Article 74 Saudi Labor Law protects both employers and employees by setting clear rules on how and when employment contracts can be ended. One of the most important legal references for this process is Article 74, which outlines legitimate, non-disciplinary reasons for contract termination.
Unlike terminations that result from violations or misconduct (such as those under Article 80), Article 74 focuses on mutual agreement, contract completion, and circumstances beyond contro
This guide will walk you through the full meaning of Article 74, its applications, benefits, and what every employee and employer in the Kingdom should know.
What is Article 74 Saudi Labor Law?
Article 74 lists the legal reasons an employment contract can be terminated without fault from either party. These are not considered dismissals for poor performance or behavior, but rather administrative or agreed-upon exits.
Here’s a simplified list of the seven legal grounds under Article 74:
- Mutual agreement between employer and employee.
- Expiration of a fixed-term contract without renewal.
- Employee’s resignation (with proper notice).
- Force majeure (unforeseen events making continuation impossible).
- Retirement as per the official retirement age.
- Company or role closure due to organizational needs.
- Any other legal cause specified in the contract or approved by the MHRSD.
In-Depth Explanation of Each Point
1. Mutual Agreement
When both the employer and employee agree to end the contract, it becomes a legal termination. No party can demand continuation or compensation (unless agreed upon).
Tip: Always put this agreement in writing, signed by both parties.
2. Contract Expiration
If an employee is hired on a fixed-term contract, it automatically ends once the period is over — unless both sides choose to renew.
If the contract continues without renewal, it may turn into an open-ended contract.
3. Resignation by the Employee
Employees have the right to resign at any time, provided they give the proper notice period (usually 30 or 60 days depending on the contract type).
If no notice is given, the employer may deduct pay equal to the notice period.
4. Force Majeure or External Circumstances
Unexpected events (like pandemics, war, fire, or government closures) that make it impossible to continue the job can legally end the contract under this provision.
This clause protects both parties from legal claims in situations beyond control.
5. Retirement Age
In Saudi Arabia, the official retirement age is:60 for men
55 for women (unless otherwise agreed in the contract)
When an employee reaches this age, the employer can legally end the contract under Article 74.
6. Company Closure or Role Elimination
If a business closes or a position is no longer needed due to restructuring, the employer can legally terminate the contract.
- The employer must justify the closure and provide written proof if required by labor authorities.
- Other Legal Causes
If there are special terms in the contract (approved by the Ministry of Human Resources and Social Development), those can also be used to end the employment legally.
End of Service Benefits (ESB) Under Article 74
If your contract ends under Article 74 Saudi Labor Law, you are entitled to receive your End-of-Service Benefits, unless you resigned voluntarily with less than 2 years of service.
Here’s a quick breakdown of ESB:
| Years of Service | ESB Entitlement |
| Less than 2 years | Partial or none |
| 2 – 5 years | One-third of ESB |
| 5 – 10 years | Two-thirds of ESB |
| 10+ years | Full ESB (½ month salary per year for first 5 years + full month per year after that) |
Note: Benefits should be paid within 7 days after the contract ends.
Required Legal Process for Termination
Even if Article 74 applies, the termination must follow legal procedures:
- Written termination letter with reason cited under Article 74.
- Notice period (30–60 days) must be respected.
- Final settlement including:
- Last salary
- End-of-service pay
- Any unpaid leave balance
- Repatriation costs (if applicable)
- Last salary
Real Example Scenarios
Case 1:
An engineer is hired on a 2-year contract. At the end of the period, both parties do not renew. This is a legal end under Article 74(2).
Case 2:
A secretary resigns with a 30-day notice as per contract. The employer accepts. This falls under Article 74(3).
Case 3:
A restaurant closes permanently due to losses. The staff are terminated under Article 74(6).
Employee Rights – What to Do if Terminated Under Article 74
- Check your termination letter: Ensure Article 74 Saudi Labor Law is mentioned.
- Review your contract: Make sure the process followed matches legal requirements.
- Ask for your final settlement: Including ESB and all dues.
- File a labor complaint through the MHRSD (وزارة الموارد البشرية والتنمية الاجتماعية) if you are not paid fairly.
Final Thoughts
Article 74 Saudi Labor Law offers a fair and non-punitive framework to end employment in Saudi Arabia. It ensures that both parties can separate professionally, without needing to accuse each other of misconduct or poor performance.
Whether you’re an employer managing restructuring or an employee finishing a contract term, understanding Article 74 helps you ensure legal compliance and preserve your rights.
