By Lawyer/Omar Baghdadi
•
September 18, 2025
Termination of Employment and Unlawful Dismissal in Saudi Arabia: Rights and Obligations under the New Labor Law Ending an employment contract or dismissing an employee is one of the most critical issues that both employers and employees may face. With the recent developments in the Saudi labor market, it has become essential to understand what the Saudi Labor Law stipulates regarding termination of employment and unlawful (unfair) dismissal, in order to safeguard the rights of all parties and avoid legal disputes. 1. Understanding Termination of Employment under Saudi Labor Law: The Saudi Labor Law defines an employment contract as an agreement between an employer and an employee, where the employee undertakes to perform a specific job under the employer’s supervision in return for wages. This contract may be terminated in the following cases: * Expiration of a fixed-term contract: When the contract expires without renewal. * Mutual agreement: Provided that the agreement is made in writing. * Retirement age: Unless otherwise agreed. * Force majeure: Circumstances beyond control that make the continuation of the contract impossible. Official Reference: Saudi Labor Law – Part Five (Termination of Contract) 2. Lawful Termination (Termination with Legal Justification): The law allows the employer to terminate an employment contract without severance pay, notice, or compensation in specific cases as provided under Article 80 of the Saudi Labor Law, including: * The employee assaults the employer or a manager during work. * Serious breach of contractual obligations. * Acts involving dishonesty or moral misconduct. * Absence from work without a valid reason for a specified period. The law requires that violations be documented and that an official internal investigation be conducted, giving the employee the right to defend themselves. 3. Unlawful (Unfair) Dismissal and Compensation: Unlawful dismissal occurs when an employer terminates an employee’s contract without a legitimate reason or without following the legal procedures. Examples include: * Termination for demanding statutory rights. * Dismissal under false pretenses (such as unproven “restructuring” claims). Compensation Entitlements: * Fixed-term contracts: The employee is entitled to compensation equal to the wages remaining until the end of the contract. * Indefinite-term contracts: The employee is entitled to 15 days’ wages for each year of service, provided that the * total compensation is not less than two months’ wages. * End-of-service benefits: As per Article 84, the employee is entitled to half a month’s wage for each of the first five years of service and one full month’s wage for each subsequent year. Official Reference: Ministry of Human Resources and Social Development – Guide to Termination of Employment 4. Steps to File a Labor Complaint In the case of unlawful dismissal, an employee may file a labor complaint through the following steps: * Amicable settlement via “Wudi” platform: A request for amicable settlement must be submitted within 21 days. * If settlement fails, the case is referred to the Labor Court through the Ministry of Justice. * The court hears and resolves the case within an expedited legal timeframe to ensure swift adjudication. Wudi Platform – official online service for amicable labor dispute resolution. 5. Practical Advice for Business Owners * Digitally document all employment contracts through the Qiwa platform to avoid disputes. * Maintain written records of investigations and administrative reports in case of disciplinary termination. * Consult a specialized labor lawyer before terminating any employment relationship, especially for long-term or senior positions. The Saudi Labor Law provides a balanced framework that protects employee rights while enabling employers to manage their operations effectively. However, failure to comply with the legal requirements for termination may lead to costly labor disputes and compensation claims. Therefore, business owners and employers are strongly advised to adhere to the law and seek professional legal counsel before ending any employment relationship.