What Is Wrongful Termination Pay in Saudi Arabia?

Article 77 of the Saudi Labour Law: Compensation for Wrongful Termination

Whether you are an employee whose service was abruptly terminated or an employer considering ending an open-ended contract, Article 77 is the provision that governs the financial consequences. This article does not prohibit termination — it puts a price on it.

Quick Answer

Article 77 of the Saudi Labour Law provides that if either party terminates the contract for an unlawful reason, the aggrieved party is entitled to agreed compensation or, failing agreement, statutory compensation: 15 days' wages for each year of service for open-ended contracts, or the wages for the remaining contract term for fixed-term contracts. The minimum compensation is two months' wages. This is in addition to — not instead of — the end-of-service award and notice-period entitlements.

Text of the Article and When It Applies

Article 77 was amended by Royal Decree No. M/46 dated 5/6/1436 AH. It applies in one specific situation: termination of the contract for an unlawful reason by either party.

What does "unlawful" mean? Simply put, termination that is not based on one of the grounds listed in Article 80 of the Saudi Labour Law (dismissal without award) or Article 81 (employee abandonment of work without notice for legitimate reasons). If you were dismissed because the employer "no longer needed you," your contract is open-ended, and the employer did not follow lawful termination procedures, Article 77 applies to you.

Important note: Article 77 does not apply automatically. A claim must be filed, usually through labour litigation.

How Compensation Is Calculated in Practice

The Law distinguishes between two types of contracts:

Open-ended contract: Compensation = 15 days' wages × number of years of service. "Wages" here means the last full wage (basic salary plus fixed allowances such as housing and transport).

Fixed-term contract: Compensation = wages for the remaining term of the contract. If you were dismissed with 8 months left on your contract, you are entitled to 8 full months' wages.

In both cases, compensation may not be less than two months' wages. This minimum protects employees at the early stages of their service.

Example: An employee with a total monthly wage of SAR 10,000 who served 4 years under an open-ended contract and was dismissed without a lawful reason. Compensation = (15 days × 4 years) = 60 days = 2 months. The minimum threshold applies automatically, giving SAR 20,000. Partial years are calculated on a pro-rata basis.

A point many overlook: compensation under Article 77 is entirely separate from the end-of-service award (Article 84) and the notice-period payment (Article 75). You are entitled to all of them.

Relationship Between Article 77 and Article 88 of the Saudi Labour Law

Article 88 of the Saudi Labour Law requires the employer to pay all wages and entitlements within one week of the end of the employment relationship if termination was initiated by the employer, or within two weeks if initiated by the employee. This includes any compensation due under Article 77, once it is established or agreed upon.

Why does this matter? Because delay in paying these entitlements constitutes an independent ground for a claim before the Labour Court and may support a request for compensation for damages. Many employers delay payment hoping to pressure employees into accepting a lower settlement.

In short: Article 77 determines the amount, and Article 88 determines the deadline.

Other Scenarios: Resignation, Probation, Pregnant Employee

Voluntary resignation: Article 77 does not apply. You ended the contract of your own accord, so no compensation is due.

Probationary period: If you are dismissed during the agreed probationary period (90 days, extendable to 180), no compensation is due under Article 77 because such termination is lawfully recognised.

Pregnant employee or employee on maternity leave: Article 155 prohibits dismissal in this situation. Any termination here is unlawful and opens the door to Article 77 in addition to other penalties.

Arbitrary termination on grounds of a labour complaint, gender, or age: This is considered unlawful. The court may order reinstatement rather than compensation — a notable judicial development in recent years.

How to File a Claim

Procedures are now almost entirely electronic:

1. Amicable settlement through the Taswiya platform of the Ministry of Human Resources and Social Development. This step is mandatory before resorting to court and takes 21 days.
2. If settlement fails, the case is automatically referred to the competent Labour Court.
3. Limitation period: 12 months from the date of termination of the employment relationship (Article 222).

Territorial jurisdiction follows the place of work. If your workplace is in Jeddah, the Jeddah Labour Court has jurisdiction over an Article 77 claim in Jeddah; if you work in Riyadh, an Article 77 claim in Riyadh is filed before the Riyadh Labour Court. The procedures are the same; only the geography differs.

Do not wait. A year passes quickly, and time-barred claims are common in labour cases.

For more on your rights upon dismissal, see Frequently Asked Questions on Labour Cases.

Warning: Accepting an amicable settlement with your employer and signing a comprehensive release may extinguish your right to claim under Article 77 at a later stage. Read whatever you sign carefully, and do not waive rights that have not yet been calculated.

Difference Between Article 77 and Article 74 of the Saudi Labour Law

Many confuse the two provisions. Article 74 of the Saudi Labour Law lists the lawful methods of contract termination (mutual agreement, expiry of the term, reaching retirement age, force majeure, permanent closure of the establishment, etc.), whereas Article 77 addresses the consequences of unlawful termination. If your contract ended by one of the means in Article 74, Article 77 cannot apply.

Similarly, dismissal under Article 80 (for disciplinary reasons such as repeated absence or assault on the employer) eliminates the employee's right to Article 77 compensation and sometimes to the end-of-service award — provided the employer followed the statutory dismissal procedures, including issuing a written warning and giving the employee an opportunity to present a defence.

Was the dismissal you experienced covered by Article 74, Article 80, or Article 77? That is the question that determines your entire financial entitlement.

References

^[1] Saudi Labour Law, Royal Decree No. M/51 dated 23/8/1426 AH, Article 77 (as amended by Royal Decree No. M/46 of 1436 AH). Ministry of Human Resources and Social Development. ^[2] Saudi Labour Law, Articles 74, 75, 80, 81, 84, 88, 155, 222. ^[3] Implementing Regulations of the Labour Law, Ministry of Human Resources and Social Development. ^[4] Taswiya Platform for Amicable Settlement of Labour Disputes — mol.gov.sa.

Need to review your situation? Speak with a licensed lawyer in Saudi Arabia →