Employment Contract Termination in Saudi Arabia 2026: A Comprehensive Guide for Employees and Employers
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Employment contract termination in Saudi Arabia is one of the most important topics for employees and employers because ending the employment relationship may involve notice, compensation, end-of-service benefits, and settlement of wages, leave balances, and other employee rights under Saudi Labor Law.
In this comprehensive guide (Pillar Content), we cover the key rules governing employment contract termination under Saudi Labor Law, starting with the cases in which a contract ends, the difference between fixed-term and indefinite-term contracts, notice periods, and Articles 74, 75, 76, 77, 80, and 81, through to end-of-service benefits and how to terminate an employment relationship through the Qiwa Platform.
- Employment contract termination cases under Article 74.
- The difference between fixed-term and indefinite-term contracts.
- Notice periods under Article 75.
- Compensation for failure to comply with notice under Article 76.
- Compensation for unlawful termination under Article 77.
- Dismissal cases under Article 80 and employee termination cases under Article 81.
- End-of-service benefits and final settlement.
- How to terminate an employment contract through Qiwa.
Do you need your employment contract reviewed or want to know the rights and compensation due when the employment relationship ends?
What Is Employment Contract Termination in Saudi Arabia?
Employment contract termination in Saudi Arabia means the end of the contractual relationship between an employee and an employer for a reason or through a procedure permitted under Saudi Labor Law. Termination may occur when the contract expires, by agreement between the parties, by the will of either party in an indefinite-term contract subject to the statutory notice requirements, through resignation, or in other cases provided by law.
Not every type of contract termination produces the same results regarding notice, compensation, or end-of-service benefits. The employee’s final rights depend on the contract type, the reason for termination, and which party initiated it.
The Difference Between Contract Expiry, Termination, Rescission, and Resignation
| Term | Meaning | Practical Example |
|---|---|---|
| Contract expiry | The employment relationship ends because a legal event occurs or the agreed contractual period ends. | A fixed-term contract reaches its expiry date without renewal. |
| Contract termination | A general description of ending the employment relationship under one of the legally recognized cases. | Ending an indefinite-term contract after giving the required notice. |
| Contract rescission | Ending the contract in certain cases because of a breach or another reason permitted by law. | Rescinding the contract in one of the cases covered by Article 80. |
| Resignation | The employee formally expresses the desire to end the employment relationship in accordance with the applicable rules. | The employee submits a resignation through the required procedure. |
| Mutual agreement | The employee and employer agree in writing to end the contract. | Both parties agree on a specific final working date. |
Employment Contract Termination Cases Under Article 74
Article 74 of Saudi Labor Law sets out the main cases in which an employment contract ends, making it one of the key provisions when examining employment contract termination conditions.
Agreement Between the Parties
The contract ends if both parties agree to terminate it, provided that the employee’s consent is given in writing in this case.
Expiry of the Contract Term
A fixed-term contract ends when the agreed term expires, unless the employment relationship continues under the law or the contract is renewed.
Indefinite-Term Contract
An indefinite-term contract may be terminated at the will of either party while complying with the notice period set out in Article 75.
Resignation
Resignation is one form of ending the employment relationship and is subject to the rules established by law.
Force Majeure
The contract may end in cases where force majeure occurs as recognized under the applicable rules.
Closure of the Establishment or Termination of Activity
The contract may end when the establishment permanently closes or the activity in which the employee works is terminated, subject to the applicable legal cases.
