Termination of Employment: Reasons, Process, and Legal Aspects

When it comes to employment, termination of employment which implies the end of professional journey is a heavy matter. However, on this stage, which can be rather difficult, one needs to have a grasp of all the details. Now, let us explore the intricacies associated with this process including its reasons and the legal issues it brings.

In this article, we will address the reasons behind terminations, procedures and also the law in the case of terminating an employee. Hence, as people and institutions delve into the complexities of termination of employment contract, they navigate these waters better. From the notice period to the exit interview, each step brings every participant into the picture.

What is Termination of Employment?

termination of employment

Termination of employment is the major component that the labor law of Saudi Arabia aims at developing the process to be reasonable and morally fair. This movement is a key factor in the delicate relationship between the employee and the employer.

In the case of Saudi Arabia, the Labor Law that is in place clearly describes the termination of employment steps and guarantees that the employer and the employee will get specific rights and protections that they are due.

The legal intricacies of dismissal are so important that they have to be taken into account when the process is being handled in order to avoid any problems at the law court.

The guarantee of notice of termination of employment has a critical value. The employers are tasked with the duty of strictly adhering to the predetermined guidelines. This in order to give the terminated employees the advanced notice and the transitional support, as well.

This act is not only open and fair to employees but also gives them advance notice that they will leave the employment.

On the other hand, the Labor Law of the Kingdom of Saudi Arabia focuses much on the fairness of the termination of employment, and this is what creates a just and fair atmosphere for both parties.

Both the employers and employees need to know these regulations beforehand as termination of employment can be messy otherwise.

Reasons for Termination

It is necessary to understand termination in Saudi Arabia by recognizing two types of contracts that have separate sets of rules under the law of employment. For instance, some of the reasons for termination of employment contract are:

  • Definite-Term Contracts: Termination of employment as per these contracts is allowable through either “non-renewal” or for some special “cause”. “Cause” includes misconduct, contract failure, deliberate loss intent, extensive unauthorized leave, and disclosure of information.
  • Indefinite-Term Contracts: Termination can be for “cause”, or after at least two months with any “legitimate reason”. The concept of “legitimate reason” remains ambiguous, thus it is possible to use it for terminations flexibly. Nevertheless, it entails a case-by-case determination.

Saudi Arabia’s Labor Law is unlike ‘at-will’ employment, because it highlights the reasons for employee dismissal. Employers can discharge workers for reasons stated in the contract or by the cause of dismissal.

Definite-term contracts provide grounds for non-renewal or cause-based termination, for instance, misconduct and unauthorized absence. The next thing is, the indefinite-term contracts provide flexibility with a 60-days notice for a “legitimate reason” which is an open term for interpretation.

What Happens During Termination?

Notice Period

In Saudi Arabia, termination process is a very important part of the system which enables the employers to give their workers enough advance notice if they are dismissed from their job.

An employer must at least furnish a 60-day termination of employment notice period upon the occurrence of any of the grounds for termination. Nevertheless, one could say that employment agreements may allow for an extended notice period leading to improved flexibility.

Employers can also choose to offer the employee the pay in lieu of the notice, which can be a more effective and systematic way of terminating the contract.

Dismissal Without Notice

Depending on the circumstances, employers may choose to terminate employees without notice or pay in lieu of notice, which is one of the options. These occurs in circumstances such as:

  • Assault: Firstly, if a worker attacks someone during work or due to work, the dismissal without notice is justifiable.
  • Job Obligations: Failing to perform the essential duties, following orders, and abiding by safety instructions after warnings.
  • Misconduct: Then, involvement in misbehavior, performing the act of which goes against honesty, integrity, or making intentional loss to the employer.
  • Forgery: Getting the position by forging documents could lead to instant dismissal.
  • Probation: During the probation period, the employer may terminate without providing the employee with notice.
  • Unexplained Absence: Lastly, long and unexplained absences without any good reason for them result in termination without notice as well.

Severance Package

When the worker-employer contract is over, or if the employer terminate it before its time, the Saudi labor law provides the employee with an end-of-service award.For instance:

  • When it comes to both fixed-term and open-ended contracts, this award rewards an employee’s devotion, giving him 15 workdays per year for up to five years.
  • After five years of service, the number of awards will increase to a full month’s pay for each additional year.

In cases of early resignation, the award size varies, for example:

  • Two year or less of service do not entitle the award.
  • Within two-five years, employees are granted one-third of the award.
  • For a term of service between five to ten years the amount is two-thirds.
  • The complete end-of-service award goes to employees who have serve for ten years or more.

This termination of employment compensation is calculated based on the employee’s last recorded wage, so that the recognition of their service is fair.

In the Kingdom of Saudi Arabia, knowledge about the complexities of the termination of employment contract is a must for employers and employees.

Exit Interviews

Exit interviews become integral part of the organizations looking for a positive feedback when workers leave. Termination of employment is a sensitive phase, and exit interviews serve as a bridge for effective communication, for instance:

  • Termination of employment may give rise to many issues and worries. Therefore, an exit interview is an opportunity for an employee to speak out and give honest feedback.
  • Also, this process allows people to communicate with each other, and they may forget the problems and concerns of the employee at the same time.
  • Employees are allowed to comment on the notice of termination of employment, for example, providing feedback.
  • Moreover, remembering reasons of employees’ termination of employment helps to improve company policies and managers’ skills.
  • Finally, the data obtained from the exit interviews is of great value in ensuring that the work environment is positive and employees’ future experiences are better.

