Saudi labor law termination of contract by employee is a sensitive aspect that requires a thorough understanding of the legal framework, especially given the multiple circumstances in which an employee is permitted to terminate a contract without incurring legal repercussions. The law provides clear provisions allowing employees to terminate their contracts during probationary periods, fixed-term contracts, or in the event of violations that threaten their safety or dignity, as stated in Article (81).
This article aims to review the legitimate reasons, legal procedures, and consequences of contract termination by an employee, highlighting the balance the law achieves between flexibility in terminating employment relationships and protecting the rights of all parties.
المحتويات
Saudi Labor Law Termination of Contract by Employee
In Saudi Arabia, employment relationships are managed through a contract that clearly defines the roles and responsibilities of both the employer and the employee. However, sometimes unexpected situations happen that make it hard for one of the parties to continue the contract. In such cases, Saudi labor Law allows either side to end the contract, as long as there are valid reasons.
Saudi Labor Law Termination of Contract by Employee During the Probation Period
- An employee has the right to end their contract during the probation period without facing any penalties.
- This right is granted to both the employee and the employer during the probation period.
- The probation period is designed to test the suitability of the working relationship.
- Either party can choose to terminate the contract during this time without legal consequences.
- An employee may go through more than one probation period at the same company in cases such as:
- Moving to a different department or position
- Returning to work after being away for more than six months (unless the contract says otherwise)
- If the employee ends the contract during the probation period:
- They are not entitled to end-of-service benefits or any compensation
- The employer also cannot claim any compensation
- The standard probation period should not exceed three months
- However, it can be extended to a maximum of six months with written agreement from both sides
Read also: Article 74 Saudi Labor Law: Contract Termination Reasons
Saudi Labor Law Termination of Contract by Employee a Fixed-Term
According to Article (81) of Saudi Labor Law, an employee has the right to leave the job and end the contract without notice — while still keeping their full legal rights — if any of the following happens:
- The employer or a supervisor assaults or insults the employee.
- The employee is treated badly or unfairly at work.
- The employer deceives the employee regarding the terms of the job or the work environment.
- The employer fails to follow what was agreed upon in the contract.
- The employee is forced to do tasks that are not part of the contract.
- The employer pressures or mistreats the employee to force them to quit.
- The workplace poses a real danger to the employee’s health or safety, and the employer doesn’t act after being informed about the risk.
In such cases, the employee is legally allowed to leave the job and still receive all due rights, including end-of-service benefits, and this would not be considered a breach of contract.
When Can an Employment Contract Be Terminated in Saudi Arabia?
Open-ended Contracts
- Both the employer and employee can terminate the contract for a valid reason.
- A written notice must be given to the other party before termination, specifying the reason.
- The notice period must be:
- At least 60 days if the employee is paid monthly.
At least 30 days in other cases
- Article 81:
- The employee has the right to leave the job without notice and retain all their rights, provided that the termination falls under the conditions set in Article 81 of the Labor Law.
- Article 80:
- The employer can terminate the contract in certain cases as outlined in Article 80 of the Labor Law.
Check out: Saudi Labor Law Article 80: Employee Termination Rights
Main Legal Reasons to Saudi Labor Law Termination of Contract by Employee
Saudi Labor Law provides clear rules for ending employment contracts in a way that protects both the employer and the employee. There are several legal reasons that allow either side to end the contract without causing legal trouble. These include:
- Contract Expiry
If the contract is for a fixed period, it automatically ends when that time is over unless both sides agree to renew or extend it. - Mutual Agreement
The contract can be ended at any time if both the employer and employee agree. The employee must give written approval that they’re ending the contract willingly. - One-Sided Termination
In open-ended contracts, either the employer or the employee can end the contract, but they must give a written notice in advance.- If the employee is paid monthly: notice must be given two months in advance.
- If paid daily or weekly: one month’s notice is required.
- Payment Instead of Notice
If either party doesn’t want to wait through the notice period, they can pay the other party the salary equal to that time instead. - Termination Clause in the Contract
Some contracts include a specific financial penalty if one party ends the contract. If that clause exists, the agreed amount must be paid when the contract ends. - Retirement Age
The contract ends automatically when the employee reaches retirement age 60 for men and 50 for women unless both sides agree to continue. Early retirement is also possible if agreed upon. - Company Bankruptcy or Closure
If the business shuts down completely or declares bankruptcy, the employment contract ends because the job no longer exists. - Stopping the Specific Activity
If the company decides to stop the specific department or service the employee works in, this can be a valid reason to end the contract, even if the whole company doesn’t shut down. - Special Conditions in the Contract
Some contracts have special conditions for ending the job. If any of those agreed conditions happen, the contract can be ended based on that. - Force Majeure
If something major and out of anyone’s control happens like a natural disaster or national emergency that makes it impossible to continue working, the contract can be legally ended with no blame on either side.
