Saudi Labor Law Termination Of Contract By Employee

Saudi labor law is essential for employers and employees to understand their rights and obligations. 

This guide explains the termination and resignation processes, including the Saudi labor law termination of contract by employee. 

It also covers end-of-service benefits under Article 84 Saudi labor law, how to use the Saudi Arabia end of service calculator, and details on vacation pay as per Saudi labor law. 

Additionally, you’ll learn about specific labor law articles like Article 74, Article 77, and Article 80 Saudi labor law. By comprehending these aspects, both parties can ensure fair and legal employment practices, fostering a positive working environment.

Types of Employment Contracts

Open-Ended Contracts

Open-ended contracts, also known as indefinite contracts, do not have a defined term of employment. These contracts continue until either party decides to terminate the agreement. They are often used for permanent positions and provide job security for employees.

Fixed-Term Contracts

Fixed-term contracts have a specified duration agreed upon by both employer and employee. These contracts automatically terminate at the end of the agreed period unless renewed. They are common for temporary or project-based roles.

Notice Periods

Notice Period for Open-Ended Contracts

For open-ended contracts, a 60-day notice period is required for termination by either the employer or employee. This period allows the other party to prepare for the transition and mitigate any potential disruptions.

Notice Period for Fixed-Term Contracts

In fixed-term contracts, no notice is required from the employer as the termination date is predefined. However, employees wishing to terminate the contract early must provide a 30-day notice and may need to compensate the employer.

Resignation and Termination Procedures

Valid Reasons for Termination

Both employers and employees must provide valid reasons for terminating the contract. Valid reasons protect both parties from unfair dismissal or resignation and ensure that the process is conducted legally.

Written Notice Requirement

Resignation or termination notices must be in writing, clearly stating the reasons for ending the employment. This documentation helps avoid disputes and provides a record of the termination process.

End of Service Benefits (EOSB)

Calculation of EOSB

Organizations often face challenges & solutions in recruiting Pakistani workers for global projects, which require understanding Saudi labor law for effective management. End-of-service benefits are calculated based on the length of service and the employee’s final salary. Employees are entitled to:

  • Half a month’s salary for each of the first five years.
  • A full month’s salary for each subsequent year.

Payment of EOSB

Employers must pay EOSB within two weeks of contract termination. This ensures employees receive their rightful compensation promptly.

Vacation Pay

Annual Leave Entitlement

Employees are entitled to:

  • 21 days of paid annual leave if they have worked for one to five years.
  • 30 days of paid annual leave for those who have worked for more than five years.

Compensation for Unused Leave

If employees do not take their annual leave, employers must compensate them for the unused days. This ensures employees do not lose their vacation entitlements.

Specific Articles of Saudi Labor Law

Article 77: Termination by Employer

Article 77 allows either party to terminate the contract without a valid reason, provided that compensation is given to the other party. The compensation amount is determined by the contract or court. The compensation includes:

  • Two months’ salary for each year of service for indefinite contracts.
  • Full wages for the remaining contract period for fixed-term contracts.

Article 84: End of Service Benefits Calculation

Article 84 details the calculation method for EOSB, ensuring employees receive fair compensation based on their length of service and final salary.

Article 80: Termination Without Notice

Article 80 permits employers to terminate employees without notice or EOSB under specific conditions, such as:

  • Gross misconduct.
  • Repeated violations of company policies.
  • Actions causing significant harm to the employer.

Article 74: Termination of Contract

Article 74 outlines the circumstances under which a work contract can be terminated, including mutual agreement, expiration of the contract term, and retirement. It includes:

  • Contract expiration.
  • Mutual agreement.
  • Retirement age attainment.
  • Force majeure events.

Termination of Contract by Employee

Termination of Indefinite Contracts

Employees can terminate indefinite contracts with a 60-day notice period. This allows employers to find a replacement and manage the transition smoothly.

Termination of Fixed-Term Contracts

For fixed-term contracts, employees must provide a 30-day notice if terminating early. They may also need to compensate the employer for the early termination.

Personal Tip:

From my years in recruitment, I’ve learned that clear communication and understanding between employers and employees are key. It makes endings smoother and boosts morale and productivity. Remember, seeking advice from legal and HR experts can offer tailored guidance for your situation.

Saudi Arabia End of Service Calculator

Importance of EOSB Calculators

End-of-service calculators help employees and employers accurately estimate EOSB. These tools consider the employee’s salary and service duration, ensuring transparency and fairness in EOSB calculations.

How to Use EOSB Calculators

Employers and employees can use online EOSB calculators by entering relevant details such as the employee’s final salary and years of service. The calculator then provides an accurate estimate of the EOSB owed.

Additional Considerations

Force Majeure and Business Closure

Contracts can be terminated without penalty due to force majeure events or permanent business closure. For organizations involved in the recruitment process for Pakistani workers abroad, understanding these legal provisions is crucial to mitigate risks and ensure compliance with Saudi labor law.

Retirement Provisions

Upon reaching the retirement age (60 for men and 55 for women), employees or employers can terminate the contract. Understanding the benefits of hiring Pakistani workers for Saudi projects includes ensuring compliance with EOSB regulations, providing financial security in their post-working years.


Understanding Saudi labor law regarding termination and resignation is crucial for both employers and employees. By following the regulations and procedures outlined in this guide, both parties can ensure fair and lawful employment practices. Implementing effective recruitment strategies to attract and retain talent is essential for organizations aiming to build a sustainable workforce. For specific cases, consulting legal experts and reliable HR consultancies is always recommended to navigate the complexities of employment termination and resignation effectively.

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Frequently Asked Questions

Can an employee terminate the contract?

Yes, an employee can terminate the contract by providing the required notice period, as specified in their employment contract or under Saudi labor law.

What is the notice period for termination in Saudi Arabia?

For open-ended contracts, the notice period is 60 days. For fixed-term contracts, if terminated early by the employee, a 30-day notice period is required.

What is Article 77 of the Saudi labor law?

Article 77 allows either party to terminate the contract without a valid reason, provided that compensation is given to the other party. The compensation amount is determined by the contract or the court.

What is Article 87 of the Saudi labor law?

Article 87 pertains to end-of-service benefits and stipulates that employees are entitled to compensation if they resign after a continuous service of at least two years.

What is termination Article 80 in Saudi labor law?

Article 80 permits employers to terminate employees without notice or end-of-service benefits under specific conditions, such as gross misconduct or repeated violations of company policies.

What is Article 37 of the Saudi labor law?

Article 37 deals with the renewal of fixed-term contracts. If both parties agree, the contract can be renewed upon expiration under the same or modified terms.

What is the employee termination policy in Saudi Arabia?

The employee termination policy in Saudi Arabia requires that terminations be based on valid reasons, comply with notice period requirements, and include the payment of end-of-service benefits where applicable. Unjust terminations can lead to legal consequences for the employer.


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