Termination of Fixed-Term and Indefinite-Term Contracts
One of the most important steps before deciding to terminate an employment contract is determining whether the contract is fixed-term or indefinite-term because the termination process and potential compensation may differ between the two. You can also review employee contract attestation in Saudi Arabia to understand the importance of documenting the contract data and its terms.
| Comparison | Fixed-Term Contract | Indefinite-Term Contract |
|---|---|---|
| Term | Has a specific duration or expiry date stated in the contract. | Does not have a specified expiry date. |
| Natural expiry | Ends when its term expires in accordance with the law. | Does not end simply because a certain period has passed. |
| Termination before expiry | May result in compensation depending on the reason for termination, the contract, and the law. | Subject to the statutory notice requirements when terminated unilaterally. |
| Article 77 | For unlawful termination where no specific compensation is stated, the basis is generally the wages for the remaining contract period, subject to the statutory minimum. | For unlawful termination where no specific compensation is stated, the basis is generally 15 days’ wages for each year of service, subject to the statutory minimum. |
Notice Period Under Articles 75 and 76
The notice period under Saudi Labor Law is one of the most important issues when terminating an employment contract. The applicable period depends on which party wants to end the contract and how wages are paid.
| Situation | Notice Period |
|---|---|
| Employee terminates an indefinite-term contract and wages are paid monthly | At least 30 days |
| Employer terminates an indefinite-term contract and wages are paid monthly | At least 60 days |
| Indefinite-term contract where wages are not paid monthly | 30 days by either party |
If the party terminating the contract does not comply with the statutory notice period, Article 76 provides for payment of an amount equal to the employee’s wage for the notice period, unless the parties agree on greater compensation.
Simple Example of Notice Pay
If the monthly wage is SAR 8,000 and the required notice period is 30 days, but the contract is terminated immediately without observing the notice period, compensation equal to SAR 8,000 may become payable, subject to the specific facts and contract.
Compensation for Contract Termination Under Article 77
Article 77 of Saudi Labor Law addresses compensation when a contract is terminated for an unlawful reason and the contract does not specify compensation.
| Contract Type | Compensation Basis | Minimum |
|---|---|---|
| Indefinite-term contract | 15 days’ wages for each year of service. | Not less than two months’ wages. |
| Fixed-term contract | Wages for the remaining term of the contract. | Not less than two months’ wages. |
Employee Dismissal Under Article 80
Article 80 of Saudi Labor Law covers cases in which an employer may rescind the contract without end-of-service benefits, notice, or compensation. However, these cases are specifically defined by law and cannot be used for any reason. You can also review the employee warning system under Saudi Labor Law to understand procedures related to warnings and workplace violations.
Examples include certain forms of assault, serious breaches of obligations or lawful instructions after the required conditions are met, certain forms of misconduct or dishonesty, disclosure of work secrets, and other cases specifically listed in the provision.
Employee Termination of the Contract Under Article 81
Article 81 gives employees, in specific cases, the right to leave work without notice while retaining their statutory rights.
Employer Fails to Meet Obligations
If the employer fails to fulfill material contractual or statutory obligations in a case covered by the provision.
Fraud at the Time of Contracting
If fraudulent methods were used when entering into the contract regarding the employment conditions.
Material Change in the Work
If the employee is assigned work that materially differs from what was agreed in cases where the law permits the employee to leave.
Assault or Harsh Treatment
If assault or conduct contrary to the applicable rules occurs and makes continuation of employment impossible.
Serious Safety Risk
If there is a serious danger threatening the employee’s health or safety and it is not addressed as required.
Conditions That Force the Employee to Leave
The article includes cases where the employer’s conduct effectively causes the employee to appear to be the party who ended the contract.
Mutual Termination of an Employment Contract
Mutual employment contract termination is a practical way to end the relationship when the employee and employer agree not to continue the contract. Article 74 provides for the contract to end by agreement between the parties, provided that the employee’s consent is given in writing in this case.
What Should Be Clarified in a Termination Agreement?
- Last working day.
- The reason for termination, if the parties agree to state it.
- Unpaid wages and other outstanding entitlements.
- End-of-service benefits, if applicable.
- Leave balance and other amounts due.
- Any agreed compensation.
- Evidence of both parties’ consent to termination.
Do you want a termination agreement drafted or a final settlement reviewed before signing?
