Payroll Compliance Requirements in Saudi Arabia

As the economy of Kingdom of Saudi Arabia Expanded after the discovery of oil in 1938, it required formal payroll management associations. Hence, in 1950 Ministry of Finance and the Saudi Arabian Monetary Authority (SAMA) came into being. SAMA came up with strict protocols that must be adhered by the companies for overseeing payroll systems in KSA.

Not just that, over the time Saudi Arab introduced numerous additional processes as the economy transformed, for country’s advancement and progression. Fundamentals to these processes included:

• Wage Protection System (WPS), for transparency and regular payments.
• The Saudi Labor Law which addresses overtime pay, minimum wage and End-of-Service Benefits (EOSB).
• General Organization for Social Insurance (GOSI) is another core component which enforces contributions from both employees and employers for social benefits.
• Saudization (the Nitagat program), this program also prioritizes the execution of international accounting standards.

Subsequently, Initiatives such as Vision 2030, the premier project of KSA was initiated which efforts toward development and growth of country without depending on their oil resources. It also focused on the enforcement of a proper payroll management; the Nitagat Program was also introduced by Vision 2030.

Following these laws and standards became challenging for the firms with outdated practices of payroll management as it requires legal accounting advisory solutions for accuracy. Furthermore, breaking these laws or in case of any negligence, reputational damage, compliance issues and penalties may be enforced.

How Accounting and Payroll together eradicated the hurdles in payroll management in Saudi Arabia?

Accounting and payroll go side by side, an accounting advisory firm operates taxes, penalties, financial planning, budgeting, payroll reconciliation, correct classification of employees, fraud detections, tax deductions, timely tax fillings, KPI tracking and designing retention and compensation packages for the employees. It manages all your payroll needs under one umbrella. This entire procedure is done with full expertise, efficient methods of operation and complete guidance company must hire an accounting advisory firm.

Establishment of accounting advisory firms in KSA vanished traditional bookkeeping methods which were prone to inaccuracies. In the current era, technology plays integral part in the management of any business process. When an accounting advisory firm is approached it not only manages payroll but makes sure to ease the financial processes by implementing the legal laws with right information and use efficient tools that makes the entire process faultless.

Why Hire an Accounting Advisory Firm? Key Advantages

The procedures in which accounting advisory firms facilitate support are,

·       Saudi Labor Laws and payroll tax optimization

The Saudi labour laws can be inflexible to follow as it pays attention to minor payroll issues, an advisory firm is responsible for ensuring that the company meets these legal obligations., not just that, it also looks after the matters related to the protection of wage, fixed working hours, overtime work hours payments, and the compensation packages for employees. These firms stay informed and updated with the contemporary changes in laws & regulations and requirements of Saudization.

Payroll tax management is yet another complex procedure which must require authorized advisors. It includes the proper implementation of payroll tax obligations, income tax for migrants, end of service benefits and Benefit fund contributions of Saudi Employees. These firms ensure that the withheld funds are supervised according to Multilateral agreements and the taxes are calculated appropriately and paid without any delay. They also benefit the company by guiding them about tax incentives offered by the government and minimizes tax accountability.

·       Executing well-Designed and planned payroll systems

As highlighted before, for a well executed payroll system technology holds significant worth. Accounting advisory firms emphasize on digitalization by transferring to automated payroll systems and using preferred payroll software. These software’s help in aligning the payroll systems with human resources, accounting services and other management platforms by creating a streamlined path. These digitalized architecture assists in tracking employee’s data, improves the accuracy of payroll and provides payroll reports that are beneficial in auditing.

Apart from that an accounting advisory firm also contributes in Workforce diversity, and benefits of hiring Saudi national over oversees workers, it forms compensation packages that attract Saudi national employees. This eliminates the obstacles that a company face to follow the Saudization Policy which has increased the business opportunities in Saudi Arabia yet it mandates enterprises to fulfill specific targets like Saudi citizen recruitment limits.

·       Supervising End-of-Service Benefits (EOSB) and Modified payroll reporting

Supervising EOSB is one of the major benefits of hiring an accounting advisory firm, it controls and calculates the severance pay that a company allocate when an employ leaves or is terminated from the organization. All the other factors that EOSB includes like the service duration, salary and the reason of termination is also managed and calculated by advisory firms according to the legal Saudi Labor laws.

Additionally, these firms provide a customized payroll report with the data of payroll cost, Key performance indicators (KPI’s) and operational efficiency of employees. This helps in cost monitoring, budgeting and workforce optimization.

Why Outsource Payroll Management to SS&co?

We know what it takes to develop a streamline payroll system that fosters your business growth. Our team of experts not just guarantees adherence and reduces the risk of penalties but also provides accurate and timely payroll processing. We adapt advanced security measures and robust technology which is the need of the modern day. When you put your trust in SS&co KSA. it becomes our utmost priority to thoroughly manage your payroll system. Hence, making it easier for your ongoing team to concentrate on alternate core business functions without fretting about payroll duties. Teaming up with us allows you to enhance productivity, alleviate risks and aims at moving your business forward. Meeting your expectations is our foremost goal!.