How does the termination of employment contract in Saudi Arabia work when both sides agree to part ways?
Termination of employment contract in Saudi Arabia by mutual agreement is one of the grounds listed in Article 74 of the Labor Law, and it requires the worker’s consent in writing. Unlike a resignation or a dismissal, it ends the contract on a date the two parties choose, so the agreement itself decides the date, the amounts and the payment deadline. A badly drafted agreement can leave the worker without clear rights, and it can leave the employer facing a claim later.
This guide covers termination of employment contract in Saudi Arabia by agreement only: what makes the agreement valid, what the worker should still receive, which clauses to include, and how disputes arise. For dismissal by the employer, see our guide to employer termination and compensation under the Labor Law.
Have you been offered an agreement to end your contract and are not sure what you are signing? You can send a short summary on WhatsApp and the Al-Safwa Law Firm team will review the draft, your dues and the dates in confidence before you sign.
Table of Contents
Termination of employment contract in Saudi Arabia at a glance
| Question | Short answer |
|---|---|
| Legal basis | Article 74: the parties agree to end the contract, and the worker’s consent is in writing |
| Who decides the end date? | The two parties, in the written agreement |
| Is it a resignation? | No. It is a separate ground, so the wording matters |
| Is notice required? | The Article 75 notice rules concern ending an indefinite contract by one party; a mutual agreement sets its own end date |
| What should the worker still receive? | Wages up to the last day, the end-of-service award, accrued leave pay and any agreed extra amount |
What is the legal basis for ending a contract by agreement?
Article 74 lists the cases in which an employment contract ends. The first is the agreement of both parties to end it, provided the worker’s consent is in writing. The other cases include expiry of a fixed term, the will of one party in an indefinite-term contract under Article 75, retirement age, force majeure, permanent closure of the establishment and the end of the work the worker was hired for. Our guide to Article 74 of the Saudi Labor Law explains each case.
When is an agreement to end the contract valid?
For a termination of employment contract in Saudi Arabia by agreement to be valid, the Law requires the worker’s written consent. In practice, a sound agreement also states:
- clear consent from both the worker and the employer;
- the employment contract being ended and its date;
- the last day of the employment relationship, and whether the worker keeps working until then or is released from attendance;
- each financial right and how it is calculated;
- the payment date and the payment method;
- how company property and files will be returned;
- the signatures of both parties and a signed copy for each.
An agreement that leaves the end date open, or mentions only a lump sum without any breakdown, is the usual source of later disputes.
Is termination by mutual agreement the same as resignation?
No. A resignation is the worker’s own decision, and the Law attaches specific consequences to it, including a reduced end-of-service award in some cases under Article 85. Termination by agreement is a different ground under Article 74. That is why you should be careful with any form that records the end of the contract as a resignation when you actually agreed a mutual exit. Our guide to resignation under the Saudi Labor Law explains the resignation rules.
| Way of ending the contract | Who decides | Main point to check |
|---|---|---|
| Mutual agreement | Both parties, worker’s consent in writing | Date, amounts and payment terms in the agreement |
| Resignation | The worker | Notice rules and the effect on the end-of-service award |
| Expiry of a fixed term | The contract itself | Whether the contract was renewed under the Law |
| Dismissal by the employer | The employer | Valid reason, notice and possible compensation |
What rights does the worker keep in a termination of employment contract in Saudi Arabia by agreement?
The agreement should cover each of the following, and should state the amount of each:
- Wages up to the last day. Everything earned until the agreed end date.
- End-of-service award. Article 84 sets the award at 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. You can estimate it with our end-of-service calculator or read our guide to end-of-service benefits.
- Accrued leave pay. Under Article 111, the worker is entitled to wages for accrued leave days if he leaves without using them.
- Any extra amount agreed for the exit. This is a matter of agreement, so it should be written as a separate line.
- Experience certificate and documents. Under Article 64, the employer must give the worker, on request and free of charge, a certificate stating the start and end dates, the profession and the last wage, without remarks that harm his reputation or job prospects. It must also return any certificates or documents the worker deposited. See our guide to the experience certificate in Saudi Arabia.
Commissions, incentives and allowances should also be listed if the contract or policy gives the worker a right to them.
When must the employer pay the dues?
