Article 77 of Saudi Labor Law – Unfair termination

In case of unfair or unlawful termination of the contract, an employee is entitled to some compensation which is explained in Article 77 of Saudi Labor Law. Article 77 of SLL was amended by the Royal Decree No. (M / 46) dated 06/6/1436H.

If there is a provision in the employment contract that specifically mentions the compensation in case of unlawful termination of the contract, Article 77 will not apply. Instead, the clause in the contract will apply.

Article 77 (1)

If an employer terminates an indefinite contract of an employee for an invalid reason, the employee will be paid 15 days salary for each year of service as per Article 77 (1) of Saudi Labor Law.

Article 77 (1) of Saudi Labor Law Article 77 (2)

In case of termination of a fixed-term contract without a valid reason, the aggrieved party is entitled to pay the salaries for the remaining period of the contract as per Article 77 (2) of Saudi Labor Law.

  • Compensation: Full salaries for the remaining period of the contract.
  • Valid reason: Article 74 of Saudi Labor Law.
  • All expatriates working in Saudi Arabia have a fixed-term contract.
  • If an employee resigns without completing his contract, he will also have to compensate the employer by paying the salary for the remaining period of contract.

Article 77 (2) of Saudi Labor Law Example 1

  • Jan 2020: An expat signed a one-year contract with a company.
  • July 2020: The employer terminated the contract without a valid reason.
  • The employee has a right to get 5 months full salary as per Article 77 (2) of Saudi Labor Law.

Example of Article 77Example 2

  • Jan 2020: An expat signed a one-year contract with a company with a clause to automatically renew it for one year.
  • Jan 2021: The contract is automatically renewed for one more year.
  • Oct 2021: The employer terminated the worker without a valid reason.
  • The employee has a right to get 3 months’ full salary as per Article 77 (2) of Saudi Labor Law.

Example of Article 77Example 3

  • Jan 2020: An expat signed a one-year contract with a company without an automatic renewal clause.
  • Jan 2021: The contract of the employee is automatically extended up to the Iqama expiry date as per Article 37 of Saudi Labor Law.
  • Iqama Expiry Date: September 2021.
  • April 2021: The employer terminated the employee without a valid reason.
  • The employee has a right to get 5 months’ full salary as per Article 77 (2).

Example of Article 77Article 77 (3)

The compensation paid under Article 77 of Saudi Labor Law must not be less than 2 months’ salary of the employee.

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Steve has been living in Saudi Arabia since 2013 and writing about Saudi rules, regulations, guides, and procedures since then.