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Blog April 25, 2026

Understanding Saudi Employment Contract Termination Rights

6 min read
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What This Article Covers

In this guide, you’ll explore the intricacies of Saudi employment contract termination rights under the Royal Decree M/51, including key articles affecting termination processes. Both workers and employers will benefit: workers to understand their rights and employers to ensure compliance. As labor laws are continuously updated, knowing these rights is essential in 2024 for avoiding legal pitfalls.

The Legal Foundation: What Saudi Law Actually Says

Saudi Labor Law, as stipulated in Royal Decree M/51, provides comprehensive guidelines on employment contract termination. Article 75 specifies that both parties may terminate an open-ended contract for a legitimate reason with a 60-day notice in the case of monthly wage workers. Article 76 details conditions under which a fixed-term contract automatically converts to an indefinite term if renewed more than twice.

Furthermore, Article 77 allows either party to terminate the contract without a valid reason but mandates compensation, calculated as 15 days’ salary for each year of service for open-ended contracts, or all wages for the rest of the term for fixed-term. Article 80 outlines specific instances where an employer may dismiss a worker without notice, such as fraud or breach of trust. Each clause aims to balance the needs of workers for job security with employers' needs for operational flexibility.

Historically, these regulations evolved to protect expatriate workers who comprise a significant portion of the workforce. Over time, the law has adapted to ensure fairness in an increasingly diversified marketplace, influenced by Vision 2030's aims to create a thriving labor market. Such legislative enhancements are carefully monitored and enforced via platforms like Qiwa and the Wage Protection System to facilitate adherence.

Who This Law Applies To

Saudi Labor Law applies to both Saudi citizens and expatriate workers under private sector employment contracts, excluding domestic labor, government positions, and part-time roles. For expatriates, termination procedures are crucial due to residency and visa implications. In addition, the Nitaqat system, which categorizes companies based on their Saudization rates, affects how termination practices influence a company’s standing within its tier, mandating compliance without discrimination.

For Workers: Know Your Rights

As an employee in Saudi Arabia, it’s essential to understand your rights if faced with termination:

  • Right to Notice: You are entitled to a 60-day notice for termination of an open-ended contract (Article 75).
  • Compensation for Unjust Termination: If terminated without a valid reason, you are entitled to compensation (Article 77).
  • No Unlawful Deductions: Employers cannot deduct without justification (Article 90).
  • Final Settlement: You have a right to your wages and end-of-service benefits settled within a week of termination (Article 88).
  • Appeal Against Wrongful Termination: You have the right to dispute an unjust termination in court via LACE (Article 81).
  • Severance Calculation: Understand your severance under both fixed and open-ended terms to ensure fair pay.

If any of these were denied, you may have a valid claim — assess it free at SNDK.ai/claim.

For Employers: Obligations, Deadlines, and Fines

  1. Provide Written Notice: Must give a 60-day notice for monthly wage employees under an open-ended contract (Article 75).
  2. Compensation Payment: Pay all due compensation within 7 days of termination to avoid fines of SAR 10,000 (Article 88).
  3. Just Cause for Dismissal: Ensure dismissals comply with valid grounds as stated in Article 80 to avoid wrongful termination claims.
  4. Appeal and Documentation: Maintain detailed records of termination processes to defend against disputes, as required by Qiwa.
  5. WPS Compliance: Ensure salary payments, including termination dues, are compliant with the Wage Protection System.
  6. Reporting and Adjustment: Any contract changes or terminations must be reported to GOSI and updated on the Muqeem system within 3 days or face fines of up to SAR 5,000.

How to Calculate Your Entitlement: Step-by-Step

Consider Ahmed, an Indian accountant, earning SAR 10,000 monthly, working for 7 years on an open-ended contract:

  1. Identify End of Service Benefit: For the first five years, EoS is half a month’s salary per year. (5 years x SAR 5,000 = SAR 25,000).
  2. Subsequent Years Calculation: Full month’s salary for subsequent years (2 years x SAR 10,000 = SAR 20,000).
  3. Summing Up: Total EoS: SAR 25,000 + SAR 20,000 = SAR 45,000.

If Ahmed resigns after 7 years, without completing 10 years, EoS is adjusted to SAR 33,750 (75% of total).

Real Case at LACE: How This Plays Out in Court

Musa, a Filipino technician in Riyadh, was terminated after alleging unfair practices. Musa filed a case stating he was dismissed without justification and not paid his full severance during the notice period. The employer cited underperformance but lacked documentation. LACE reviewed the case, and due to insufficient evidence from the employer, ruled in Musa’s favor. Musa was awarded SAR 50,000 covering severance and unpaid compensation, reaffirming the critical role of documentation.

Common Employer Violations

  • Unjustifiable Dismissal: Terminating without reason or documentation violates Article 77, leading to compensation and fines.
  • Late Payment of Dues: Delaying post-termination payments breaches Article 88, fined up to SAR 10,000.
  • Incorrect Gratuity Calculation: Miscalculating end-of-service benefits breaches Article 84, risking disputes and penalties.
  • Non-compliance with WPS: Failing to adhere is penalized, emphasizing timely salary and dues processing.

Step-by-Step: What to Do If Your Rights Were Violated

  1. Document Everything: Gather employment and termination documents.
  2. Consultation: Call HRSD at 19911 for advice.
  3. File Complaint on Qiwa: Utilize the complaint portal at https://www.qiwa.sa, within 30 days.
  4. Historical Salary Record: Verify payments via Mudad.
  5. Physical Evidence Submission: Submit claim with evidence to LACE.
  6. Case Follow-up: Track the dispute timeline and update evidence.
  7. Legal Support: Engage with a labor lawyer if unresolved.

Employer Compliance Checklist

  • [ ] Issue 60-day notice for termination of an open-ended contract.
  • [ ] Ensure Just Cause for any immediate dismissal and document it.
  • [ ] Pay out all termination dues within a week as per WPS standards.
  • [ ] Maintain careful records of termination proceedings.
  • [ ] Update GOSI and Muqeem for all contract changes promptly.
  • [ ] Regular audit of end-of-service benefit calculations.

Frequently Asked Questions

  1. What is the notice period for contract termination? Per Article 75, you are entitled to a 60-day notice for open-ended contracts if paid monthly.

  2. How is severance pay computed in Saudi Arabia? Article 84 specifies that severance for the first five years is half a month's salary per year and full salary thereafter.

  3. Can an employer terminate a contract without notice? Article 80 allows immediate dismissal if justified, e.g., misconduct, with proper proof.

  4. What if my employer doesn't pay my end-of-service benefits? File a complaint via Qiwa or LACE as mandated under Article 77, enforced by HRSD.

  5. How quickly must an employer pay dues post-termination? Article 88 mandates payment within 7 days to avoid a fine.

  6. Is compensation mandatory for unjust termination? Article 77 specifies compensation is mandatory, calculated by service years or contract's remaining term.

Key Legal Articles Referenced

  • Article 75, 76, 77, 80, 84, 88, 90

Assess Your Claim Free — SNDK.ai/claim

Evaluate your case with SNDK.ai, a streamlined platform offering free labor dispute assessments. Understand your rights under Saudi law, and explore potential next steps with expert guidance. Start now at https://sndk.ai/claim.

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