Employer Obligations When Ending Employment Under Saudi Labor Law
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An employer's obligations when an employment relationship ends depend on how that relationship ended and the specific legal reason behind it. Understanding these distinctions in advance helps an employer handle each situation correctly, rather than treating every case the same way.
Starting Point: Identifying the Legal Basis for Ending the Relationship
Saudi Labor Law recognizes several ways an employment relationship can end: termination by agreement of both parties, provided the worker's consent is in writing; expiration of the contract term; termination by either party under the law's governing provisions; resignation; the worker reaching retirement age, unless both parties agree to continue the work beyond it; force majeure; permanent closure of the establishment; termination of the activity in which the worker is employed, unless agreed otherwise; and a final decision or judgment from the competent court ending the worker's contract in connection with bankruptcy proceedings opened under the Bankruptcy Law, among other cases the law specifies. Each of these paths carries its own rules, which is why the first step is always identifying which one applies to the situation at hand before considering what obligations follow from it.
Notice for Ending an Indefinite Term Contract
When either party to an indefinite term employment contract ends the relationship for a legitimate reason, the law requires prior written notice under Article 75, with the applicable period depending on how wages are paid and which party ends the contract. If the worker is paid on a monthly basis, the notice period is at least thirty days when the worker is the one ending the contract, and at least sixty days when the employer is the one ending it. If wages are not paid on a monthly basis, the notice period is at least thirty days from whichever party ends the contract. Under Article 76, a party that does not observe the notice period must pay the other party an amount equal to the worker's wage for the notice period, unless the parties agree on a greater amount.
Exceptional Termination Without Notice or Compensation
Under Article 80, an employer may not end the contract without a gratuity, notice or compensation except in specific cases the article lists exhaustively, and only after giving the worker the opportunity to state the reasons for objecting. This exception is narrow and conditional, and should not be treated by an employer as a general power to end a contract free of obligations.
Managing Resignation Requests
Since the 2025 amendments, the law defines resignation as the worker's written declaration, made without coercion, of the wish to end a fixed term employment contract without any condition, and the employer's acceptance of it. Article 79 bis sets out the procedure: if the employer does not respond to a resignation request within thirty days, the request is treated as accepted. Where the interests of the work require it, the employer may defer acceptance for a period not exceeding sixty days, provided the employer states the reasons in writing before the initial thirty day period expires; the deferral period is calculated from the date the written explanation is provided to the worker. The worker may also withdraw the resignation request within seven days of submitting it, unless it has already been accepted. A resignation request may not specify a deferred date. The contractual relationship continues in full during the resignation process, and a worker whose relationship ends by resignation receives the entitlements the law provides.
Financial Rights and End of Service Gratuity
As a general rule, a worker is entitled to an end of service gratuity calculated at half a month's wage for each of the first five years of service and a full month's wage for each year after that, with partial years calculated proportionally, based on the worker's most recent wage. The exact amount can vary, however, depending on the legal reason the relationship ended: Article 85 sets out specific rules for gratuity on resignation that vary with length of service, while Article 87 sets out specified exceptional cases in which the full gratuity is due. Determining the gratuity amount therefore starts with identifying precisely why the relationship ended.
Final Settlement of Dues
When a worker's service ends, the employer must pay the worker's wages and settle the worker's rights within no more than one week from the end of the contractual relationship. If the worker is the party who ended the contract, the settlement period may not exceed two weeks. Meeting these deadlines is a core part of an employer's obligations when employment ends, whatever the reason for its ending.
Service Certificate and Returning Documents
When employment ends, the employer must, on the worker's request, provide a service certificate free of charge containing the information the law requires, and must return any certificates or documents the worker had deposited with the employer.
Why Careful Documentation Matters
Whatever the reason an employment relationship ends, an employer who documents each step, from the date of notice through the final settlement and the return of documents, reduces the likelihood of a later dispute over what actually happened, and is better placed to demonstrate compliance with the law's requirements if that becomes necessary.
Frequently asked questions
Saudi Labor Law recognizes several ways an employment relationship can end, including termination by agreement of both parties, provided the worker's consent is in writing; expiration of the contract term; termination by either party under the law's governing provisions; resignation; the worker reaching retirement age, unless both parties agree to continue the work beyond it; force majeure; and permanent closure of the establishment. Each of these paths carries its own rules, which is why the first step is identifying which one applies to the situation at hand before considering the obligations that follow from it.
If either party ends an indefinite term contract for a legitimate reason and the worker is paid on a monthly basis, the employer, when it is the one ending the contract, must give written notice at least sixty days before the termination date, and the worker, when the worker is the one ending it, must give written notice at least thirty days before (Article 75). If wages are not paid on a monthly basis, the party ending the contract must give written notice at least thirty days before. A party that does not observe the notice period must pay the other party an amount equal to the worker's wage for the notice period, unless the parties agree on a greater amount (Article 76).
An employer may do so only in the specific cases Article 80 lists exhaustively, and only after giving the worker the opportunity to state the reasons for objecting. This exception is narrow and conditional, and should not be treated as a general power to end a contract free of obligations.
If the employer does not respond to a resignation request within thirty days, the request is treated as accepted, under Article 79 bis. Where the interests of the work require it, the employer may defer acceptance for a period not exceeding sixty days, provided the employer states the reasons in writing before the initial thirty day period expires, and the deferral period is calculated from the date the written explanation is provided to the worker. The worker may also withdraw the resignation request within seven days of submitting it, unless it has already been accepted.
As a general rule, the gratuity is calculated at half a month's wage for each of the first five years of service and a full month's wage for each year after that, with partial years calculated proportionally, based on the worker's most recent wage. The exact amount can vary, however, depending on the legal reason the relationship ended: Article 85 sets out specific rules for gratuity on resignation that vary with length of service, while Article 87 sets out specified exceptional cases in which the full gratuity is due. Determining the gratuity amount therefore starts with identifying precisely why the relationship ended.
The employer must pay the worker's wages and settle the worker's rights within no more than one week from the end of the contractual relationship, or within no more than two weeks if the worker is the party who ended the contract. As a general rule, the worker is also entitled to an end of service gratuity, the amount of which can vary depending on the legal reason the relationship ended. On the worker's request, the employer must also provide a service certificate free of charge containing the information the law requires, and must return any certificates or documents the worker had deposited with the employer.