Early Termination of Employment Contracts in Saudi Arabia: Legal and Non-Compliant Cases
Introduction
Both employers and employees often face significant legal and procedural challenges when attempting to terminate an employment contract before its agreed end dateGiven the strict protections embedded in Saudi Labor Law, understanding the legal framework for termination is not only essential for legal compliance but also critical from a business standpoint.As a licensed attorney, I will outline below the scenarios where early termination is considered lawful, followed by cases that fall outside legal bounds, and finally the consequences of unlawful termination under Saudi law.
1. When Is Early Termination of an Employment Contract Legally Permissible?
Under Saudi Labor Law, either party may lawfully terminate a contract before its expiration in the following eight situations:
- Mutual Agreement: Both parties consent in writing, with the employee’s explicit signature required.
- Expiration of Term: The contract ends naturally without renewal.
- Force Majeure: Events such as wars or natural disasters that make the execution of the contract impossible.
- Permanent Closure of the Business: A complete and final shutdown of the employer’s operations.
- Final Judicial Ruling: For example, a court decision or insolvency ruling that leads to the termination of the company’s operations.
- Accepted Written Resignation: Becomes effective automatically if the employer remains silent for 30 days, or upon formal acceptance.
- Probationary Period Clause: Provided the period does not exceed 180 days and is explicitly stated in the contract.
- Violations under Article 80: Including physical assault or breach of confidentiality, provided proper investigation and warnings are documented.
Note: Termination under Article 80 without completing due process can expose the employer to substantial compensation claims.
2. When Is Early Termination Considered Unlawful?
Termination is deemed unlawful if carried out by either party without valid legal grounds or in violation of procedural requirements. This includes:
- Citing Article 80 violations without substantial evidence or without adhering to legally required disciplinary procedures.
- Relying on a probation period that was not explicitly stated in the contract or one that has already expired.
- Terminating the contract based solely on personal reasons, without regard to the remaining contract term or the other party’s entitlements.
3. Compensation for Unlawful Termination
Under Saudi labor regulations, the injured party—typically the employee—is entitled to compensation equal to the wages for the remainder of the contract term, unless otherwise agreed in writing. Additional allowances or benefits may also be awarded if actual harm is proven, such as loss of an alternative employment opportunity.
Practical Guidance for Employers and Employees
- Always document mutual terminations in a written and signed agreement.
- Clearly state the probation period and its duration when drafting the employment contract.
- Consult a legal expert before proceeding with any termination to avoid unexpected liabilities or legal exposure.
Need Tailored Legal Advice?
we specialize in Saudi labor law and provide expert guidance on employment contracts, termination procedures, and dispute resolution. Click the "Contact Us" icon at the bottom of the page to schedule a consultation with one of our licensed legal advisors. Yaqeen Al Farasa Law Firm, .
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The information provided herein is for general awareness only and does not constitute legal advice or create an attorney‑client relationship. For tailored guidance, please contact Yaqeen Al‑Farasa Law Firm
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