Saudi Labor Law 2020: What Actually Changed?

If you are an employee or employer in the Kingdom looking for updates to Saudi labor law in 2020, you are most likely referring to the package of amendments launched by the Ministry of Human Resources under the "Labor Relations Reform Initiative" in March 2021, together with the amendments to the Labor Law issued by Royal Decree No. (M/24) of 1441 AH. This page summarizes what matters.

Quick Answer

The Saudi Labor Law 2020 is not a new statute in itself; it is a set of amendments to the Labor Law issued by Royal Decree No. (M/51) of 1426 AH. The most significant changes were: amendment of Articles 74, 77, and 81 relating to contract termination, and the launch of the Labor Relations Reform Initiative, which effectively eliminated the requirement for an expatriate worker to obtain employer consent for transfer of sponsorship, exit and re-entry, and final exit during the term of the contract, subject to specific conditions.

Key Amendments to the Labor Law

The most important amendment came through Royal Decree No. (M/24), dated 12/5/1441 AH, which modified several articles of the Labor Law. Among them:

• Article 74: Regulates the cases in which an employment contract ends, including the expiry of the term in a fixed-term contract without the need for notice.
• Article 77: Sets compensation for arbitrary dismissal at 15 days' wages per year of service for an open-ended contract, and the wages for the remaining term of a fixed-term contract, with a minimum of two months.
• Article 81: Expands the cases in which a worker may leave employment while retaining statutory entitlements.

Perhaps the most important point many people overlook is that the amendment removed the ambiguity around "notice" in fixed-term contracts. Expiry of the term equals termination of the contract — no notice required.

Labor Relations Reform Initiative

The initiative launched on 14 March 2021 and represents the most significant practical impact on the labor market in decades. It grants expatriate workers three services without requiring employer consent:

1. Transfer of sponsorship after one year from the worker's entry into the Kingdom, provided the employer is notified 90 days before the contract expires.
2. Exit and re-entry through the Absher and Qiwa platforms.
3. Final exit upon expiry of the contract.

The employer retains the right to claim compensation before the Labor Court if the worker breaches the contract. However, administrative detention to prevent departure has ended.

Note: Transfer of sponsorship before one year still requires employer consent, except in specific cases such as failure to transfer the sponsorship within 90 days of arrival, non-payment of wages for three months, or the existence of a malicious absenteeism report.

Effect of the Amendments on End-of-Service Benefits

End-of-service gratuity was not changed by the 2020 Saudi labor law amendments — the rule in Article 84 remains fixed: half a month per year for the first five years, and a full month per year thereafter. What did change is the judicial interpretation of cases of full entitlement upon resignation following the Reform Initiative: a worker who resigns with statutory notice after the expiry of the contract term is now entitled to full gratuity under the conditions of Article 85.

In practical terms, this means that resigning after the contract expires has become a financially clean option.

What About Working Hours and Leave?

The 2020–2021 amendments did not affect the core provisions on working hours (48 hours per week, 8 hours per day under Article 98) or annual leave (21 days, rising to 30 days after 5 years under Article 109). However, subsequent ministerial decisions added regulations on remote and flexible work, most notably the decision of the Minister of Human Resources No. 178743 of 1442 AH on remote work.

For a deeper look at end-of-service entitlements, see End-of-Service Gratuity in the Employment section.