Achieving Compliance with GOSI Rules: Key Considerations for Global Businesses
An active GOSI certificate is a crucial part of a successful Saudi business expansion. The document provides proof of the company’s full compliance with Saudi Arabia’s labor laws.
As part of the 20-step Saudi market expansion roadmap, registering with the General Organization for Social Insurance (GOSI) and obtaining a certificate is a crucial area of compliance in the Kingdom.
A GOSI certificate, generated electronically via the Ministry's platform, is key to unlocking various business opportunities and maintaining the stability of business operations.
This foundational document provides a snapshot of the company's workforce, employment periods, base salaries, and total remuneration. It provides concrete proof of the company's full compliance with making social contribution payments toward its employees.
Against this backdrop, this article sheds light on how the contributions originate and the importance of adhering to GOSI regulations to streamline successful business operations.
Understanding Contributions to GOSI and Calculation Process
GOSI employs a contribution system where both employers and Saudi and non-Saudi employees participate. Maintaining a thorough understanding of the breakdown of these contributions and how they propagate is crucial for ensuring compliance.
Breakdown of GOSI Contributions
Annuities (for Saudi Employees)
- Employee Contribution: 9% of the employee's monthly wage.
- Employer Contribution: 9% of the employee's monthly wage.
Occupational Hazards (for all employees, Saudi and non-Saudi)
- Employee Contribution: 0% (fully covered by the employer).
- Employer Contribution: 2% of the employee's monthly wage.
Unemployment Insurance (SANED, for Saudi Employees)
- Employee Contribution: 0.75% of the employee's monthly wage.
- Employer Contribution: 0.75% of the employee's monthly wage.
Ensuring compliance with GOSI requirements is Paramount to Achieving Success in Saudi Arabia
For global businesses, a GOSI certificate remains a requirement to complete business undertakings and secure contracts for large-scale projects.
It ensures the company’s full compliance with the Ministry's frameworks and the Kingdom’s labor laws. Upon a company’s request, the GOSI certificate is updated. The certificate, which has a validity of 30 days, demonstrates that the company has paid its social insurance for its employees up to the specified date.
Noncompliance, on the other hand, leads to a cascade of operational hurdles for global businesses, impacting a company's ability to grasp lucrative market opportunities and its future financial performance.
Businesses that delay or refrain from making GOSI payments are denied the opportunity to obtain an updated GOSI certificate, which potentially leads to a 2% penalty on the invoice amount for late payments. Moreover, the government will withhold payments to the business unless an active GOSI certificate is provided.
Beyond the financial implications, noncompliance results in businesses being barred from bidding on government projects and obstacles in completing vendor registrations with government entities.
This can create severe cash flow issues, especially for businesses that are heavily reliant on government contracts or partnerships.
How Global Businesses Can Navigate GOSI Requirements
As Saudi Arabia continues to be home to an ever-growing number of international businesses, the importance of compliance with GOSI rules becomes more and more pronounced as the country solidifies a strong legal framework to safeguard the rights of the country’s workforce.
Leveraging the extensive expertise of its on-ground team in Riyadh, setup companies like AstroLabs help incoming global businesses effectively navigate the GOSI requirements.
In doing so, AstroLabs implements a comprehensive approach to facilitating GOSI compliance for global companies.
It encompasses sending reminders to global businesses, alerting them when monthly GOSI invoices are issued. In addition, it helps them validate that GOSI payments are reflected in the portal and ensures that all newly added employees are listed in the GOSI portal.
Paying GOSI obligations on time significantly eliminates the risk of late payments and associated penalties, allowing for smooth and efficient operations. This enables global businesses to establish a firm foundation for long-term growth in Saudi Arabia's ever-evolving market.
