The Saudi Labor Law outlines several key guidelines and procedures regarding employment termination, focusing on safeguarding both employees and employers. Among the most essential components within the employment relationship is the right to terminate a contract, a significant area regulated by Article 75, and some other provisions i.e. 77, 80, and 74 of the Saudi Labor Law.
This article clarifies that the employment contract is made for indefinite period but it can be terminated for certain reasons and grounds.
Also read: Limited vs Unlimited Contract in UAE
Indefinite Period of Employment (No Stipulated Period)
Article 75 of Saudi Labor law permits parties to an indefinite employment contract to have rights to terminate the contract under certain circumstances.
Here’s an overview:
- Notice Period Requirements: If an employee receives wages on a monthly basis, the party that seeks to dismiss the employee must give a written notice of dismissal at least 60 days before the date of dismissal. Employees paid according to a different schedule must be given written notice of dismissal 30 days before the date of dismissal.
- Grounds for Termination: Parties to the contract can both unilaterally exercise the right of termination based on the existence of valid reasons to be documented. That reason must be stated clearly in the termination notice to ensure that it does not cause any conflict and lead to further legal issues.
Compensation for Unlawful Contract Termination
Compensation provisions for unlawful contact termination include:
- Compensation for Indefinite Contracts: Where a contract of employment is for an indefinite period and the contract is being terminated without a proper legal reason, the employee is entitled to terminal payment of 15 days wages for each completed year of employment.
- Compensation for Fixed-Term Contracts: When a contract of a limited duration has been unfairly dismissed the worker has the right to wages for the rest of the contract duration.
- The amount paid as compensation must not be less than two months wages so as to provide justice to any employee who has been unfairly dismissed.
What are The Grounds for Immediate Dismissal Without Wages?
There are grounds for immediate termination under the labor law as given:
- Physical Attack: Any worker who physically assaults the employer or any other superior is entitled to dismissal without prior notice. This is such as using violence or force in a workplace, including Violence motivated by substance use or alcohol dependence.
- Failure to Comply with Orders of Law: When an employee has disciplined himself to completely disobey lawful directives at the workplace, this means he can be fired. Failure to follow orders is unlawful and can destabilize the authority of an employer or management team in an organization.
- Workplace Safety Violations: Not following other measures may result in termination of employment right away if the violation jeopardizes people or threatens the employee’s health. This could include failing to take measures that are standard practice in a line of business that has many controls imposed on it due to safety sensitivity, for instance a hospital or a factory.
- Unethical or Moral Character Management: Sexual harassment; any act of dishonesty or other misconduct in a manner that will be in breach of contractual terms are likely to cause termination immediately. This could involve wrongdoing, manipulation, or actions that are not acceptable in the society by the society standards. It is operationally critical for a company to sustain its set and recognized corporate values of the company within the organization.
- Voluntary Shrinking of Earnings for Employer’s Benefit: When an employee embezzles money from the employer, or takes any other unlawful action, or while being grossly negligent, the employer can fairly dismiss the employee without any notice. Risk can be defined as taking any action that compromises the company’s financial value, its standing or operations.
- Deception in Hiring: Lying on the employee’s application form, a candidate who submits fake information in their CV or CV over-qualification, or false certification is a form of mild betrayal of the employer’s trust. The employers may terminate employees who had been hired through misrepresentation.
- During Probation: The new employees especially those in probation may be dismissed without prior notice if he or she is found wanting in performance. Probation is a realistic point whereby most employees are judged as to suitability for a certain job, and can be dismissed relatively easily.
- Excessive Unapproved Absence: Another common cause is unlawful truancy in connection with which an employee can be dismissed if the absence is not excused. Employment contract can be legally terminated if an employee has been absent for more than 30 days in the year or if the employee has taken the 15 days continuous leave, with the employer’s permission.
- Prohibition Against Revelation of Company Secrets: Whatever information an employee receives in confidence, including sensitive or proprietary data, is prohibited to share with the company. Suppose, an employee sends information, including secret data and trade secrets, to third parties; they can be terminated immediately since these compromises the main basics of employer – employee relations.
Conditions for Lawful Contract Termination
Both employers and employees need to comprehend these grounds to establish clear expectations and to recognize the conditions under which the employment relationship may be legally terminated. Below are two primary circumstances in which a contract may lawfully be terminated:
- Mutual Agreement: A contract can be terminated as and when both the contracting parties feel like terminating it. This is most common also since it involves express consent of both the parties to the contract. For instance, if both the employer and the employee consider it in the best interest of both to no longer continue a business relationship, they may mutually consent to the early termination of the contract. This kind of contract termination is often used when both parties desire to avoid going to court on the contract and want to leave the business relationship on a good note. This should not be the case since all dealings between two parties should be put in writing in order to minimize ensuing disputes.
- Contract Term Expiration: Most of the contracts are agreed to run for a certain period or are intended to be effective for some particular time when a certain event happens. If there is a term attached to the agreement it ends after the expiry of the term unless otherwise the agreement is renewed. For instance, where an employment was made under one-year contract, the employment will lapse at the expiry of the year, unless the contract was renewed. There is usually a provision provided whereby such a contract can be renewed but if nothing is done, then it lapses.
- Retirement Age: Retirement age in the law is proposed to be 60 years for both sexes, but early retirement seems possible too. Where an employee is in a fixed term contract and the period of such contract does last beyond the retirement age then the contract is likely to be completed at this time unless the parties have otherwise agreed to extend the contract.
End-of-Service Award in Saudi Arabia Labor Law
As per the Saudi Arabia Labor Law, employees have rights to be awarded formally known as end of service benefits based on the years of their service. This is a fundamental part among the many that form the country’s remuneration policy and enables a proper and respectable parting when an employment relationship ends.
Also read: Termination of Employment Contract in UAE
How To Calculate the Benefits Of End-of-Service?
- It is stipulated as a half month salary for each year of service for the first five years.
- Every year over the initial five years, the employees can be paid a full month’s wage for each year.
- Where award is beneficial where it offers financial security to the client/employees with regard to the service that they have offered to their organization’.
In conclusion, Saudi Arabia has established fair procedures within its labor laws concerning employment dismissal, thereby safeguarding the rights of both employers and employees.
The Saudi Labor Law provides clear guidelines on contract termination in Articles 75, 77, 80, and 74, which contribute to a stable legal framework by upholding and promoting legal rights in contract termination matters.
Both employees and employers in Saudi Arabia need to be familiar with these provisions. When all parties involved in employment relationships adhere to these guidelines, it enhances the protection of employment rights and fosters more stable, positive working relationships with reduced tension.