Unfair Dismissal in Saudi Arabia: Compensation Under Article 77

When a termination is lawful

Article 74 lists the situations in which an employment contract ends. They include:

• the parties agree to end it, with the worker's written consent;
• a fixed-term contract expires without being expressly renewed;
• the worker resigns;
• the worker reaches retirement age;
• force majeure;
• the establishment closes permanently;
• certain court rulings in bankruptcy proceedings.

For an indefinite contract with monthly pay, either party may end it for a legitimate reason, by written notice. The employer must give at least 60 days' notice, and the employee at least 30 (Article 75). If notice is not given, the wage for the notice period is payable, unless the parties agreed on a larger amount (Article 76).

The employer may dismiss without notice, compensation or end-of-service award only in the nine cases listed in Article 80. Even then, the worker must first be given the chance to state his objection. See Article 80.

A worker also cannot be terminated because of illness before using up the statutory sick leave periods (Article 82).

Compensation under Article 77

If the contract is ended without a legitimate reason, compensation is payable. If the contract sets its own amount, that amount applies. If not, Article 77 sets it:

Compensation is separate from your end-of-service award. When the employer ends the contract other than under Article 80, the full award under Article 84 is also due.

Worked example: fixed-term contract (the usual expat case)

An electrical engineer has a 3-year contract with an actual wage of SAR 9,000. After 18 months, the employer ends it with no legitimate reason. The contract sets no compensation figure.

• Article 77 compensation: 18 months remaining × 9,000 = SAR 162,000
• End-of-service award: 1.5 years × 4,500 = SAR 6,750
• Plus: unpaid wages, unused leave (Article 111) and the return ticket (Article 40)

If the contract had set compensation at, for example, three months' wage, the compensation would be SAR 27,000 instead. That is why the compensation clause in your contract matters.

Worked example: indefinite contract

This example mainly applies to Saudi employees, because a non-Saudi's contract stays fixed-term however often it is renewed (Implementing Regulations, Article 12). An employee on an indefinite, monthly-paid contract worked 6 years with an actual wage of SAR 12,000. The employer ended the contract without a legitimate reason.

• Article 77 compensation: 15 days × 6 years = 90 days' wage. The daily wage is 12,000 ÷ 30 = 400, so 90 × 400 = SAR 36,000. This is above the two-month minimum of SAR 24,000.
• End-of-service award: 5 × 6,000 + 1 × 12,000 = SAR 42,000

Your rights during the employer's notice

If your employer gives you notice, you may take one full day a week, or eight hours during the week, to look for another job, with pay. You choose the day or hours, and you must tell the employer at least one day in advance (Article 78).

What to do if you were dismissed

1. Ask for the termination reason in writing, and keep the letter.
2. Do not sign a release before checking the figures. See Signing a Final Settlement.
3. Collect your Qiwa contract, payslips and any warnings or investigation records.
4. File for amicable settlement with MHRSD. If it fails, the claim goes to the labor court. See How to File a Labor Complaint.
5. Act within 12 months of the end of the employment relationship. After that, a claim is not admissible unless the court accepts an excuse or the employer acknowledges the right (Article 234(a)).

If you plan to challenge your dismissal, check the time limit for filing a labor claim.

For employers

Before ending a contract, write down the legitimate reason and check which route applies: Article 74, Article 75 or Article 80. Check the compensation clause in the contract.

For fixed-term contracts, ending one early without a legitimate reason can cost the wage for the whole remaining term. See Labor Law Support for Employers.