How Employment Can End in Saudi Arabia
Employment in Saudi Arabia can be terminated in several ways, each with different legal consequences for both parties:
- Expiry of a fixed-term contract
- Mutual agreement between employer and employee
- Resignation by the employee
- Dismissal by the employer (with or without notice)
- Constructive dismissal (employee forced out due to employer conduct)
The terms of termination — especially whether proper notice was given and whether the reason for ending the contract was lawful — determine what you are owed.
Notice Periods
Saudi Labor Law requires both employers and employees to provide notice before terminating an open-ended (indefinite) employment contract:
- The standard notice period is 60 days for monthly-paid employees.
- For employees paid on a shorter cycle (weekly or daily), a shorter notice period may apply.
- If your employer terminates you without providing required notice, you are entitled to compensation equal to your wages for the notice period, regardless of the reason for termination.
- If you resign without giving proper notice, your employer may be entitled to claim compensation in return.
Practical tip: Always submit your resignation in writing and keep a dated, acknowledged copy. Verbal resignations are difficult to prove and can lead to disputes.
Lawful Grounds for Dismissal
Your employer must have a valid legal reason to terminate your employment. Dismissal without cause — or dismissal that violates procedural requirements — is considered arbitrary dismissal and entitles you to additional compensation.
Common lawful grounds for dismissal under Saudi Labor Law include:
- Serious misconduct or a major violation of workplace rules
- Repeated minor violations after formal written warning
- Absence without authorization beyond the permitted threshold
- Causing intentional harm to the employer's property or business
Arbitrary (Wrongful) Dismissal
If your employer terminates you without a valid reason, you are entitled to claim compensation for arbitrary dismissal in addition to your other end-of-service entitlements. Saudi labor courts take arbitrary dismissal seriously.
- You have the right to file a claim with the Labor Courts or initially through the Ministry of Human Resources and Social Development's conciliation mechanisms.
- Compensation for arbitrary dismissal is determined by the court based on factors including your length of service, salary, and the circumstances of dismissal.
Situations Where an Employer CANNOT Dismiss You
Saudi Labor Law prohibits dismissal in certain circumstances, including:
- During sick leave (within the protected sick leave period)
- During maternity leave for female employees
- For reasons that constitute discrimination (gender, disability, age)
Dismissal in these circumstances is void and you may be entitled to reinstatement or enhanced compensation.
End-of-Service Gratuity (EOSG)
The end-of-service gratuity is one of the most important financial entitlements under Saudi Labor Law. It is a lump-sum payment made when your employment ends, calculated based on your final basic salary and length of service.
How the Gratuity Is Calculated
- For each of the first 5 years of service: half a month's basic wage per year.
- For each year beyond 5 years: one full month's basic wage per year.
- Partial years are calculated on a pro-rata basis.
Example: If your basic salary is SAR 10,000 per month and you have worked for 7 years:
- First 5 years: 5 × SAR 5,000 = SAR 25,000
- Next 2 years: 2 × SAR 10,000 = SAR 20,000
- Total EOSG: SAR 45,000
What Counts as Basic Salary?
Only your basic wage is used for EOSG calculation — not housing allowance, transport allowance, or other benefits. Review your payslip carefully to identify your contractual basic wage.
Resignation and Reduced Gratuity
If you resign (rather than being dismissed), your gratuity entitlement may be reduced depending on your length of service:
- Less than 2 years of service: no gratuity on resignation.
- Between 2 and 5 years: one-third of the full gratuity.
- Between 5 and 10 years: two-thirds of the full gratuity.
- More than 10 years: full gratuity.
This makes it financially significant to understand whether you are resigning or being dismissed, especially after 5–10 years of service.
Other End-of-Service Entitlements
In addition to the gratuity, when your employment ends you are typically entitled to:
- Payment for any accrued but unused annual leave (calculated on full salary, not just basic wage in most cases)
- Wages owed up to and including your last working day
- Repatriation costs to your home country if your employer brought you to Saudi Arabia
Filing a Claim If Your Employer Does Not Pay
If your employer fails to pay your EOSG or other entitlements on time:
- Submit a complaint via the Musaned or Qiwa platforms online, or visit the nearest Labor Office.
- If unresolved, your case will be referred to the Labor Courts.
- Remember: your unpaid entitlements are first-rank privileged debts — you have priority over most other creditors even in bankruptcy.
Practical Tips for Expats
- Know your basic salary figure exactly — this is the number that determines your gratuity.
- Keep records of your start date — your official Saudi employment start date affects every calculation.
- Do not sign any document waiving your gratuity rights during your employment — such waivers are void under Saudi Labor Law unless they benefit you.
- If you are approaching a significant service milestone (2, 5, or 10 years), factor the gratuity change into your decision about whether to resign or negotiate a mutual termination.
- Consult a licensed Saudi labor lawyer if you believe you have been arbitrarily dismissed or denied your full end-of-service entitlements.