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Employee Termination in Saudi Arabia: A Guide for Overseas Employers

Looking to hire an employee in Saudi Arabia? Here’s what you need to know about employee termination. One of our clients with employees in Saudi Arabia had a question about termination laws in that country, and how to comply at the local level.  The employee’s contract was expiring, and our client was under the impression that simply not renewing the contract, would be enough to terminate the employee. 

This assumption is not correct in Saudi Arabia, where notice, termination and severance rules are fairly strict.  Some of the rules were just changed in 2016, so we wanted to make sure that the client was using the most up to date employment rules.  Ignoring the process could end being very costly, so we stepped in and outlined the termination regulations for our client.

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Notice and Severance Rules in Saudi Arabia 

For termination of an employee in Saudi Arabia, 60 days notice is required on open ended contracts (with an indefinite term and paid monthly).  For fixed term contracts, the notice period is 30 days.  So, the simple expiration of a fixed term contract will not be enough to fulfill the termination and notice rules.

The notice should be in writing and specify the reasons for termination.  If the termination is without a valid reason, then a minimum of two months salary must be paid as severance to the employee.  In addition, if the contract is for a fixed term, then the balance of wages owed for the term must be paid (but still with the two month minimum).

The Shield GEO Employment Solution

This example is one reason that our clients have engaged Shield GEO to handle all of their foreign employment needs.  Every country has unique labor, payroll and immigration laws that all frequently change.  We monitor the regulations through our local partners and experts so there are no surprises.

Termination and notice are one area that get a lot of attention, since many countries are very pro-labor in their policies.  If a company appears to be dismissing employees for no good reason, or without proper notice, there may be penalties and payments to be made.  Please contact us if you have questions about notice, termination and severance in any country where you do business.

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