The King also ordered two months extra salary be paid to frontline military personnel taking part in Saudi-led operations in Yemen.
In September Saudi Arabia cut ministers' salaries by 20% and scaled back financial perks for public sector employees in one of the energy-rich kingdom's most drastic measures to save money at a time of low oil prices.
The decree said the cuts had come as a response to the sharp drop in the price of oil, which sank to a low of around $28 past year.
The price of oil has since risen to about $52 a barrel and ministers said budgetary performance had been better than expected in the first quarter of this year.
"The government has conducted a review of the measures initiated in the fall in relation to the public-sector employees' allowances".
Alsheikh and other key officials highlighted trends pointing to economic recovery.
Salaries and allowances accounted for 45 per cent of government spending in 2015 or $128 billion and contributed to a record budget deficit of $98 billion, reports the BBC.
"We believe this move will boost positive sentiment as domestic demand recovers on the back of enhanced government employees' disposable income", said Alsheikh.
Prince Khaled bin Salman, an F-15 pilot who has trained in the United States, was made ambassador to Washington.
Prince Abdulaziz Bin Salman was named the Kingdom's new minister of state for energy affairs.
Prince Khalid replaced Prince Abdullah Bin Faisal Al-Saud atop the Kingdom's mission in the U.S. As the king's son, the prince has a direct line to the Saudi monarch.
The king fired his civil service minister and put him under investigation for abuse of office.
According to a written statement from the Royal Court, two sons of King Slaman were appointed to senior posts through the decrees. The kingdom's anti-corruption body Nazaha concluded the minister had hired his son in a post for which he was unqualified.