A Look Back at 2025: Regulatory Shifts & Macro Trends Shaping Saudi’s Business Landscape

Explore Saudi Arabia’s 2025 economic milestones, labor reforms, Saudization expansion, and what investors should expect as the Kingdom moves into 2026.

2025 was a year characterized by resilient economic growth, sweeping regulatory updates, and a significant rise in foreign investor interest across nearly every sector of the economy. Commercial registrations and regional headquarters (RHQs) hit major milestones, while investment into non-oil activities rose to record highs.

As we progress into 2026, it is essential to examine the defining shifts of the past year and assess what lies ahead for investors and operators in the Kingdom.

2025’s Defining Shifts: Employment Regulation and Workforce Reform

Labor Law Amendments

2025 brought key updates to Saudi employment regulations, reinforcing the Kingdom’s commitment to fair, transparent, and merit-based labor practices. One of the most notable updates requires employers to clearly stipulate salary payment dates in all contracts registered on Qiwa. Employees now have the right to claim unpaid wages directly through Qiwa within 30 days of the due date.

Moreover, employment contracts must separately itemize base salary and allowances, such as housing, transportation, and telecommunications, aligning Saudi practices more closely with regional standards in the UAE and other Gulf markets.

Under the Labor Law amendments, unveiled earlier last year, resignation procedures were also overhauled. Under the new frameworks, resignations are automatically accepted if employers fail to respond within 30 days.

Employers may delay acceptance for up to 60 days, but only with written justification. Employees are additionally granted the right to withdraw a resignation within seven days, provided it has not already been accepted.

Family-friendly policies expanded notably. Maternity leave increased from 10 to 12 weeks, paternity leave now allows three days to be taken within seven days of childbirth, and bereavement leave provides three days for the loss of immediate family members.

GOSI Contributions and Social Insurance Reform

Issued in 2024 and effective from July 2025, amendments to the Social Insurance Law introduced a new retirement system for new workforce entrants while modifying provisions for existing employees.

Under the revised framework, the statutory retirement age now ranges between 58 and 65, depending on the contributor’s age as of 3 July 2024. For those under the new system, the standard retirement age is set at 65. Early retirement remains possible up to 10 years earlier, provided the contributor has completed 360 months (30 years) of contributions.

The amendments also introduced a gradual increase in the contribution period required for early retirement, rising from 25 to 30 years.

Additionally, employee and employer contribution rates will each increase incrementally from 9% to 11% of contributory wages, rising by 0.5% annually from July 2025 through 2028.

Saudization Expansion: From Quotas to Precision Mandates

Beginning in October 2025, Saudization requirements expanded significantly across specific professions, particularly in healthcare (including pharmacy and dentistry), financial services (accounting), and engineering.

Further localization measures were introduced targeting the sports and fitness sector.

Effective from November 18, 2026, establishments with four or more employees must localize 15% of selected roles across 12 job categories in men’s and women’s sports centers and gyms. These include sports coach, professional football coach, personal trainer, athletics coach, and sports supervisor roles.

For foreign companies setting up in Saudi Arabia, Saudization planning must begin during the setup phase—not after operations commence.

Looking into 2026, companies should expect additional professions to receive defined quotas and stronger enforcement mechanisms and invest in workforce compliance and training programs for national employees.

Economic Milestones: Private Capital and FDI Momentum

2025 Half-Year FDI Performance

Saudi Arabia’s trade and economic corridors with the US, Asia, and Europe—its primary FDI source markets—continued to strengthen, reshaping long-term investment and FDI patterns. These corridors underpin the Kingdom’s ambition to raise private-sector contribution to GDP to 65% by 2030.

Government data show that net FDI inflows averaged around SAR 22.5 billion per quarter in H1 2025, with SAR 22.2 billion in Q1 (up 44% YoY) and SAR 22.8 billion in Q2 (up 15% YoY).

Equally significant was the sharp decline in FDI outflows, signaling increased capital retention within the Kingdom. Outflows fell to SAR 1.75 billion in Q1 (a 54% YoY decline) and SAR 2.1 billion in Q2, down 75% from Q2 2024.

This momentum culminated in Saudi Arabia ranking 13th globally in Kearney’s 2025 Foreign Direct Investment Confidence Index—its highest position to date.

A Surge in Business Expansion and Regional HQ Establishment

Saudi’s business landscape had an iconic moment in 2025. By Q3 of the same year, commercial registrations surpassed 1.7 million. Extrapolating the data, this reflects an average of 100,000 to 128,000 new business registrations each quarter.

This surge highlights that Saudi Arabia’s positioning is no longer viewed as merely an operational base but as a long-term core market for international companies, with LLC registrations reaching 502,000, a 158% increase since 2020.

More than 760 RHQ licenses had been issued by 2025, with expectations for the number to surpass 1,000 within a few years.

On average, 10–12 multinational companies establish regional headquarters in the Kingdom each month, reinforcing Saudi Arabia’s role as the MENA region’s leading command center for global businesses.