Employment Contracts in Saudi Arabia: More Than Just Paperwork

Employment contracts in Saudi Arabia are the foundation of every professional relationship—whether you’re hiring talent or accepting a new role. But in a country with specific legal requirements, especially for expatriate workers, knowing what’s inside that contract can make all the difference.

In this guide, we break down everything you need to know about employment contracts in Saudi Arabia—how to write them, what they must include, how to terminate them legally, and the compensations you’re entitled to after leaving a job.

Terms of Writing an Employment Contracts

The conditions for employment contract in Saudi Arabia can be summarized as follows:

1. Identification of Both Parties:
    employment contracts must clearly state the full legal names of both the employee and the employer, along with verified identity details, nationalities, and official addresses.
2. Job Title and Work Location:
    The type of work to be performed and the specific location where the employee will carry out their duties must be explicitly stated.
3. Wages and Payment Terms:
    A Saudi labor law employment contract must specify the agreed-upon salary, including the payment method and schedule (monthly, bi-weekly, etc.).
4. Start Date of Employment:
    Indicating the commencement date of employment is critical, especially for fixed-term contracts, as it directly impacts the contract’s termination or renewal timeline.
5. Type and Duration of Contract:
    The agreement must clarify whether it is a fixed-term or indefinite contract. It’s important to note that contracts for non-Saudi employees must be fixed-term by law.
6. Probation Period (if applicable):
    If a probationary period is agreed upon, its duration must be clearly stated and must not exceed the legally permitted limit under the Saudi Labor Law.
7. Duties and Rights of Both Parties:
    employment contracts must outline the obligations and entitlements of each party, ensuring that the employee’s rights are not less than the minimum standards set by Saudi labor regulations and the implementing bylaws.
8. Reference to Applicable Regulations:
    The contract should include a clause stating that it is subject to the employer’s approved internal regulations, as well as the Saudi Labor Law and its executive bylaws.
9. Signatures and Contract Date:
    The contract must be signed by both the employer (or their authorized representative) and the employee, with the date of signing clearly mentioned.

Read also: Complete Guide to the employment contract in Saudi Arabia

Essential Elements of a Employment Termination Letter

1. Letterhead and Title:
    Include the company’s name, official address, and the date of issuance at the top of the letter.
2. Formal Salutation:
    Begin the letter with a polite greeting, such as:
    “Dear Mr./Ms. [Employee’s Full Name],”
3. Purpose of the Letter:
    Clearly state the purpose of the letter. For example:
    “We would like to inform you of the termination of the fixed-term employment contract signed between us on [contract date].”
4. Contract Details:
    Mention key details of the contract, such as the start date, the agreed duration, and the employee’s job title.
5. Reason for Termination (if applicable):
    If there is a legal or contractual reason for termination, it should be stated. Example:
    “Due to the expiration of the contract term…” or
    “As a result of [state legal reason]…”
6. Termination Date:
    Specify the official date of termination. Example:
    “The contract will be terminated effective as of [termination date].”
7. Financial Entitlements:
    Clarify the employee’s financial rights and dues. For instance:
    “All your financial entitlements, including salary and accrued leave, will be paid up to the date of termination.”
8. Notice Period (if applicable):
    If prior notice is required, mention the period given. Example:
    “You have been notified [number of days] in advance, in accordance with legal and contractual obligations.”
9. End-of-Service Certificate:
    Mention the issuance of an official certificate. Example:
    “An end-of-service certificate will be issued indicating your job title and the duration of your employment.”
10. Signature:
     The letter should be signed by an authorized representative of the company, with their name and job title clearly stated.

End Contract Letter to Employer​

• Date: [Insert Date]
• To: Mr./Ms. [Employee Full Name]
• Position: [Job Title]
• Company: [Company Name]
• Subject: Termination of Employment Contract
• Dear Mr./Ms. [Name],

We hereby inform you that your fixed-term employment contract, signed on [Contract Date], will be terminated effective [Termination Date].

