The relationship between the worker and his employer is known as: “the contractual relationship,” meaning that it is conditional on the existence of an employment contract. Which regulates this relationship and explains in detail the rights and duties of each party towards the other in light of the guidelines and rules of the Saudi labor system from the beginning of work until the end of service. Employment contracts differ among themselves depending on the details of each work. The role required to be performed in the facility, the period required to be performed there, and some other details that can be found in the article.
Your Guide to the Employment Contract in the Saudi Labor System, in which we have detailed all the details of employment contracts in Saudi Arabia.
Employment contracts are divided in terms of time period into fixed-term and indefinite-term contracts, and each of them has controls and conditions that require that things be conducted in a professional manner that respects the rights of the worker and the organization and attempts to limit disruption to the interests of either of them upon termination of the contract.
No one should think that the fact that a contract of indefinite duration – for example – gives the employer an advantage at the expense of the worker in his freedom to dispose of it; This is not real. Rather, the issue of terminating or stopping contracts in general requires some controls and prior arrangements, to which we have devoted this article separately, so that the matter is clear.
What is the difference between fixed-term and indefinite-term employment contracts?
The contract is of indefinite duration
- It is a contract that does not require a period of time to complete the work. It does not end except for a legitimate reason or the desire of one of the parties, with some controls.
The contract is for a fixed period.
- It is a contract linked to the completion of a specific work in a specific period, and ends with the expiration of the period – unless it is renewed or its implementation continues.
When does the employment contract normally end?
The employment contract terminates naturally – in accordance with Articles 74 and 75 of the Labor Law – in the following cases:
- When the contract expires without its renewal or continuation of work.
- In the event that one of the parties wishes to terminate, taking into account the controls.
- Upon the worker’s death, resignation, or reaching retirement age, unless otherwise agreed upon.
- When the activity in which the worker works is stopped, when there is force majeure, and after the facility is permanently closed.
- Any other case required by another system.
When is an employment contract forcibly terminated or terminated?
The employment contract is considered implicitly terminated – without expiration of its term and without any party wanting to terminate it, in some cases, most of which include the occurrence of disruptive or illegal behavior by one of the parties. Which relieves the other of the responsibility to abide by the contract and its terms. Below are examples of these cases for both the worker and the employer separately.
Cases in which the employer may terminate the worker’s contract, in accordance with Article 80:
- If the worker assaults the employer, his responsible manager, one of his superiors, or his colleagues during work.
- If the worker does not perform his obligations and roles agreed upon in the contract, and when he violates assignments, legitimate orders, and announced instructions regarding work and worker safety – provided that he has been warned in advance.
- If he commits bad behavior, or an act that is dishonorable or dishonest.
- If he intentionally causes a material loss to the employer due to bad faith or negligence on his part – provided that the employer informs the competent authorities within twenty-four hours of becoming aware of the incident.
- If it is proven that the worker resorted to fraud in order to obtain work, and if he illegally exploited his job position to obtain personal benefits.
- If the worker is appointed on probation.
- If the worker is absent without a legitimate reason for more than 30 separate days or 15 consecutive days during one contractual year – provided that he has been warned in writing after 20 separate days, and 10 consecutive days.
Cases in which the worker himself may terminate the employment contract, according to Article 81:
- If the employer breaches his contractual obligations towards him.
- If it is proven that the employer deceived the worker at the time of contracting with regard to the terms and conditions of work.
- If the employer assigns him work that is not related to the work agreed upon in the contract.
- If the employer, his relatives, or his managers conduct behavior that is described as assault or a breach of public morals towards the worker or a member of his family. Or if their treatment of him is characterized by intransigence, violence, or injustice and intentional harm.
- If there is a grave danger to the worker’s life at the workplace, and the employer does not take any measures to protect him after learning of this.
