Termination of employment in Saudi Arabia is governed by the Saudi Labor Law, which aims to ensure fairness and clarity for both employers and employees. Whether you’re a Saudi national or an expatriate, understanding the rules, rights, and procedures around termination is essential to avoid legal disputes and secure your benefits.
Types of Employment Contracts in Saudi Arabia
There are two main types of employment contracts in Saudi Arabia:
1. Fixed-Term Contracts
- Common for expatriates.
- Ends when the contract expires or the work permit (Iqama) ends.
- Can be terminated early:
- By mutual agreement.
- For a justified cause (as defined by Article 80).
- Upon expiration or non-renewal with proper notice.
- By mutual agreement.
2. Indefinite (Open-Term) Contracts
Mostly for Saudi and GCC nationals.
Can be terminated:By mutual consent.
By resignation or employer-initiated dismissal.
Due to force majeure, retirement, or business closure.
Legal Grounds for Termination of Employment in Saudi Arabia (Articles 74, 77, 80, 81)
1. Article 74 – Mutual and Natural Endings
Termination by agreement.
Contract expires or work is completed
Company closes down or specific department is shut.
Retirement or total disability.
2. Article 77 – Termination Without Cause
Allows either party to terminate for any reason, with notice.
Employer must pay compensation:
- 15 days’ wage per year of service (for indefinite contracts)
- Remaining salary for fixed contracts + potential damages.
3. Article 80 – Dismissal Without Notice
Employers can terminate immediately without paying end-of-service benefits if the employee:
- Commits dishonesty, theft, or fraud.
- Assaults a manager or co-worker.
- Is absent without valid reason (30 total or 15 consecutive days).
- Fails to perform duties despite warning.
- Discloses company secrets.
- Is proven guilty of workplace misconduct.
Note: The employer must give the employee a chance to explain before applying Article 80.
4. Article 81 – Resignation Without Notice
Employees can resign immediately (without losing benefits) if:
- They are assaulted or insulted at work.
- Employer fails to pay salaries.
- Unsafe work conditions exist.
- Employer assigns work outside the contract without consent.
- Abuse, threat, or injustice is proven.
Notice Periods
| Reason | Notice Required | Contract Type |
| Employer termination | 60 days | Indefinite |
| Employee resignation | 30 days | Indefinite |
| Mutual termination | None | Any |
| Article 80 or 81 | None | Any |
End of Service Benefits (EOSB)
Employees are entitled to a gratuity payment at the end of service:
- For the first 5 years: Half-month salary for each year.
- After 5 years: Full-month salary for each additional year.
- If terminated for misconduct (Art. 80): No EOSB.
- If resigned: Partial EOSB depending on length of service:
- Less than 2 years: No EOSB.
- 2–5 years: One-third of EOSB.
- 5–10 years: Two-thirds.
- Over 10 years: Full benefit.
- Less than 2 years: No EOSB.
Compensation for Unlawful Termination
If an employer unfairly dismisses an employee:
- Employee can file a claim with the Saudi Labor Court or Ministry of Human Resources (MHRSD).
Compensation may include
- Salary balance.
- End-of-service award.
- Damages (as per Article 77).
- Reinstatement or additional financial relief.
Procedure for Legal Termination
- Issuance of official termination of employment in Saudi Arabia letter.
- Clearance of dues – pending salary, unused leave, EOSB.
- Exit procedures for expatriates (including final exit visa).
- Transfer of sponsorship (if applicable).
- Update in GOSI and MHRSD systems.
Key Takeaways
- Termination must follow proper legal steps.
- Both employer and employee have rights and responsibilities.
- Unlawful dismissal can lead to compensation claims.
- Always keep written documentation during disputes.
- Understand your contract terms before signing or resigning.
Final Thoughts
Saudi Arabia’s Labor Law provides clear protections for both parties in the employment relationship. Whether you’re leaving your job voluntarily termination of employment in Saudi Arabia, or dealing with workplace issues, it’s crucial to understand your legal position and seek advice when needed. For serious disputes, approaching a labor lawyer or the Labor Dispute Committee can help protect your rights.
