Saudi Arabia: Termination of Employment | iGlobal Law

To ensure legal compliance and avoid disputes, employers must be aware of the following key provisions of Saudi labour law that governs the terminations of employment.

Contract Termination Without Misconduct

Article 74: Lawful Termination by Agreement or Natural Expiry

Article 74 outlines various legitimate reasons for ending an employment contract without assigning fault to either party. These include:

Mutual Consent: Termination through mutual written agreement.
Contract Expiry: Automatic termination upon reaching a pre-set end date without renewal.
Resignation with Notice: Voluntary departure from an open-ended contract, provided legal or contractual notice requirements are met.
Retirement: Reaching retirement age—60 for men, 55 for women—unless otherwise stated in the employment contract.
Force Majeure: Situations beyond the control of both parties, such as natural disasters or war.
Business Closure: Permanent cessation of the employer’s operations.

Terminations under Article 74 typically do not lead to legal consequences provided procedures are followed. However, compensation must be honoured if stipulated in the employment contract.

Article 77: Unilateral Termination and Compensation

Article 77 applies in cases where either the employer or employee chooses to terminate the employment relationship without a justified legal cause. This primarily covers open-ended contracts but can also apply to fixed-term contracts under certain conditions.

Compensation must be provided when unilateral termination occurs, calculated as:

The amount defined in the employment agreement; or
Fifteen days’ salary for each completed year of service (for open-ended contracts); or
The remaining salary due for the rest of the fixed-term contract.

Employers must also observe the statutory notice period (usually 60 days unless otherwise agreed) and issue written documentation explaining the rationale for termination.

Contract Termination Due to Misconduct

Article 80: Dismissal Due to Employee Misconduct

Article 80 permits employers to terminate an employee without severance or end-of-service benefits in serious cases, such as:

Repeated absenteeism without valid reason.
Proven dishonesty or gross misconduct at work.
Assaulting colleagues or superiors.
Misuse of position for personal gain.
Violation of job responsibilities.

These reasons must be substantiated with evidence, and employers cannot rely on Article 80 to penalise past behaviour that was previously tolerated. Any deviation from these specific criteria could result in reinstatement orders or compensation claims by the employee.

Article 81: Resignation Without Notice Due to Employer Misconduct

Article 81 grants employees the right to resign immediately and without notice if the employer breaches key contractual or legal obligations. Grounds for such resignations include:

Deception at the time of contract agreement.
Consistent failure to pay wages on time.
Physical or verbal abuse by the employer.
Unsafe or hazardous working conditions.
Being transferred to a role not agreed upon in the contract.

Employees must gather evidence such as complaints, wage records, or health documentation to support their claims. If these claims are validated, they retain the right to end-of-service benefits and avoid penalties associated with abrupt resignation.

Employer Obligations

Regardless of who initiates the end of the employment relationship, employers must observe procedural fairness. Failure to meet these obligations can expose employers to administrative fines or legal claims from the employee. Key obligations include:

Providing written notification or justifying immediate termination.
Issuing final settlements covering all owed wages and entitlements.
Delivering an experience certificate upon request.

Employers are advised to document all actions and maintain transparent communication with employees.

This is a high level general update only. Legal advice should be obtained on specific circumstances.