Controls for terminating indefinite-term employment contracts in the Saudi labor system
Unlike cases in which the employment contract is sometimes terminated automatically or forced, there are cases in which termination can occur by mutual consent, taking into account the controls set by the labor system in a way that allows all parties to benefit, and avoid any ambiguities or damages. Terminating a contract in this way is common, especially in the private sector, as the worker is not expected to stay in one facility until retirement. Rather, he will inevitably want to look for a new challenge in another facility, or some facility will show interest in his abilities and skills. The same applies to the employer, if he needs to lay off some workers, for example, for any reason. Therefore, there is no problem. The worker and the employer have the right to agree on termination – whether the contract is indefinite, or before the end of the fixed-term contract, in the professional manner approved by the labor system for that purpose.
Failure to adhere to the specified period of notice, and to have it written by agreement between the worker and the employer: violates the contractual relationship and the legal status of the party wishing to terminate, and causes harm to the other party, and makes him entitled to financial compensation.
Compensation upon termination of the employment contract in the Saudi labor system
Financial compensation is the Saudi Labor Office’s tool for warning or imposing punishment, and any party to the contract is obligated to do so in the event that it violates the generally accepted principles and controls for terminating the employment contract or specifically stipulated in the contract – provided that they are consistent with the general rules of the system. Therefore, there are no compensations when contracts are terminated by mutual consent, for example, or when any other of the previously mentioned reasons occurs, which are included in Articles (74, 75, 80, 81) of the Labor Law, but rather when an explicit violation of the contractual relationship occurs, in the following cases:
If the party that terminated the contract does not observe the specified period, notify the other party of departure
It is a period set by the Labor Law of at least sixty days – if the worker’s wage is paid monthly, or thirty days – if otherwise. When this condition is violated, the party who terminated the contract is obligated to pay material compensation for the deadline that he did not observe – unless a specific amount is agreed upon.
If the contract is terminated for an illegal reason
This is if any excuse, illegal reason, or even a crime is proven to be invalid, prompting one party to terminate the contract without notifying the other and giving him the opportunity to object and justify. This may happen under the pretext of exploitation and evasion of the notice period, for example, or for any personal benefit.
If the contract does not stipulate a specific amount for compensation in these cases; The injured party receives fifteen days’ wages for each year of his service if his contract is of indefinite duration, or wages for the full remainder of his contract if his contract is of limited duration.
What is the Sanid unemployment insurance system for workers ?
In the year 1435 AH, the Social Insurance Institution in the Kingdom launched some systems aimed at achieving social welfare, including the SAND system . It is a system that aims to take into account the Saudi worker and his family in the transitional period following his cessation of work – due to circumstances beyond his control. The system provides the minimum wage that guarantees the worker and his family a decent living, while providing him with resources that help him find another job opportunity soon.
Conditions for joining the Sanid system:
- The worker must be of Saudi nationality.
- He must be under sixty years of age.
- The worker has exceeded the working period stipulated in the Labor Law regarding the SANED system.
- He must not have any other income during his absence from work.
- The worker must adhere to the training assigned to him by the Ministry.
- He must not have been dismissed from his job due to personal reasons, or of his own free will.
- To be able to work.
End of service reward calculation
It is considered one of the most important rights of the worker over the employer upon termination of the contract, whether its term has expired or it has been terminated by resignation or by mutual consent. It consists of half a month’s wages for each year spent in the first five years, and a full month’s wages for every year thereafter. The total amount of the reward can be easily calculated by entering the required information through the service reward calculator of the Labor Culture Portal.
The end-of-service gratuity is calculated according to the period the worker spent in the service of the employer. If the period ranges between two and five years of service: the worker is entitled to one-third of the amount of the reward in the aforementioned manner. If his period of service exceeds five to ten years: he is entitled to two-thirds of the reward. If his service period exceeds ten years: he is entitled to the full reward.
When is a worker deprived of end-of-service benefits?
Terminating the contractual relationship is one of the stressful issues for both the worker and the organization. Sometimes it is difficult to replace good workers, especially after a long period of training, guidance, motivation, and investment. The same applies to the worker during the transitional period, trying to find a new job, adapting to his circumstances, etc. We believe that the last thing either party would want is for a dispute or violation of rights to occur at the time of termination; Therefore, we advise our readers to continue collecting essential and basic information about business rules and principles; To create a professional personality characterized by maturity and professionalism.
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