Guide on Employee Termination in Saudi Arabia

 Working in Middle East grants people from all over the world a hub of opportunities. It is through

GUIDE ONof human EMPLOYEE TERMINATION IN SAUDI ARABIA the right kind resource consulting that many businesses have obtained talented

resources from worldwide to work in Saudi Arabia as well. However an expat cannot independently acquire a work visa in the Kingdom of Saudi Arabia unless a local Saudi or a foreign company which is legally registered in the country sponsors him. There are many HR outsourcing companies in Saudi Arabia which provide HR solutions to help employers in recruiting expat workers. It is common for foreign registered companies in Saudi Arabia to consult with HR outsourcing companies to enable those acquiring highly talented resources in KSA.  As there are rules and steps following the Saudi labor laws for hiring an employee, there are

certain factors which an employer and the employee both, need to keep in consideration while applying for employment termination as well.  Here are few things that both parties – the employer and the employee shall learn and

understand before signing up for an employment contract.

1. TYPE OF CONTRACT There are commonly two types of employment contracts in Saudi Arabia – open ended contract and fixed contract. An open ended contract is where the term of employment is not defined at the time of hiring. These types of contracts are also known as ‘permanent’, ‘indefinite’ or ‘retained’ contracts as there is no fixed tenure of employment agreed between the parties. Such kind of contract is often renewed and revised. On contrary to this, a fixed contract is the type of contract in which the service tenure is defined and agreed between the employer and employee. In a fixed contract, the employee is automatically terminated from the service on agreed date.

2. NOTICE PERIOD  Open ended Contract – The notice period for an open ended contract is of 60 days according

the Article 75 of Saudi Labor Law. Whether it is the employer or the employee, whoever wants to terminate the service contract, must give a notice of 60 days.  Fixed Contract – The employer with a fixed contract does not necessarily provide a notice to

the employee as the date for termination of service is decided at the time of contract being signed. However, a notice period of 30 days is defined as per Saudi Labor Law in case the employee wishes to end the service before the decided date.

3. RESIGNATION OR TERMINATION NOTICE  The notice or the resignation letter shall be in writing and must specify the reasons for

termination of contract. The reason for the termination of contract must be valid and shall not cause any harm to either of the parties. . If the employer terminates the employee earlier than the decided date, this may be noted as breach of contract.

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Salary Disbursement

 If the employee is terminated before the agreed date without a valid reason, the employer is

liable to pay their salary for two months at least.

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Retirement

 According

to the Article 83 of Saudi Labor Law, the age of retirement for male employee is sixty years and female employee is fifty five years. However it is up to the employee if they wish to work after retirement, with an agreement between them and employer they can continue the services.

4. END OF SERVICE SETTLEMENT

 According to Article 84 of Saudi Labor Law, the employer must pay the employee an end of

service award if the employee has worked in a company for five or more years. The end of service award is calculated by accumulating half of the salary of each month for the first five years and complete one month’s salary each month for the following years. The base salary to be considered is the last salary the employee draws.  An employer cannot terminate the employee on the basis of illness and other health related

issues. According to Saudi Labor Law, in such a case, the employee reserves the right to obtain sick leaves combined with annual leaves to secure the employment.  Whether you are the employee or the employer, the Saudi labor laws have clauses for guidance

of both parties. However, it is also a good option to consult reliable and experienced HR consultancy for HR solutions and clearer guidance on employee termination to prevent penalties.

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