Resignation and End-of-Service Benefits
Resignation is an independent reason for ending the employment relationship, but end-of-service benefits upon resignation are not calculated in the same way in every case. Article 85 establishes special percentages based on length of service.
| Length of Service at Resignation | End-of-Service Benefit |
|---|---|
| More than 2 years and up to 5 years | One-third of the benefit otherwise due under the general rules. |
| More than 5 years and less than 10 years | Two-thirds of the benefit otherwise due under the general rules. |
| 10 years or more | The full benefit under the general rules. |
How to Calculate End-of-Service Benefits
Under Article 84, the general basis for the benefit is half a month’s wage for each of the first five years of service and one month’s wage for each year thereafter, with fractions of a year calculated proportionally to the period worked.
| Length of Service | Benefit Basis |
|---|---|
| First 5 years | Half a month’s wage for each year. |
| After 5 years | One month’s wage for each year. |
| Part of a year | Calculated proportionally to the period worked. |
Simple Example
If the employee has 8 years of service and the final wage used for the calculation is SAR 9,000:
First five years: 5 × 4,500 = SAR 22,500.
Next three years: 3 × 9,000 = SAR 27,000.
Basic total in this example = SAR 49,500 before applying the special rules based on the reason the employment relationship ended, such as resignation.
Final Settlement of Employee Rights After Contract Termination
After employment contract termination in Saudi Arabia, the settlement is not limited to the final salary. All entitlements arising from the employment relationship up to the termination date should be reviewed.
- Wages due through the last working day.
- End-of-service benefits, where applicable.
- Financial compensation for accrued leave, according to the applicable rules.
- Notice pay, where applicable.
- Compensation for unlawful termination when the conditions of Article 77 are met.
- Any other established and payable entitlements under the contract and law.
After the employment relationship ends, the establishment may also need to review the employee’s status with social insurance for establishments and complete the procedures associated with the end of employment.
The establishment should also ensure that the employee is excluded from social insurance after the employment relationship ends, in accordance with the applicable procedures and requirements.
Article 88 provides that if the employer terminates the contract, the employer must settle the employee’s rights and pay the amounts due within a period not exceeding one week, while the period is two weeks if the employee is the party who ended the contract.
How to Terminate an Employment Contract Through Qiwa
The Ministry of Human Resources provides the Termination of Contractual Relationship service electronically through the Qiwa Platform. According to the official service, an employee with an active contract can submit a termination request from their account. citeturn0search0
To understand the full picture of electronic contract management, you can also review the guide to Qiwa contract authentication.
Log in to Qiwa Individuals
The employee logs in to their Qiwa Individuals account.
Go to Employment Contracts
From the Services section, select Employment Contracts.
Select the Contract
Select the active contract connected to the employment relationship the employee wants to end.
Select Terminate Contract
Select the Terminate Contract service and proceed to the reason.
Select the Termination Reason
Choose the appropriate reason from the available options.
Set the Termination Date
Specify the date on which the employment relationship will end according to the applicable case and procedure.
Review and Submit the Request
Review the information and submit the termination request electronically.
Common Mistakes When Terminating Employment Contracts
- Terminating the contract without reviewing its type: The rules for fixed-term and indefinite-term contracts differ.
- Failing to comply with the notice period: This may result in notice pay becoming due.
- Using Article 80 incorrectly: The article contains specific cases and requirements.
- Confusing Article 77 compensation with end-of-service benefits: Compensation for unlawful termination and end-of-service benefits are separate entitlements.
- Ignoring leave and other entitlements: The final settlement should include all rights due up to the end of the employment relationship.
- Signing a release without reviewing it: Confirm the amounts and details before signing.
- Failing to document the termination: Keep requests, notices, agreements, and documents related to the termination.
Tips for Employers Before Terminating an Employee’s Contract
Review the Contract Type
Determine whether the contract is fixed-term or indefinite-term before choosing the termination method.
Identify the Legal Ground
Make sure there is a clear legal basis for termination, especially in dismissal cases.
Calculate Entitlements
Review the final salary, end-of-service benefits, leave, and any termination-related allowances or compensation.
Document the Procedure
Keep notices, decisions, releases, and documents proving how the employment relationship ended.
