Penalty for Breaking Employment Contract in Saudi Arabia: Legal Consequences

Penalty for breaking employment contract in Saudi Arabia is a highly significant subject for both employers and employees, as it delineates the legal repercussions and financial obligations that arise when an employment contract is terminated unlawfully or without valid justification.

To address such situations, the Saudi Labor Law establishes clear and detailed regulations aimed at ensuring fairness, safeguarding the interests of both employers and employees, and providing a structured process for lawful contract termination and the imposition of appropriate penalties when violations occur.

Penalty for Breaking Employment Contract in Saudi Arabia

If one of the parties terminates the employment contract in accordance with the Saudi Labor Law and through a lawful process, no penalty for breaking employment contract in Saudi Arabia will be imposed. However, if the contract is terminated without a legitimate reason or in violation of the law, it is considered “unlawful termination” or “arbitrary dismissal,” and the party at fault will be required to pay compensation as stipulated in Article 77 of the Labor Law.

According to this article, the party who unlawfully terminates the contract must compensate the other party. The compensation amount depends on what was agreed upon in the contract. If the contract does not specify a compensation amount, the law guarantees fair compensation as follows:

• For an indefinite-term contract, compensation equals 15 days’ wages for each year of the employee’s service.
• For a fixed-term contract, compensation equals the wages for the remaining period of the contract.
• In all cases, compensation must not be less than two months’ wages based on the employee’s last received salary.

It is important to note that awarding compensation for arbitrary dismissal does not exempt the violator from other legal penalties if the termination involved a criminal act, such as physical assault, harassment, or any other serious offense that may result in further legal consequences under other applicable laws in the Kingdom.

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

Saudi Labor Law Termination of Contract by Employee

In Saudi Arabia, the employment relationship between an employee and an employer is governed by an employment contract that clearly outlines the rights and obligations of both parties throughout the duration of the contract until its termination. However, certain unforeseen circumstances may arise that make it impossible to continue this contractual relationship. For this reason, the Saudi Labor Law allows either party to terminate the contract if there are legitimate and justified reasons, while also specifying the penalty for breaking employment contract in Saudi Arabia in cases where termination occurs without lawful cause.

Check out: Guide To Saudi Labor Law Termination of Contract by Employee

Termination of the Contract by the Employee During the Probation Period

An employee has the right to terminate the employment contract during the probation period without facing any legal consequences. This period is intended to evaluate the compatibility between the employer and the employee. While the penalty for breaking employment contract in Saudi Arabia does not apply during probation, it is important to note that an employee may undergo probation more than once within the same company if transferred to a different position or job function, or if the employee had previously left work for more than six months and then returned, unless otherwise stated in the contract.

It is important to note that if the employee ends the contract during the probation period, they forfeit their right to an end-of-service benefit or any form of compensation. On the other hand, the employer is not entitled to claim any compensation for the employee’s early termination during this time. The probation period must not exceed three months, but it can be extended provided both parties agree in writing up to a maximum of six months.

Termination of a Fixed-Term Contract by the Employee

In the case of fixed-term contracts, the Saudi Labor Law specifically Article 81sets out a number of conditions under which the employee is allowed to terminate the contract without bearing any liability. These include:

• Being physically assaulted or attacked by the employer or a supervisor gives the employee the legal right to walk away from the job immediately.
• Facing abusive or violent treatment from management is a valid reason for the employee to terminate the contract without consequences.
• Discovering any fraud or deception by the employer especially regarding job terms or working conditions entitles the employee to end the contract lawfully.
• When the employer fails to meet their contractual commitments, the employee has the right to terminate the agreement.
• Being asked to perform duties not originally agreed upon in the contract can also justify the employee’s decision to leave.
• If the employer is clearly trying to make the work environment unbearable or is pressuring the employee unfairly to resign, that behavior is considered unlawful.
• Working in conditions that seriously threaten the employee’s health or safety, especially after notifying the employer and seeing no corrective action, is another legal ground for resignation.

In all of these cases, the employee has the right to terminate the contract immediately without it being considered a breach, and they are entitled to retain all their rights under the labor law.

How to Check My Employment Contract in Saudi Arabia?

Since the Ministry of Human Resources and Social Development now requires employers to officially document employment contracts through the “Qiwa” platform, once a contract is registered there, the information is automatically reflected across all related government entities, especially the General Organization for Social Insurance (GOSI).

This makes it easy for any employee in Saudi Arabia to verify the authenticity of their employment contract through either the Qiwa platform or the GOSI system.

Learn about: Article 74 Saudi Labor Law: Contract Termination Reasons

Verify your employment contract on Qiwa:

1. Log in to the Qiwa Individuals portal.
2. Select your workplace (company).
3. Choose the “Contract Management and Documentation” service.
4. Fill in the company details.
5. Enter the employee’s information.
6. Complete the contract details (job title, contract duration, working hours, additional clauses, etc.).
7. Submit the request to the employee for confirmation.

Verify your contract through GOSI (Social Insurance):

1. Visit the GOSI or open their official app.
2. Navigate to the “Services” section and choose “Individual Services.”
3. Select “Social Insurance” and click on “Subscribers’ Contract Documentation.”
4. Click “Apply for Service.”
5. Enter your National ID number and verification code.
6. Click “Confirm” to see a list of your pending or verified contracts.

Conclusion

Penalty for breaking employment contract in Saudi Arabia involves paying compensation if the contract is terminated without a valid reason. For precise legal advice and support on employment contract matters, you can contact Etqan Law Firm, which specializes in providing comprehensive legal solutions to ensure your rights under the Saudi Labor Law are fully protected.

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: +966550600204, +966551020060.

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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