Saudi Labor Law: Termination of Contract And Resignation

There are several types of employment contracts. In this sense, an employment contract can be for a fixed or indefinite period. Likewise, labor regulations regarding resignation or dismissal according to each type of employment contract are different. In the same way, the rules regarding the type of duration of employment contracts will vary depending on whether it is a Saudi employee or a foreign employee as established among others in Article 37 rights of employment of the Saudi Labor Law.

In this article, we are going to analyze the content of Article 37 rights of employment of the Saudi Labor Law. Among other things, we will analyze the regulations for the renewal of fixed-term contracts, as well as the regulations for dismissal or resignation in this type of employment contracts. On the other hand, you will see these same rules but for open-ended contracts.

Analysis of the Content of Saudi Labor Law Article 37

Article 37 rights of employment

Basically, Article 37 rights of employment of the Saudi Arabian Labor Law establishes as mandatory that first of all the employment contract for foreigners must be written and of a fixed duration. On the other hand, Article 37 of Labor Law establishes that if the employment contract does not establish the duration of its validity, it will be understood that the contract will have the same validity as the work visa.

In conclusion, foreign employees may only work under the protection of a fixed-term employment contract. On the other hand, Saudi employees can work under both types of employment contracts.

Contract fixed-term work

All employees, whether Saudi or foreign, can sign this type of employment contract. Now, a fixed-term employment contract is one in which the period of time of its validity is clearly defined.

In this sense, in Saudi Arabia, fixed-term employment contracts are a common form of employment. These contracts establish an employment relationship between an employer and an employee for a specific period of time.

On the other hand, these contracts must include information on the terms and conditions of employment, such as the duration of the contract, the nature of the work, salary, working hours, benefits, and other relevant clauses that may or may not include a renewal clause.

Rules for the renewal of a fixed-term employment contract

Normally, a fixed-term employment contract will expire on the date of its completion. But in this same contract, there may be a renewal clause. In these cases, the renewal will last the time established in this clause.

On the other hand, there may be no renewal clause in these contracts. These are the rules for this case.

  • In the case of foreign employees, the contract will have the same renewal period as the validity of their Iqama.
  • For Saudi employees, if the contract is renewed, it will automatically become a fixed-term employment contract.

Rules for the resignation or termination of fixed-term employment contracts

Below we present the rules to follow in cases of resignation or termination of indefinite contracts:

  • The employee can resign from his job or the employer can terminate the employment contract by granting the notice period.
  • If the contract ends without prior notice on the part of the employee or unjustifiably on the part of the employer, you may obtain compensation according to the damages caused.

Indefinite employment contracts

Unlike fixed-term employment contracts, this type of employment contract does not expressly indicate its duration. So its termination will occur through the resignation of the worker or dismissal by the employer.

Meanwhile, in Saudi Arabia, open-ended employment contracts establish a continuous employment relationship without a specific end date. These contracts are very common and provide greater job stability compared to fixed-term contracts.

Under an indefinite-term employment contract, the employee has the right to continue in his or her job as long as he or she complies with the terms and conditions of the job. Furthermore, termination of the contract by the employer requires valid justification and compliance with the procedures established by Labor Law.

Importantly, these employment contracts may also include initial probation periods, during which both the employer and the employee can assess their suitability for the position. During this probation period, the contract can be terminated by any of the parties without the need for justification.

Rules for the renewal of indefinite-term employment contracts

These are the Rules for cases of renewal of employment contracts for an indefinite period:

  • In the case of Saudi employees:

For this case, a fixed-term contract will automatically be of indefinite duration if any of these conditions are met:

  • If the fixed-term employment contract does not have a renewal clause and the employer keeps the employee in the job.
  • In the event that there are 3 consecutive renewals.
  • The worker lasts more than 4 years of service in the company.

Rules for the termination or resignation of indefinite-term employment contracts

Article 37 rights of employment

To waive the termination of the indefinite employment contract, the party wishing to terminate the employment relationship must grant the 60-day notice period established by the Saudi Arabian Labor Law.

In Saudi Arabia, the notice period is an important aspect of the termination of employment contracts. Both the employer and the employee must comply with the obligations and deadlines of Saudi labor law when notifying the termination of the employment contract.

During this period the employee has the opportunity to look for another job. Likewise, the employer will have enough time to fill the vacancy.

However, if the employee resigns without prior notice, he must compensate the employer for the damages caused to the company. Likewise, if the employer terminates the employment contract without prior notice, the employee may demand compensation from the employer, which will normally be 60 days, which is the minimum time established by the Saudi Labor Law as a notice period.

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