Saudi Labor Law: Termination of Contract by Employee

Saudi labor law termination of contract by employee

Saudi labor law termination of contract by employee depends on certain legal provisions that you should be aware of. In addition, it will depend on the type of contract that the employer has made with the worker. Also, the reason is that labor laws in Saudi Arabia are strict and you must follow them to avoid legal inconveniences.

In this article, you will see what these laws are and how to apply them depending on the type of employment contract. Additionally, what are the benefits that the employer must pay at the end of the employment contract.

Article 37 of the Saudi Labor Law

Saudi labor law termination of contract by employee

Saudi labor law provides that an employee who is not a Saudi citizen will obtain a fixed-term job. Likewise, you can corroborate it in Article 37 of the labor law of Saudi Arabia. Thus, the law establishes the following:

  • For expatriate employees, they will have a fixed-term contract.
  • For employees who are Saudi citizens, the contract will be fixed-term + indefinite contract.

Fixed Term Contracts

According to Saudi labor law for termination of contract KSA, this type of contract has a set end date. Likewise, upon completion of the contract, it will be automatically terminated unless its renewal is agreed upon.

Renewal of a fixed-term contract

If there is a renewal clause for a fixed-term contract, the employer must renew it for the agreed time. Likewise, you can observe this provision in Article 55 of the Saudi Labor Law. Otherwise, you may proceed with the Saudi labor law termination of contract by employee or the employer.

Furthermore, according to Saudi labor law for contract renewal, the following occurs:

  • For non-Saudis. The employer must renew the contract until the expiration time of the Iqama for foreign workers.
  • For Saudi citizens. If the employer does not dismiss his Saudi employee, the contract will be renewed and become indefinite.

Saudi labor law termination of contract and resignation

There may be a Saudi labor law termination of contract by employee or by the employer in a fixed-term contract. In this case, it is determined by Article 74 of said law, stating that there must be a notice period. Furthermore, if any of the parties wish to terminate before the established time, they must pay compensation to the other.

Indefinite contract

As we have said before, a permanent contract is only for employees of Saudi origin according to the labor law. Therefore, we will explain what the renewal process and termination and resignation are like in this type of contract.

Renewal of an indefinite contract

For a Saudi worker, the fixed-term contract may become indefinite, under the following conditions:

  • If there is no clause indicating the renewal of the employment contract for a specific period. Likewise, if during this time the employer does not dismiss the worker at the end of the contract. In this case, it will become a defined contract.
  • Furthermore, a contract for a fixed period becomes indefinite when it has been renewed 3 consecutive times. Likewise, when the employee has completed 4 years of service according to Article 55 of Saudi law.

Termination and resignation in an indefinite contract

There may be a Saudi labor law termination of contract by employee or by the employer for this type of contract. In this case, both parties can do so as long as they give 60 days of notice. Furthermore, if it is the employer who terminates the contract, he must pay the employee compensation following Article 77 of the labor law.

Termination in Saudi labor law

Employers will terminate a contract at the end of fixed-term employment as stipulated in Saudi labor law on termination. However, the employer must announce the dismissal of the employee with sufficient advance notice. Furthermore, if the employer or the employee wishes to terminate the fixed-term contract before the expiration date, there must be compensation.

Also, the legal provision for this is in Article 77 of the Saudi Labor Law for termination of contract. Consequently, we have the following:

  • According to Saudi labor law: termination of contract and resignation.
  • By mutual agreement: an easy way to terminate employment contracts

In the latter case, it must be in writing to ensure the veracity of the agreement between the employee and the employer.

Complexity of fixed-term contracts

The complication of this type of contract is that it can be terminated by mutual agreement according to Article 75 of the labor law. That is, there is a Saudi labor law termination of contract by employee and the employer in agreement. However, you must submit the notice and cite in writing the exact reason for the termination.

Likewise, with terminated contracts where there is no necessary notice, the party terminating the contract must provide compensation to the other party. In addition, the compensation will be equivalent to the salary of the worker for the period of notice or as agreed with the employer.

Termination of employment contract due to retirement

Another reason for terminating an employment contract is retirement, which is when the employee reaches the age specified in the law. Likewise, in this Saudi labor law termination of contract by employee can be suspended if it is what both parties agree to. In this case, the employment relationship will continue beyond the retirement age and the contract will remain in force.

Other circumstances for termination of contract Saudi labor law

In addition to the above reasons, certain circumstances may lead to termination of the employment contract. For example, completion of the work, closure of the company, and completion of the activity carried out by the worker, among others. However, termination of contract and resignation must be provided for in Saudi labor law.

Unique issues for terminating an employment contract

In this case, it is when a contract is for a specific task, and therefore the contract ends upon completion of said task. Similarly, where the employment contract relates to a specific worker, it will not end upon death. However, this will depend on whether the worker has been considered to formalize the employment contract.

Otherwise, the contract ends with the death of the worker or if there is a medical certificate that makes the work of the employee impossible.

Worker rights for the notification period

During the time of notice of job termination, the employee will have the right to take time off between one day and 8 hours to search for employment. However, this will be if indicated by the employer, and the employer will not be able to deny the right to salary for that period. Additionally, this action will allow the employer to find employment without having to deal with transition issues.

Compensation in case of illegal dismissal

Illegal termination of the employment contract will result in compensation from the employer. Likewise, if the contract is for an indefinite period, the employer will pay those affected 15 days for each year of service to the company. Likewise, in the case of unlimited contracts, the employer will pay the remaining salary for the term as a bonus.

Additionally, compensation may not be less than 2 months of salary. Now, if it is a resignation of an indefinite contract, you can give a 60-day notice according to article 75 for the termination of the contract of the Saudi labor law. Furthermore, if the employer terminates a permanent contract, it will compensate the worker according to Article 77 of the Saudi labor law.

Who is entitled to benefits at the end of employment service?

Any employee who works in KSA will be entitled to receive benefits upon termination of the service contract. However, this law does not apply in the following cases:

  • Workers who work without transferring Iqama sponsorship.
  • Employees working on a business visit visa.
  • Workers with a consulting contract.

Calculation of bonuses in case of termination

To calculate bonuses, you must consider whether it is due to the dismissal of the employee or, on the contrary, due to resignation. Thus, we have that, in article 84 of the labor law, an employee will be entitled to benefits in the event of dismissal. Furthermore, according to Saudi labor law, it will be as follows:

  • The worker will receive 1/2 salary during the first 5 years for each year of service.
  • The employee will get a full salary after the first 5 years for each year of service.

However, you should know that there will be no right to payment if you terminate the contract based on Article 80 of the Saudi labor law.

Saudi Labor Law Termination Benefits

Saudi labor law termination of contract by employee

According to termination in Saudi labor law, the employer must pay termination benefits within time. Hence, the benefits would be as follows:

  • In case of termination, it will be 1 week.
  • In case of resignation, it will be 2 weeks.

Furthermore, if you do not meet these deadlines after 2 weeks, the employee may present the case to the Saudi Labor Court. Likewise, the employer will receive a fine of SR 10,000 for the delay.

In conclusion, you must understand the Saudi labor law termination of contract by employee. In addition, you must know the associated rights and duties that will help you complete these procedures.

However, if you have any questions, you can contact us and we will be happy to resolve your concerns.


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