In the evolving business landscape of the Kingdom, understanding the legalities of the termination of contract in Saudi Arabia is paramount for both employers and employees. As we move through 2026, the Saudi Labor Law and the recent digital reforms via the Qiwa and Mudad platforms have brought unprecedented transparency to how employment relationships end.
Whether you are navigating an open-ended agreement or the termination of fixed term contract in Saudi Arabia, compliance with the Ministry of Human Resources and Social Development (MHRSD) regulations is the only way to avoid costly labor disputes and “Article 77” compensation claims.
1. Legitimate Grounds for Termination (Article 74)
Under the Saudi Labor Law, an employment contract can only be terminated under specific, legitimate circumstances.
Common Valid Reasons:
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Mutual Consent: Both parties agree in writing to end the relationship.
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Contract Expiry: Automatic termination when a fixed-term contract reaches its end date without renewal.
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Retirement: Reaching the statutory retirement age (60 for men, 55 for women, unless otherwise stated).
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Force Majeure: Unforeseeable circumstances that prevent the fulfillment of the contract.
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Business Closure: Permanent shutting down of the entire establishment or specific activity.
2. Termination of Fixed Term Contract in Saudi Arabia
The termination of fixed term contract in Saudi Arabia is often more rigid than indefinite contracts. These contracts are designed to last for a specific duration (e.g., 1 or 2 years).
Early Termination by the Employer:
If an employer terminates a fixed-term contract before its expiry without a “valid cause” (as defined by Article 80), they are liable to pay the employee the wages for the remaining period of the contract.
Early Termination by the Employee:
If an employee resigns before the term ends without a “valid cause” (as defined by Article 81), they may be required to compensate the employer for the remaining term or as specified in the contract.
Important for 2026: For non-Saudi employees, if no duration is specified, the contract defaults to one year and is considered a fixed-term contract that renews automatically upon expiry.
3. Understanding Article 77: Compensation for Unfair Termination
One of the most discussed topics is Article 77. This article applies when a contract is terminated by either party for an “illegitimate reason” and the contract does not specify a compensation amount.
The Compensation Formula:
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For Indefinite Contracts: 15 days’ wage for each year of service.
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For Fixed-Term Contracts: Wages for the remaining period of the contract.
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Minimum Protection: In either case, the compensation cannot be less than two months’ wages.
4. Summary Dismissal: Article 80 vs. Article 81
Saudi law provides mechanisms for immediate termination without notice or indemnity in extreme cases.
Article 80 (Employer’s Right):
An employer can dismiss an employee without notice or end-of-service benefits if the worker:
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Commits an act of dishonesty or forgery.
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Is absent for more than 30 non-consecutive days or 15 consecutive days in a year (after written warnings).
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Assaults a supervisor or colleague.
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Discloses industrial or commercial secrets.
Article 81 (Employee’s Right):
An employee can resign immediately without notice while retaining all rights if:
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The employer fails to pay wages for a significant period.
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The employer or a representative commits a violent assault against the worker.
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The work presents a serious hazard to health and safety that the employer is aware of but fails to fix.
5. Notice Periods and Final Settlements (2026 Standards)
For indefinite (unlimited) contracts, the notice period is a legal requirement unless termination is under Article 80 or 81.
| Worker Type | Notice Period (By Employer) | Notice Period (By Worker) |
| Monthly Paid | 60 Days | 30 Days |
| Others (Daily/Weekly) | 30 Days | 30 Days |
The Settlement Timeline (Article 88):
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Termination by Employer: All dues (wages, EOSB, unused leave) must be paid within one week.
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Resignation by Worker: All dues must be paid within two weeks.
6. Digital Governance: The Role of Qiwa and Mudad
In 2026, the termination of contract in Saudi Arabia is managed digitally.
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Qiwa Platform: Employers must submit termination requests through Qiwa, selecting the specific legal reason. The system automatically calculates notice periods and notifies the employee.
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Work Interruption Service: A new 2026 service allows employers to report workers who stop showing up, providing a 60-day grace period for the worker to transfer sponsorship or exit the country legally.
7. How Connect Resources Saudi Protects Your Business
Navigating the termination of fixed term contract in Saudi Arabia requires precision. One procedural error can lead to a lawsuit at the Labor Court. Connect Resources Saudi provides the expertise to mitigate these risks:
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Compliant Offboarding: We manage the entire termination process via Qiwa/Mudad, ensuring all legal “Articles” are cited correctly.
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EOR/PEO Safety: When you use our Employer of Record services, we take on the legal liability of the employment relationship, shielding your company from direct litigation.
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Final Settlement Audits: We calculate End of Service Benefits (EOSB) to the last Riyal, preventing disputes over “Actual Wage” components.
8. Conclusion: Fair Exit as a Pillar of Vision 2030
A fair and transparent termination of contract in Saudi Arabia is essential for maintaining a healthy business ecosystem. By adhering to the notice periods, respecting the terms of fixed-term contracts, and utilizing digital government portals, companies can grow with confidence in the Kingdom’s robust legal framework.
Need Expert Assistance with Labor Compliance in KSA?
Avoid the pitfalls of Article 77 and ensure your HR processes are 2026-compliant. Connect Resources Saudi is your strategic partner for all workforce and legal compliance needs in the Kingdom.
Contact Our Saudi Labor Law Experts Today
FAQ: Contract Termination in KSA
Q1: Can an employer terminate a contract during the probation period?
Yes. Under Article 53, during the probation period (up to 90 days, extendable to 180), either party can terminate the contract without notice or compensation unless otherwise agreed.
Q2: Does “Article 77” apply if the employee resigns?
Yes. If an employee resigns from a fixed-term contract without a valid legal reason before its expiry, the employer may claim compensation under Article 77.
Q3: Is an experience certificate mandatory?
Yes. Upon termination, the employer must provide a certificate of service free of charge, stating the date of joining, date of exit, and profession.
