Saudi Labour Law: A Guide to Termination and Resignation

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Table of Contents

• Employee Termination in Saudi Arabia: Key Rules for 2027
• Types of Employment Contracts in Saudi Arabia
• Notice Period for Termination and Resignation
• How Resignation Works After the 2025 Amendments
• Probation Period
• Termination With and Without Cause
• End-of-Service Award in Saudi Arabia
• Final Settlement Deadlines
• Retirement
• Employee Protections
• What This Means for Employers in 2027
• Need Support with Employee Termination and HR Compliance?
• FAQs on Termination in Saudi Arabia

Last updated: 4 November 2026 | Applies to: Private-sector employers and employees in Saudi Arabia

Ending an employment contract in Saudi Arabia is governed by the Saudi Labour Law, issued by Royal Decree No. M/51 of 1426H, as amended. The most recent major amendments came into force on 18 February 2025. They changed the notice period for employee resignations, introduced a formal resignation process and extended the maximum probation period. These rules continue to apply in 2027.

This guide explains how termination and resignation work, the notice periods that apply, when compensation is due, how the end-of-service award is calculated and the deadlines for paying final settlements.

Employee Termination in Saudi Arabia: Key Rules for 2027

• Employer notice (indefinite contract): 60 days’ written notice.
• Employee notice (indefinite contract): 30 days’ written notice.
• Resignation: deemed accepted if the employer does not respond within 30 days.
• Probation: up to 180 days by written agreement; either party can end the contract during probation.
• Unfair termination: compensation of at least two months’ wages, in addition to the end-of-service award.
• End-of-service award: half a month’s wage per year for the first 5 years, then one month’s wage per year after that.
• Final settlement: within one week if the employer ends the contract, within two weeks if the employee ends it.

Types of Employment Contracts in Saudi Arabia

Fixed-term contracts run for an agreed period and end on the expiry date unless renewed. Contracts for non-Saudi employees are fixed-term. If the contract does not state a term, the work permit period is generally treated as the contract term.

Indefinite-term contracts have no end date and continue until either party ends them in line with the law. A fixed-term contract for a Saudi national can become indefinite if it is renewed several times or continues after expiry, depending on the circumstances.

All private-sector employment contracts should be documented and authenticated on the Qiwa platform.

Notice Period for Termination and Resignation

Under Article 75, as amended in February 2025, either party can end an indefinite-term contract for a valid reason by giving written notice:

Before the amendments, the notice period was the same for both sides. The employment contract can set longer notice, but not shorter than the legal minimum. If the party ending the contract does not give the required notice, it must pay the other party an amount equal to the employee’s wage for the notice period.

Fixed-term contracts end automatically on their expiry date. If either party ends a fixed-term contract early without a legitimate reason, the other party can claim compensation (see below).

How Resignation Works After the 2025 Amendments

The amendments introduced a formal resignation process. A resignation must be written, voluntary and unconditional. The key rules are:

• The employer must accept or respond to the resignation within 30 days. If it does not, the resignation is automatically treated as accepted.
• The employer can delay acceptance by up to 60 days for a valid work-related reason, provided it gives written reasons within the first 30 days.
• The employee can withdraw the resignation within 7 days of submitting it, if the employer has not already accepted it.
• The employee cannot set a future effective date for the resignation.

Employment ends on the earliest of: the date the employer accepts the resignation, 30 days after submission if there is no response, or the end of a justified delay period.

Probation Period

The employer and employee can agree in writing to a probation period of up to 180 days. Either party can end the contract during probation without notice and without compensation, but any wages already earned must still be paid. Certain leave periods, such as sick leave, are excluded from the probation period.

Termination With and Without Cause

Termination without notice or end-of-service award (Article 80)

An employer can end the contract without notice, compensation or end-of-service award only in the specific cases listed in Article 80. These include assault on the employer, a manager or a colleague; failure to perform essential duties after a written warning; misconduct or acts breaching honesty or integrity; fraud or false documents used to get the job; disclosure of confidential work information; and prolonged unexcused absence after a written warning. The employee must be given the opportunity to state their position before the decision.

Employee leaving without notice (Article 81)

An employee can leave without notice and keep all statutory rights if the employer breaches its essential obligations. Examples include not paying wages, fraud in the terms of employment, assault or indecent behaviour by the employer or a manager, and conditions that create a serious danger to the employee’s safety or health.

Compensation for unfair termination (Article 77)

If a contract is ended for an illegitimate reason, the affected party is entitled to compensation, unless the contract specifies an amount:

This compensation is paid in addition to the end-of-service award.

End-of-Service Award in Saudi Arabia

Under Article 84, when the employer ends the contract or a fixed-term contract expires, the employee is entitled to an end-of-service award based on the last wage, which includes basic salary and fixed allowances:

• First 5 years: half a month’s wage for each year of service.
• After 5 years: one month’s wage for each year of service.
• Partial years are paid in proportion to the time worked.

End-of-service award on resignation (Article 85)

Under Article 87, the employee receives the full award, regardless of the reductions above, if they leave because of force majeure, or if a female employee ends her contract within six months of marriage or within three months of giving birth.

Example

An employee with a last wage of SAR 12,000 (basic salary plus fixed allowances) and 7 years of service:

First 5 years: 5 × (12,000 ÷ 2) = SAR 30,000
Next 2 years:  2 × 12,000       = SAR 24,000
Full award (employer termination or contract expiry) = SAR 54,000
If the employee resigns (5 to 10 years, two thirds) = SAR 36,000

Final Settlement Deadlines

Under Article 88, the employer must pay the employee’s wages and dues:

• Within one week of the end of employment if the employer ends the contract.
• Within two weeks if the employee ends the contract.

The final settlement should include outstanding salary, pay for unused annual leave, the end-of-service award and any compensation due. The employer may deduct amounts the employee legally owes in connection with the work.

Retirement

An employment contract can end when the employee reaches retirement age, unless the parties agree to continue. For Saudi employees, retirement age is linked to the social insurance rules. Under the new Social Insurance Law, which applies to Saudis who joined the workforce for the first time on or after 3 July 2024, the statutory retirement age is 65, with earlier retirement possible after the required contribution period. Existing contributors remain under the earlier rules. Check the employee’s GOSI status before ending a contract on retirement grounds.

Employee Protections

• An employer cannot end a contract because the employee is on sick leave within the legal sick leave entitlement.
• An employee cannot be dismissed during annual leave.
• Female employees are protected from dismissal during pregnancy and maternity leave, and during illness resulting from pregnancy or childbirth, within the legal limits.
• A dismissal decision should be in writing and state the reason.

What This Means for Employers in 2027

• Update contract templates and HR policies to reflect 60 days’ employer notice and 30 days’ employee notice for indefinite contracts.
• Set up a process to respond to resignations within 30 days, with written reasons for any delay.
• Record probation periods in the contract and on Qiwa.
• Document warnings and investigations before relying on Article 80.
• Calculate end-of-service awards on the last wage, including fixed allowances, and pay final settlements within the legal deadline.

Need Support with Employee Termination and HR Compliance?

Termination errors often lead to labour disputes and penalties. Our payroll services in Saudi Arabia cover final settlements, end-of-service calculations, GOSI updates and payroll records, so your exits stay compliant with the Saudi Labour Law in 2027.

FAQs on Termination in Saudi Arabia

Sources:
Ministry of Human Resources and Social Development

Tareq Badarin

Research and Publications Department
Payroll Middle East
Tel: +971 4 2500251 | Email: sales@payrollmiddleeast.com