What does Saudi labor law termination of contract by employer actually allow, and when can a worker claim compensation?
Saudi labor law termination of contract by employer is allowed only for a valid reason, and in most cases only after written notice. If an employer ends the contract without a valid reason, the worker can claim compensation under Article 77 of the Labor Law. If the employer relies on one of the cases listed in Article 80, it may end the contract without notice, end-of-service award or compensation, but only after giving the worker a chance to state his objections.
This guide follows the official text of the Labor Law. It explains how a contract ends, what notice an employer must give, the nine cases in Article 80, how compensation is calculated, what the worker still receives, and how to bring a claim.
Has your employer ended your contract and you are not sure whether it was lawful? You can send a short summary on WhatsApp and the Al-Safwa Law Firm team will review the contract, the termination letter and the dates in confidence before you take any step.
Table of Contents
Saudi labor law termination of contract by employer at a glance
| Situation | What the Labor Law says | Likely result |
|---|---|---|
| Indefinite contract, valid reason, written notice given | Article 75: the reason is stated in a written notice served before the termination date | Lawful termination; the worker still receives his dues |
| Valid reason, but notice not observed | Article 76: compensation equal to the worker’s pay for the notice period | Notice pay is owed |
| No valid reason | Article 77: compensation set by the contract, or the statutory formula | Compensation is owed |
| One of the Article 80 cases is proven | The contract may end without award, notice or compensation, after the worker is heard | No notice pay or compensation |
When can an employer end an employment contract in Saudi Arabia?
An employer cannot end a contract simply because it wishes to. Article 74 lists the cases in which an employment contract ends. They include:
- mutual agreement, with the worker’s consent in writing;
- expiry of a fixed term, unless the contract is renewed under the Law;
- the will of one party in an indefinite-term contract, under Article 75;
- the worker reaching retirement age under the Social Insurance Law, unless the parties agree to continue;
- force majeure;
- permanent closure of the establishment;
- the end of the line of business the worker was hired for, unless the parties agreed otherwise.
For an indefinite-term contract, the employer needs a valid reason and must follow the notice rules below. For a fixed-term contract, ending it early without an Article 80 case is a termination without a valid reason, which brings Article 77 into play. Our guide to Article 75 of the Saudi Labor Law explains the indefinite-term rule in more detail.
What notice must the employer give?
Under Article 75, the party ending an indefinite-term contract must state the valid reason in a written notice served on the other party before the termination date. The minimum notice period is:
- 60 days if the worker’s wage is paid monthly;
- 30 days if the wage is paid on any other basis.
If the employer does not observe the notice period, Article 76 requires it to pay the worker compensation equal to his pay for the notice period. The parties may agree on a higher amount. In addition, Article 78 gives the worker paid time to look for another job after the employer’s notice: one full day or eight hours a week, chosen by the worker with one day’s advance notice to the employer.
Which reasons let an employer end the contract without notice or compensation?
Article 80 is the main exception. An employer may end the contract without giving the worker an end-of-service award, advance notice or compensation only in the nine cases below, and only after the worker has been given a chance to state the reasons for his objection.
| No. | Case in Article 80 (in plain words) |
|---|---|
| 1 | The worker assaults the employer, the manager in charge or a superior, during or because of work |
| 2 | The worker fails to perform essential contractual duties, disobeys lawful orders, or deliberately ignores safety instructions despite written warnings |
| 3 | Misconduct or an act against honesty or integrity is established |
| 4 | The worker deliberately causes material loss, and the employer reports it to the authorities within 24 hours of learning of it |
| 5 | Forgery to obtain the job is established |
| 6 | The worker is still in the probation period |
| 7 | Absence without a valid reason for more than 30 days in one contract year, or more than 15 consecutive days, after written warnings |
| 8 | The worker unlawfully uses his position for personal gain |
| 9 | Disclosure of trade secrets is established |
Saudi labor law termination of contract by employer without notice is narrow: the employer must prove one of the nine cases. A vague reason such as “restructuring” or “poor fit” is not one of them. If the employer cannot prove the case it relies on, the worker can argue that the termination had no valid reason and claim under Article 77. For a closer look, read our guide to Article 80 of the Saudi Labor Law.
Can an employer terminate a sick worker?
Article 82 says an employer may not end a contract because of illness before the worker has used the sick-leave period provided in Article 117. Ending the contract earlier on that ground is a strong basis for a claim. Each case depends on the medical reports and the dates, so keep every sick-leave document.
How much compensation is due for termination without a valid reason?