Compensation for Terminating the Contract Without a Valid Reason
If the contract is terminated by either the employer or employee without a valid reason, the party that ends the contract must compensate the other party for any damage caused. The compensation is calculated based on the type of contract and the nature of the work as follows:
- For a fixed-term contract: If one party ends the contract, the other party must be paid compensation equal to the remaining period of the contract
- For an open-ended contract: The party ending the contract must pay compensation equal to 15 days’ salary for each year the employee worked.
- Minimum Compensation: The compensation amount should not be less than two months of the employee’s salary.
- If a specific amount is agreed in the contract: If the contract specifies a set compensation amount, the party terminating the contract must pay that amount.
If you need more information about terminating an employment contract, compensation for unfair dismissal, or how to calculate end-of-service benefits in Saudi Arabia, you can consult a labor law attorney from Etqan Law Firm.
Employee Contract Termination Form
If there are legitimate reasons, as stated in Saudi law, that encourage the employee to terminate the contract, the employee should submit a contract termination form.
This form should comply with the law and clearly outline the reasons that led the employee to request the contract termination, such as mistreatment, non-payment of wages, etc. The form must also include important details and specific conditions that the employee should be aware of, as well as the legal consequences of requesting compensation.
The compensation is an essential requirement and must be paid by the party wishing to terminate the contract to the other party who is affected by the termination, especially if there is no clear and justifiable reason for termination.
To proceed with the termination, the termination request form must be correct and in line with the conditions set by the law. The form should look like this:
Learn about: End of Service Benefits Saudi Labor Law: Rights After Contract Termination
Dear Sir/Madam,
- Employee’s Full Name: __________
- Nationality: __________
- Company Name: __________
To: Mr./Ms. __________ (Manager)
I am writing to request the termination of my employment contract, which I started on __________. I am requesting the termination based on the following reasons:
__________ (Detail the reasons)
I sincerely thank you for your cooperation.
Employee’s Signature: __________
Date of Letter: __________
Finally, Saudi labor law termination of contract by employee provides a comprehensive framework for terminating employment contracts by employees, preserving their rights without neglecting the interests of employers. It is essential that each party adhere to legal controls and seek the assistance of specialized entities such as Etqan Law Firm to provide accurate legal advice, especially in cases of disputes or ambiguity in the interpretation of legal provisions. This ensures a smooth and transparent termination of employment relationships, reflecting the legislative progress the Kingdom is pursuing to promote human rights and support economic development.
The Etqan Al Mutamayza Law Firm can provide the necessary support. You can contact their team
through the following mobile numbers: 056113776, 0541110440, 504315333
Alternatively, you can visit our branches:
- Jeddah: Al-Aziziyah District–Mohammed bin Abdulaziz Street (Tahlia)
- Riyadh: King Abdulaziz Street – In front of Kingdom
- Dammam: Al-Ashri’a Street, Al-Badeea, Dammam 32415.
FAQ
What is the contract termination law in Saudi Arabia?
In Saudi Arabia, both open-ended and fixed-term contracts are governed by specific regulations regarding termination. For open-ended contracts, either party can terminate the contract with a valid reason. However, a written notice must be provided to the other party before termination. The notice period is 60 days if the employee receives a monthly salary, or 30 days if the payment structure is different.
For fixed-term contracts, these can be terminated early by mutual agreement or if there is a valid reason. If terminated without cause, compensation may be required.
Employees also have rights under Saudi Labor Law. According to Article 81, employees are allowed to leave their job without notice and still retain their full rights in certain circumstances. On the other hand, Article 80 gives employers the right to terminate an employee’s contract under specific valid conditions, such as misconduct or violation of company policies.
What is the penalty for breaking the employment contract in Saudi Arabia?
If the employer terminates the contract without a valid reason, they are required to compensate the employee. This may involve paying for the remaining term of the contract or providing compensation equivalent to 15 days’ salary for every year worked if it’s an open-ended contract.If the employee breaks the contract without a valid reason, they must compensate the employer, either for the remaining contract period or as agreed in the contract.
If the contract is terminated without a valid reason, the party terminating it may be required to pay damages, including any lost wages. However, if the employer has a justified cause for termination under Article 80, such as employee misconduct, they are not required to provide compensation to the employee.
What are the conditions for terminating an employment contract in Saudi Arabia?
In Saudi Arabia, an employment contract can be terminated by either the employee or employer under certain conditions. For open-ended contracts, either party can terminate the contract for a valid reason, provided that a written notice is given. The notice period must be 60 days if the employee is paid monthly, or 30 days for other types of payments.
For fixed-term contracts, they can be terminated early by mutual agreement or valid reasons, and compensation may be required if terminated without cause. Employees have the right to leave without notice under specific circumstances outlined in Article 81 of the Saudi Labor Law, while employers can also terminate an employee’s contract for reasons such as misconduct, as stated in Article 80.