Legal Library

Why this article matters

Most employment disputes that reach the courts do not begin on the day of dismissal or resignation. They begin on the day the contract is signed, with an unwritten probation clause, an undefined wage, or a non-compete clause that is worth nothing, and the consequences surface years later as compensation or an end-of-service award that nobody planned for.

The amendments to the Labour Law issued by Royal Decree No. (M/44) came into force in February 2025 and changed the rules on probation, notice, resignation and maternity leave. Any employer that has not updated its contracts and policies since then is operating under rules that no longer apply. This article sets out, for employers and employees alike, the key rules that govern the relationship from start to finish.

The employment contract: what is written is what you will be held to

A contract with a non-Saudi employee must be in writing and for a fixed term, while a contract with a Saudi employee may be fixed-term or indefinite. The difference is not a formality: it later determines the notice period and how compensation is calculated on unlawful termination. Registering the contract on the Qiwa platform with all its elements, from job title, basic wage and allowances to contract type and term, is the first line of defence for both parties.

Probation is no longer presumed. It must be stated expressly in the contract, its total may not exceed 180 days, and an employee may not be placed on probation more than once with the same employer except in specific cases. If the contract ends during probation, neither party is entitled to compensation, and the employee earns no end-of-service award for that period.

As for non-compete clauses, many companies include them and only discover in a dispute that they do not help, because the law requires the clause to be in writing, limited to no more than two years from the end of the relationship, and limited by place and type of work. An open-ended clause that bars the employee from working anywhere in any field is hard to defend.

The employee’s core rights

• Wages: paid on time, in Saudi riyals, through the Wage Protection System. Repeated late payment is one of the most common grounds that entitles an employee to leave while keeping all of their rights.
• Working hours: no more than eight hours a day or forty-eight hours a week, reduced during Ramadan for Muslim employees. Anything beyond that is overtime, paid at the hourly wage plus 50% of the basic wage.
• Annual leave: twenty-one days on full pay, rising to thirty days after five continuous years with the same employer.
• Special leave: among the most notable additions is three days of paid leave on the birth of a child, to be taken within seven days of the birth, alongside five days for marriage or for the death of a spouse, ascendant or descendant.
• Non-discrimination: the amendments prohibit discrimination between job applicants and employees on the basis of race, colour, sex, age, disability or marital status, an obligation that extends to job advertisements themselves.

The employer’s rights: the law does not favour one side

Many employers treat the Labour Law as biased toward employees. In fact, it gives employers strong tools for those who use them well. A business may adopt approved internal work regulations and impose disciplinary penalties under their procedures, and may require employees to perform their work in line with its lawful instructions and to protect its confidential information and property.

Article 80 allows the contract to be terminated without an award, compensation or notice in specific cases, including assaulting the employer or a manager during or because of work, breaching essential obligations or disobeying lawful orders despite written warning, misconduct or acts that breach honour and integrity, disclosing work secrets, and unjustified absence of more than thirty days in a single contract year or more than fifteen consecutive days after written warning, provided the employee is given the opportunity to state the reasons for their objection. This is where companies lose most of their cases, not because the incident did not happen, but because the procedure was not documented.

On resignation, the amendments allow the employer to postpone acceptance by up to sixty days where the interests of the business require it, provided the employee is notified in writing of the reasons within the first thirty days. Otherwise, the resignation is deemed accepted after thirty days without a response.

Working women and pregnancy

The amendments extend maternity leave from ten to twelve weeks on full pay. Six weeks after the birth are mandatory, during which she may not be employed, and she may distribute the remaining six weeks as she wishes, starting from four weeks before the expected date of delivery. The leave may be extended by one month without pay. The pay covers the full period, so it may not be halved for any week of it.

On her return, the employee is entitled to nursing breaks totalling no more than one hour a day, counted as working time, for twenty-four months from the date of birth, and the employer must provide her with medical care during pregnancy and childbirth.

Most importantly for employers, an employee may not be dismissed or warned of dismissal during maternity leave, or during an illness resulting from pregnancy or childbirth that is proven by a medical certificate, up to one hundred and eighty days. Any termination decision in this period, whatever its reasons, will be read by the court in light of this protection.