Legal Aspects of Termination

termination of employment

It is essential to keep in mind the legal aspects of termination as this is the only way for a workplace to be free from any injustice and violations. Employers have the obligation to ensure that the termination of employment procedures follow the law.

An employment contract is a legal document that provides for the fundamental principles, and conditions of work. The employment contract clearly spells out the expectations that can help to avoid many different misunderstandings that may lead to termination of employment.

Nevertheless, dismissing an employee wrongfully may have severe repercussions for the employers. Job applicants who are victimised by unlawful dismissal can pursue legal remedies which stress the need for fair treatment.

In terms of the reasons for termination of employment contract, the employers need to be aware of possible legal pitfalls. Conveying the causes of dismissal openly and transparently can reduce the risk of legal disputes.

Furthermore, employers shall be aware of possible legal actions that result from unfair dismissal, thus showing the importance of following the due process.

Basically, grasping the various legal facets surrounding termination of employment guarantees both employers and employees from unwanted legal tangles.

Employment Contracts

In Saudi Arabia, termination of employment, especially for indefinite contracts, hinges on justifiable causes like employee misconduct. Understanding the specifics is vital:

  • Employers terminating indefinite contracts must have just cause, such as employee misconduct, aligning with KSA labor laws.
  • The termination of employment notice period in Saudi Arabia stands at 60 days for monthly salaried employees. Then, 30 days for others, unless specified otherwise.
  • Work contracts may stipulate extended notice periods, and employers might provide pay in lieu of notice.

For fixed-term contracts:

  • Termination with just cause is permissible, but non-renewal after the end date is considered a form of termination.
  • Notice periods in fixed-term contracts require mutual agreement, defaulting to 60 days if unspecified.

In case of termination for cause:

  • Employees must be given the chance to object, involving a disciplinary meeting and documented minutes.
  • Collective dismissals demand a 60-day advance notification to the Ministry of Human Resources and Social Development.

Understanding the intricacies of termination of employment in Saudi Arabia is crucial to navigate this landscape effectively.

Unlawful Termination

Terminating employees in Saudi Arabia requires careful consideration of legal parameters to avoid unlawful actions. Here are key aspects:

  • Protection from Illness Termination: Dismissing an employee due to illness before utilizing statutory sick leave is prohibited. The employee can merge sick leave with annual leave upon request.
  • Pregnancy and Maternity Leave: Employers cannot threaten termination during pregnancy or maternity leave, even if the female employee is ill. Valid medical reports and absence within 180 days annually are prerequisites.
  • Mass Terminations and Collective Dismissals: Special rules apply. Employers must notify the Ministry of Human Resources and Social Development (MHRSD) 60 days in advance before collectively dismissing Saudi nationals, except for bankruptcy or final closure.
  • Collective Action Limitations: Generally, labour claims can only be individually asserted, barring class or collective actions.
  • Mandatory Retirement Age: The retirement age is 60 for both genders, but mutual agreement allows employees to work beyond this age.

Understanding these regulations is crucial to prevent unlawful termination of employment in Saudi Arabia. It safeguards both employers and employees, ensuring fair and legal employment practices.

Unemployment Benefits

In Saudi Arabia (KSA), the social security system plays a crucial role in providing a safety net for employees facing termination of employment. Employers bear the responsibility of ensuring timely social security contributions throughout an employee’s tenure.

For instance, some of the key components of social security are:

  • Old-age Retirement: Ensures financial support for employees in their retirement years.
  • Survivors’ Pensions: Provides financial assistance to the dependents of deceased employees.
  • Unemployment Benefits: Offers financial aid to those facing job loss, aiding in their transitional period.
  • Long-term Disability: Supports employees dealing with prolonged illnesses or disabilities.
  • Employee Compensation: Provides benefits for personal injuries sustained at the workplace.

Additionally, there is also end of service gratuity. All employees, including KSA nationals, are entitled to end of service gratuity upon termination, safeguarded by KSA Labour Law. Then, the calculation involves:

  • 15 days’ wages for each complete year of employment for the first five years.
  • One month’s wages for each complete year of employment exceeding five years.

Resignation results in a reduced gratuity. This ensures a fair balance in acknowledging an employee’s commitment.

In short, Saudi Arabia’s robust social security system and end of service gratuity provisions contribute to a comprehensive approach in supporting employees facing termination of employment.


In conclusion, termination of employment is a significant phase demanding a delicate balance of empathy and legality. Understanding the reasons for termination enables a smoother transition, fostering a more compassionate workplace.

By incorporating a well-defined notice period and providing a fair severance package, organizations demonstrate a commitment to the well-being of their workforce. Exit interviews serve as valuable tools for continuous improvement, ensuring a positive working environment. On the legal front, clear employment contracts act as preventive measures against disputes, fostering transparency.

Employers must be vigilant to avoid unlawful termination, respecting labor laws. Acknowledging the possibility of unemployment benefits offers financial support during this transitional period.

Striking the right balance between compassion and legality is crucial for employers navigating termination. It is a journey that requires careful consideration, paving the way for a more just and humane workplace.

Saudi Company Formation

Would you like to know more about termination of employment in Saudi Arabia? Then, visit our insights section. If you have any questions, contact Saudi Company Formation. You can email us at contact@saudicompanyformation.com or also call us on +971 43 316 688 to talk to one of our representatives, who will answer your questions.

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