Details of the contract:  

• Start Date: [Start Date]
• Job Title: [Job Title]
• Contract Type: Fixed-Term
• Reason for termination: [e.g., Expiry of contract / Restructuring / Legal reason]

All your financial entitlements, including salary, unpaid leave, and applicable bonuses, will be settled in accordance with Saudi labor law and the company’s policies.

• You have been notified [X days/weeks] in advance, in accordance with legal requirements.
• An end-of-service certificate will be issued to reflect your service duration and position.
• We appreciate your contributions to the company and wish you success in your future endeavors.
• Sincerely, 
• [Full Name] 
• [Position] 
• [Company Name] 
• [Signature]

Check out: The Saudi Industry Forum: Etqan Law Firm at the Heart of the Event

Compensation and Entitlements After Termination of a Fixed-Term Employment Contracts

When a fixed-term employment contract ends, the employee is entitled to specific compensations and benefits in accordance with the contract terms and applicable labor laws in Saudi Arabia. Below are the key entitlements to be considered:

1. Outstanding Salary
    The employee is entitled to receive their full salary up to the last working day, including any applicable overtime or allowances.
2. Unused Annual Leave Compensation
    If the employee has unused annual leave days, they are entitled to financial compensation for those days.
3. Early Termination Compensation
    If the contract is terminated before its agreed end date without a valid legal reason, the employee has the right to compensation equal to the remaining period of the contract.
4. Notice Period Compensation
    If the employer fails to give the required advance notice, the employee is entitled to a payment equivalent to the duration of the notice period.
5. Bonuses and Allowances
    Any due bonuses, incentives, or periodic allowances must be paid in accordance with the company’s internal policies or the employment agreement.
6. End-of-Service Certificate
    The employee is entitled to receive an end-of-service certificate that clearly outlines their job title, period of employment, and responsibilities—without any negative remarks.

The Importance of Following Legal Procedures When Terminating a Contract

Properly terminating an employment contract in compliance with Saudi labor regulations ensures the protection of both parties’ rights and minimizes the risk of disputes. Adhering to the correct procedures—such as providing prior notice, timely payment of dues, and issuing the end-of-service certificate—enhances the company’s professional image and fosters respectful employee relations. That’s Why Is Legal Compliance Important:

• Protecting Employee Rights:
   Ensures that the employee receives all financial and legal entitlements.
• Avoiding Legal Disputes:
   Compliance reduces the likelihood of labor complaints or lawsuits.
• Preserving Company Reputation:
   Professional and lawful contract termination enhances the employer’s credibility.
• Promoting a Positive Work Environment:
   Respecting contract terms builds mutual trust between employers and employees.

In cases of legal ambiguity or uncertainty, it is highly recommended to consult a legal advisor or a lawyer specialized in Saudi labor law—such as the professionals at Etqan Law Firm—to ensure full compliance with the regulations and safeguard all rights.

Learn about: Guide To Saudi Labor Law Termination of Contract by Employee

Conclusion

Saudi employment contracts are non-negotiable. From salary terms and job roles to contract duration and termination rules—every clause can protect you or put you at risk.

Whether you’re an employer striving for compliance or an employee seeking clarity. For expert legal support that ensures your employment contracts meet all legal standards and protect your rights, Etqan Law Firm is here to help. Our experienced legal professionals specialize in Saudi labor law.

The Etqan Al Mutamayza Law Firm is ready to provide the essential support you need. You can reach their team at the following mobile numbers: +96656113776, +966541110440, +966504315333.

Additionally, feel free to visit our branches located at:

• Jeddah: Al-Aziziyah District, Mohammed bin Abdulaziz Street (Tahlia)
• Riyadh: King Abdulaziz Street, across from the Kingdom Tower
• Dammam: Al-Ashri’a Street, Al-Badeea, Dammam 32415.

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