In the evolving business landscape of the Kingdom, the termination of fixed term contract in Saudi Arabia is governed by strict statutory provisions that prioritize contractual stability. With the recent 2025-2026 amendments to the Saudi Labor Law, understanding when and how a contract ends is no longer just an HR task—it is a critical legal safeguard.
At Connect Resources, we empower organizations to manage their workforce with full compliance. Whether a contract is reaching its natural expiry or facing a premature exit, this guide breaks down the essential articles and financial implications of the Saudi Labor Law.
1. Defining the Fixed Term Contract in KSA
A fixed-term contract (or “Limited Contract”) is an agreement with a predetermined start and end date. In Saudi Arabia, all non-Saudi employees must, by law, be on a written fixed-term contract.
Automatic Renewal vs. Indefinite Conversion
Under Article 55, a fixed-term contract terminates automatically upon the expiry of its term. However, businesses must be cautious:
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If both parties continue to perform the work after the expiry without a written renewal, the contract may automatically convert to an indefinite-term contract (for Saudi nationals).
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For expatriates, the contract remains fixed but is typically considered renewed for a period equal to the original term or as specified in the work permit.
2. Lawful Grounds for Termination (Article 74)
The termination of fixed term contract in Saudi Arabia is considered lawful under Article 74 in the following scenarios:
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Expiry of the Term: The most common ground; the contract reaches its end date without renewal.
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Mutual Consent: Both the employer and employee agree in writing to end the relationship.
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Force Majeure: Unforeseeable circumstances that prevent the fulfillment of the contract.
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Permanent Closure: The company or the specific department officially ceases operations.
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Retirement: The employee reaches the statutory retirement age.
3. Early Termination and the “Article 77” Penalty
One of the most litigated aspects of Saudi labor relations is the premature termination of fixed term contract in Saudi Arabia without a valid legal reason. If either party breaks the contract early, Article 77 dictates the compensation.
The Compensation Formula
If the contract does not specify a fixed compensation amount for early termination, the following statutory rules apply:
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The “Remaining Wages” Rule: The injured party is entitled to the wages for the entire remaining period of the contract.
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The Minimum Guarantee: By law, this compensation cannot be less than two months’ wages, regardless of how little time was left on the contract.
Expert Note: This “Remaining Wages” rule makes fixed-term contracts a “high-stakes” commitment. At Connect Resources, we advise clients to include specific, reasonable compensation clauses in their initial contracts to avoid the full weight of Article 77.
4. Notice Periods in 2026: What Has Changed?
While a fixed-term contract naturally expires on its end date without the need for a notice period (unless specified), the rules change for resignations or non-renewals:
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Notice for Non-Renewal: It is standard practice to provide a 30-day notice if a party does not intend to renew the contract, though this must be stipulated in the agreement.
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Resignation during the Term: If an employee resigns before the end of a fixed term without a legal cause (such as those listed in Article 81), they may be liable to pay the employer the Article 77 compensation (the remaining wages).
5. Termination Without Notice (Article 80)
An employer may execute the termination of fixed term contract in Saudi Arabia immediately and without compensation or end-of-service benefits under Article 80. This is reserved for “Gross Misconduct,” including:
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Assaulting the employer or supervisors.
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Failure to perform essential contractual obligations despite written warnings.
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Disclosure of industrial or trade secrets.
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Forgery of documents to obtain the job.
6. Employee Rights Upon Termination (Article 81)
Conversely, Article 81 allows an employee to leave a fixed-term contract early without notice and while retaining all rights if:
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The employer fails to pay wages for a significant period (typically over 60-90 days).
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The employer or a representative commits a violent or immoral act against the employee.
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The workplace presents a serious hazard that the employer refuses to fix.
7. End of Service Benefits (EOSB) Calculation
Regardless of how the termination of fixed term contract in Saudi Arabia occurs (unless under Article 80), the employee is generally entitled to an End of Service Award:
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First 5 Years: Half a month’s salary for each year.
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After 5 Years: A full month’s salary for each subsequent year.
For fixed-term contracts, if the contract expires, the employee gets the full award. If the employee resigns early, the award is scaled based on their tenure (1/3, 2/3, or full).
8. Strategic Compliance with Connect Resources
Managing the termination of fixed term contract in Saudi Arabia requires more than just knowing the law; it requires proactive HR management. Connect Resources provides the strategic support needed to:
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Draft Airtight Contracts: Including specific termination and compensation clauses that mitigate Article 77 risks.
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Manage Qiwa & Absher Workflows: Ensuring all terminations and non-renewals are digitally processed according to MHRSD standards.
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Dispute Resolution: Representing your interests in labor courts to justify terminations and minimize financial exposure.
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EOR Services: As your Employer of Record, we take the legal responsibility for the entire contract lifecycle, protecting your parent company from local litigation.
9. Conclusion: Precision in Exit Management
In 2026, the termination of fixed term contract in Saudi Arabia is a highly regulated process where “arbitrary” actions are quickly penalized. By understanding the interaction between Articles 74, 77, and 80, businesses can ensure their separations are clean, professional, and—most importantly—compliant.
Ready to Secure Your Contractual Compliance?
Avoid the pitfalls of improper terminations. Connect Resources is the leading expert in Saudi Labor Law. Whether you need a contract audit or a compliant EOR partner, we are here to help.
FAQ: Termination in KSA
Q1: Can I terminate a fixed-term contract with a 60-day notice? If it is an indefinite contract, yes. If it is a fixed-term contract, you can only terminate it before the end date if you pay the remaining wages (Article 77) or have a valid reason under Article 80.
Q2: What is the maximum probation period in 2026? Following recent amendments, the maximum probation period can now be up to 180 days (6 months), providing employers more time to assess fit before the full fixed-term protections kick in.
Q3: Does the employee get their final exit visa immediately? Upon termination, the employer is responsible for processing the Final Exit Visa and providing the flight ticket home, provided the employee is not transferring to another sponsor.