Under Saudi labor law termination of contract by employer without a valid reason is compensated under Article 77. If the contract itself sets a specific compensation for this case, that amount applies. Otherwise the Law sets the following:
| Contract type | Compensation under Article 77 |
|---|---|
| Indefinite term | Fifteen days’ wage for each year of the worker’s employment |
| Fixed term | The wage for the rest of the contract term |
| Minimum in both cases | Not less than two months’ wage |
As an illustration only, a worker on an indefinite contract with six years of service and a monthly wage of SAR 8,000 would be looking at about SAR 24,000 under the statutory formula (six years at half a month’s wage each), before any other dues. Real figures depend on the contract and on how the wage is calculated. Our guide to Article 77 of the Saudi Labor Law goes through the formula step by step.
What else is the worker entitled to when the employer ends the contract?
Compensation under Article 77 is only one part of the final settlement. Depending on the case, the worker may also be owed:
- End-of-service award (Article 84): half a month’s wage for each of the first five years and one month’s wage for each year after that, based on the last wage, with partial years calculated pro rata. It is not payable where the employer validly ends the contract under Article 80.
- Accrued leave pay (Article 111): wages for leave days earned but not used when the worker leaves the job.
- Notice pay (Article 76): if the employer did not give the required notice.
- Unpaid wages up to the last working day.
Under Article 88, when the employer ends the contract, wages and entitlements must be settled within one week at most. A late or partial settlement is itself a ground for a claim.
How do you challenge a Saudi labor law termination of contract by employer?
If you believe the termination was unlawful, the usual path is:
- Collect your documents. Keep the contract, the termination letter or message, payslips, warnings, investigation records and any messages about the reason.
- Start the amicable settlement stage. The Ministry of Human Resources and Social Development (HRSD) describes friendly settlement as the first stage of a labor dispute. You file an electronic request with the settlement office for the city of your last workplace, and the service is free.
- Go to the labor court if no settlement is reached. Under the settlement rules, the first session is set within 10 working days of registration, and the settlement period is 21 working days from the first attendance, after which the case is referred to the labor court. Our guide to the labour court in Saudi Arabia explains the next stage.
Do not wait. Article 234 of the Labor Law bars labor court claims for rights under the Law after twelve months from the end of the employment relationship, unless the court accepts the claimant’s excuse or the defendant acknowledges the right. The same article provides that labor cases are heard on an urgent basis. If you want the filing steps in detail, see our guide to labour complaints in Saudi Arabia. If both sides prefer to part ways without a dispute, a written agreement is a different route, covered in our guide to termination of an employment contract in Saudi Arabia.
How can an employer stay within the law?
Employers reduce risk in any Saudi labor law termination of contract by employer when they follow a clear sequence:
- identify the legal basis first: Article 75 with notice, or one of the nine Article 80 cases;
- give the reason in writing and observe the 60-day or 30-day notice period;
- let the worker state his objections before relying on Article 80;
- keep written warnings, attendance records and investigation reports;
- settle wages and entitlements within one week of the termination.
Employers who need help preparing a termination file can speak to a labour lawyer in Jeddah before sending the notice.
Frequently Asked Questions about Saudi labor law termination of contract by employer
Can an employer end my contract without giving a reason?
No. For an indefinite-term contract, Article 75 requires a valid reason stated in a written notice. An employer that ends the contract without a valid reason can be required to pay compensation under Article 77.
How much notice must an employer give under Saudi labor law?
At least 60 days if the wage is paid monthly, and at least 30 days if it is paid on another basis. If the employer does not give the notice, Article 76 requires payment equal to the worker’s pay for the notice period.
Can I be dismissed during the probation period?
Yes. Article 80 lists the worker still being in the probation period among the cases in which the employer may end the contract without an award, notice or compensation. The worker must still be given a chance to state his objections.
Do I still get an end-of-service award if I am dismissed?
In general, yes. Article 84 gives the award on the end of the employment relationship. The exception is a valid termination under Article 80, which is without an end-of-service award.
How long do I have to file a claim after termination?
Article 234 sets twelve months from the end of the employment relationship for claims before the labor courts, unless the court accepts an excuse or the employer acknowledges the right. It is safer to act as soon as possible.
Can an employer terminate a worker because of illness?
Not before the worker has used the sick-leave period in Article 117. Article 82 prohibits ending the contract on that ground earlier.
This guide covered Saudi labor law termination of contract by employer from the worker’s and the employer’s sides: valid reasons, notice, the Article 80 cases, compensation and the claim route. If you have a real situation, contact us through the WhatsApp button at the bottom of the screen.
Sources:
- Labor Law (English text) – Ministry of Human Resources and Social Development
- Labor Law – Bureau of Experts at the Council of Ministers (Arabic)
- Friendly Settlement for Labor Disputes – Ministry of Human Resources and Social Development
- Article 234 and the claim period – Ministry of Human Resources and Social Development (Arabic)
A legal advisor holding a Bachelor’s degree in Law from the prestigious Cairo University. He possesses extensive experience spanning over 25 years in criminal, civil, and family law, during which he has achieved notable accomplishments that have solidified his reputation as a valuable asset to any legal team