Article 88 sets settlement deadlines for two situations: a maximum of one week when the employer ends the contract, and two weeks when the worker ends it. A mutual agreement is neither, so do not leave the payment date open. Write the exact date and the payment method into the agreement, and keep the date short. If the employer does not pay on that date, the worker can bring a claim for the unpaid amount.
Which clauses should the agreement include?
| Clause | What it should say |
|---|---|
| Parties and contract | Names, ID or residence numbers, the employer’s details, and the date and type of the employment contract |
| Written consent | A clear statement that both parties agree to end the contract and that the worker’s consent is given in writing and freely |
| End date | The last working day, and whether the worker keeps working or is released |
| Financial settlement | A separate figure for wages, end-of-service award, leave pay, commissions and any extra amount, with the total |
| Payment | The date, the method and the bank account |
| Handover | Devices, files, keys and documents, with a handover record |
| Certificate | Delivery of the experience certificate and return of the worker’s documents |
| Copies | Each party keeps a signed copy |
Does the agreement waive the worker’s rights?
It should not be drafted that way. Article 8 of the Labor Law makes contract terms that conflict with the Law null and void, and a release of the worker’s statutory rights during the contract is ineffective unless it is more favourable to him. A signed paper is also not proof that money was paid. Before signing a receipt, check that every amount listed has actually been transferred. If the worker signs a general release, he should make sure it matches the real payments.
Can the parties end the contract during probation?
Probation has its own rule. Under Article 53, probation must be expressly stated in the contract and may last up to 90 days, not counting the Eid holidays and sick leave. A written agreement can extend it, but the total may not exceed 180 days. During probation either party may end the contract, unless the contract gives that right to only one party. If the exit happens after probation has ended, the mutual agreement rules above apply, and it is safer to record the end date and the dues in writing even if the discussion started during the probation period.
What about the Qiwa record and the non-compete clause?
If the contract is registered electronically, the termination reason entered on Qiwa should match the signed agreement. The Ministry’s service for ending the contractual relationship lets the worker choose a termination reason and a termination date, so a mismatch between the platform and the paper can create a dispute later.
A non-compete clause does not disappear automatically. Under Article 83, it is valid only if the job gives the worker access to the employer’s clients, it is in writing, it specifies time, place and type of work, and it does not exceed two years from the end of the relationship. A vague or unlimited clause should be questioned before signing.
When does a mutual agreement become a dispute?
Typical disputes include a worker saying he did not give genuine written consent, or signed under pressure, a mismatch between the recorded reason and the signed paper, disagreement over the wage used to calculate the award, and an employer that did not pay the extra amount promised for the exit. When a termination of employment contract in Saudi Arabia ends in a dispute like this, the claim starts with the amicable settlement stage, and Article 234 sets twelve months from the end of the employment relationship for labor court claims. Our guide to labour complaints in Saudi Arabia explains how to file.
If the agreement is complicated, a labour lawyer in Jeddah can review or draft it before either side signs.
Frequently Asked Questions about termination of employment contract in Saudi Arabia
Can a contract be ended by agreement in Saudi Arabia?
Yes. Article 74 lists the agreement of the parties as a ground for ending the contract, provided the worker’s consent is in writing.
Is a verbal agreement enough?
No. The worker’s consent must be in writing. A verbal understanding is difficult to prove and should be recorded in a signed document.
Do I still get an end-of-service award if we agree to part ways?
Article 84 gives the end-of-service award when the employment relationship ends. The agreement should state the amount and how it was calculated, and it should not record the exit as a resignation if that is not what was agreed.
Do I need to give notice before a mutual termination?
The notice periods in Article 75 concern ending an indefinite-term contract by one party. In a mutual agreement, the parties agree the end date in writing.
Can the employer refuse to give me an experience certificate?
No. Under Article 64, the employer must issue the certificate on request and free of charge, with the start and end dates, the profession and the last wage.
What if the employer does not pay after we sign?
Keep the signed agreement, the payment details and any messages. The claim then goes through the amicable settlement stage and, if needed, the labor court, within the twelve-month period in Article 234.
This guide covered termination of employment contract in Saudi Arabia by agreement: the legal basis, the worker’s rights, the clauses to include and the common disputes. If you have a real case, 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)
- Ending the Contractual Relationship service – Ministry of Human Resources and Social Development (Arabic)
- Friendly Settlement for Labor Disputes – Ministry of Human Resources and Social Development
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