Tips for Employees Before Terminating the Contract or Resigning
- Read the employment contract and verify its type, duration, and notice clause.
- Identify the reason for termination before submitting the request.
- Check the required notice period.
- Estimate end-of-service benefits and other entitlements in advance.
- Keep copies of the contract, correspondence, and termination request.
- Do not sign a release before reviewing the amounts due.
Frequently Asked Questions About Employment Contract Termination in Saudi Arabia
What is employment contract termination in Saudi Arabia?
It is the end of the contractual relationship between an employee and an employer under one of the legally recognized cases, such as contract expiry, agreement between the parties, termination of an indefinite-term contract under the applicable rules, or resignation.
What are the employment contract termination cases under Article 74?
They include written agreement between the parties, expiry of a fixed-term contract, termination of an indefinite-term contract under Article 75, resignation, force majeure, permanent closure of the establishment, termination of the activity, and certain other statutory cases.
What is the notice period for terminating an indefinite-term contract?
If wages are paid monthly, the notice period is 30 days for the employee and 60 days for the employer. If wages are not paid monthly, the period is 30 days for either party.
What happens if I do not comply with the notice period?
Under Article 76, the party that terminates the contract without observing the notice period must pay an amount equal to the employee’s wage for the notice period, unless the parties agree on greater compensation.
What is Article 77 compensation?
If the contract is terminated unlawfully and the contract does not specify compensation, compensation for an indefinite-term contract is 15 days’ wages for each year of service, while compensation for a fixed-term contract is the wages for the remaining period, subject in both cases to a minimum of two months’ wages.
Can an employee be dismissed without notice?
Yes, in the cases specified in Article 80 and subject to the applicable requirements and procedures, not simply because the employer wants to terminate the employee.
Can an employee leave work without notice?
Yes, in the cases specified under Article 81, such as certain forms of the employer’s failure to meet obligations, serious danger, or treatment that gives the employee the right to leave work.
Is an employee entitled to end-of-service benefits upon resignation?
An employee may be entitled to end-of-service benefits upon resignation, but the amount is affected by length of service under Article 85 and related provisions.
When should employee rights be settled after contract termination?
If the employer terminates the contract, the employee’s rights should be settled within a period not exceeding one week. If the employee terminates the contract, the period is two weeks under Article 88.
How can an employment contract be terminated through Qiwa?
The employee logs in to Qiwa Individuals, then goes to Services and Employment Contracts, selects the contract, chooses “Terminate Contract,” specifies the reason and date, reviews the request, and submits it. citeturn0search0
Does mutual contract termination require the employee’s consent?
Yes. Mutual termination is based on agreement between the parties, and Article 74 requires the employee’s consent to be given in writing in this case.
How Does Holoul 360 Help With Employment Contract Termination and Employee Affairs Management?
At Holoul 360, we provide specialized services to help establishments manage employment relationships in compliance with Saudi Labor Law, from contract review through termination of the employment relationship and settlement of employee entitlements.
| Service | What We Provide |
|---|---|
| Employment Contract Review | Review of the contract type, clauses, termination conditions, and notice requirements. |
| Termination Agreement Drafting | Preparation of mutual termination agreements in line with applicable legal requirements. |
| Dismissal Procedure Review | Support in reviewing the legal basis and procedures before terminating an employee’s service. |
| Entitlement Calculation | Review of end-of-service benefits, notice pay, compensation, and other entitlements. |
| Employee Final Settlement | Organization of final settlement steps and documentation related to the end of employment. |
| Employee Affairs Services | Support for establishments in managing contracts, employee files, and related procedures. |
Protect Your Company and Employees with Holoul 360
If you are looking for a correct and safe way to terminate an employment contract in Saudi Arabia, reviewing the contract, legal grounds, and entitlements before making the decision can help reduce the risk of future disputes and claims.
Start by reviewing the employment contract, identify the appropriate termination method, calculate the entitlements, and document the procedures clearly.