The termination of an indefinite-term (unlimited) contract in the Kingdom of Saudi Arabia (KSA) is primarily governed by Articles 75 and 76 of the Saudi Labor Law.
Unlike fixed-term contracts, an unlimited contract requires advance written notice and must be concluded for a legitimate reason to be lawful. Understanding these notice periods and the consequences of violating them is essential for both employers and employees.
The Principle of Legitimate Termination in Unlimited Contracts (Article 75)
An unlimited contract may be terminated by either party, provided this is done for a valid (legitimate) reason stated in a written notice served to the other party.
Unlawful Termination Indemnity
If a court determines that the termination lacked legitimate grounds, the aggrieved party is entitled to compensation.
For unlimited contracts, this indemnity equals 15 days’ wage for every year of service, with a minimum guarantee of two months’ wages.
👉 Read the full compensation rules for Invalid Termination →
Termination for Cause (No EOSB)
If dismissal occurs under Article 80 (serious misconduct), the employer may terminate the worker immediately, without notice, EOSB, or indemnity.
👉 See the strict legal cases for EOSB Deprivation (Article 80) →
Resignation for Cause (Full EOSB)
Under Article 81, a worker may resign without notice but retain full EOSB rights, if justified (e.g., due to employer fraud, violence, or breach of contract).
Mandatory Notice Periods (Article 75)
For valid terminations not involving misconduct, the following written notice periods must be followed:
| Worker Type | Party Terminating | Minimum Written Notice Required |
|---|---|---|
| Monthly paid worker | Employer | 60 days prior to termination |
| Monthly paid worker | Worker (Resignation) | 30 days prior to termination |
| Non-monthly paid worker (daily/weekly/piecework) | Either Party | 30 days prior to termination |
Consequences of Non-Compliance: Indemnity Payments (Article 76)
If either party fails to observe the required notice period, Article 76 mandates that compensation must be paid to the other party.
Indemnity Calculation
| Worker Type | Calculation Basis |
|---|---|
| Time-based workers (monthly/daily) | Compensation = worker’s last wage × remaining notice days |
| Productivity/piecework workers | Compensation = average wage over last year of service (Article 96) |
The compensation for lack of notice cannot be less than the minimum wage amount set by law but can be higher if agreed in the contract.
End of Service Benefits (EOSB) upon Termination
Whenever an unlimited contract ends - whether initiated by the employer or the worker - the EOSB must be calculated and paid, except in cases of serious misconduct under Article 80.
General EOSB Calculation (Article 84)
| Service Period | Entitlement Rate |
|---|---|
| First five years | Half-month wage per year |
| Each subsequent year | One-month wage per year |
The calculation is based on the last Actual Wage, which includes the basic salary and fixed allowances.
👉 Read the Full EOSB Calculation Guide →
EOSB Entitlement upon Resignation (Article 85)
If the contract ends due to resignation, the worker’s EOSB entitlement depends on total continuous service:
| Length of Service | EOSB Entitlement |
|---|---|
| 2–5 years | One-third (⅓) of full award |
| 5–10 years | Two-thirds (⅔) of full award |
| 10+ years | Full award |
👉 View the full Entitlement Rules for Resignation and Termination →
Settlement Timeline (Article 88)
All dues - including EOSB and final wages - must be settled within strict timelines depending on who initiated termination:
| Termination Initiated By | Settlement Deadline |
|---|---|
| Employer (or contract expiry) | Within 1 week from contract end |
| Worker (resignation) | Within 2 weeks from termination date |
The employer may deduct any outstanding work-related debts from the final settlement, if applicable.
Any unresolved disputes or questions must be formally directed to the relevant Saudi authorities for official clarification and binding decisions.
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