An employee who resigns within six months of her marriage, or within three months of giving birth, is entitled to the full end-of-service award, as an exception to the rules that reduce the award on resignation.

Ending the relationship: notice, resignation and compensation

For an indefinite contract with an employee paid monthly, the notice period is now thirty days if the employee terminates and sixty days if the employer terminates, and thirty days for both parties if the wage is not paid monthly. Termination must be for a legitimate reason stated in writing.

The amendments also regulate resignation and its procedure: an employee may withdraw a resignation within seven days of submitting it, unless the employer has already accepted it. As for the practice in some businesses of taking a signed, undated resignation from the employee at hiring, it does not protect them, because what counts is the employee’s will at the time the relationship ends, not a paper signed on the first day, and that paper often turns against the employer in court.

If the contract is terminated for an unlawful reason, the injured party is entitled to compensation under Article 77, unless the contract specifies an amount: fifteen days’ wages for each year of service under an indefinite contract, and the wages for the remaining term under a fixed-term contract, and in all cases no less than two months’ wages. This compensation is in addition to the end-of-service award, not a substitute for it.

Conversely, an employee may leave without notice while keeping all of their rights in the cases set out in Article 81, including where the employer breaches its essential obligations, such as failing to pay wages on time, assaulting the employee, or assigning work that differs materially from what was agreed.

End-of-service award: how it is actually calculated

The award is calculated on the last actual wage the employee received, meaning the basic wage plus fixed allowances, not the basic wage alone as some businesses assume. The rule is half a month’s wage for each of the first five years and a full month’s wage for each year after that, with parts of a year counted pro rata.

If the contract ends by resignation, the award is reduced according to length of service: nothing below two years, one third from two to under five years, two thirds from five to under ten years, and the full award at ten years or more.

Example: an employee with an actual wage of SAR 10,000 who has served eight years is entitled to SAR 55,000 if the employer ends the contract (SAR 25,000 for the first five years and SAR 30,000 for the next three). If the employee resigns, they are entitled to two thirds, about SAR 36,667.

The employee is not entitled to the award if the contract is terminated under Article 80, or for the probation period if the contract ends during it. Claims are not heard by the competent authorities once twelve months have passed from the end of the employment relationship, a deadline many people overlook.

What to do, and what to avoid

If you are an employer

• Do: review contracts signed before February 2025, as their probation and notice clauses may not comply with the law now in force.
• Do: document every violation and every warning in writing, and give the employee a chance to respond before any termination, because the court looks at the procedure before the incident.
• Do: draft the non-compete clause with a defined period, place and type of work, or do not rely on it.
• Don’t: take an advance resignation from the employee at hiring, and don’t calculate the award on the basic wage alone.
• Don’t: take a termination decision against an employee on maternity leave or on sick leave resulting from pregnancy before putting it to your adviser.

If you are an employee

• Do: keep a copy of your registered contract, your payslips and every message relating to a warning or an assignment.
• Do: submit your resignation in writing with a clear date, and know that you may withdraw it within seven days unless it has been accepted.
• Don’t: walk out suddenly before you are sure your situation falls within what the law allows, or your right may turn into a liability.
• Don’t: delay claiming your rights, because the twelve-month deadline passes faster than you expect.

Talk to us

At Shehab Alsaleh Lawyers & Legal Advisors we work with both sides of the employment relationship. We help businesses draft and review employment contracts and internal work regulations in line with the amended law, and manage termination decisions before they become lawsuits, and we help employees review their contracts before signing, calculate their entitlements when the relationship ends, and claim them before the labour courts.

If your company is still using contracts that have not been reviewed since the amendments, or is facing a termination decision or an ongoing employment dispute, book an appointment through our contact page with the company name, a copy of its commercial registration and a brief summary of the matter. If you are an employee whose employment has ended, who doubts how your award was calculated, or who has been dismissed in a way you believe is unlawful, contact us through the same page by choosing “Individual”, and don’t wait until the twelve-month deadline is close.

This article is for general awareness only and does not constitute legal advice on any specific case.