Terminating an employee in Saudi Arabia is tightly regulated under the Saudi Labor Law (Royal Decree M/51). Lawful dismissal requires either one of the Article 80 exhaustive grounds (with a proper disciplinary process) or termination with notice and payment of end-of-service gratuity. This guide sets out the Article 80 list, the required five-step disciplinary process, notice periods, wrongful and constructive dismissal risks, fixed-term rules, and a documentation checklist. For dispute resolution, see labor disputes; for contract terms that can protect you, see employment contracts and non-compete and NDA clauses. Employer of record and HR teams must ensure process and paperwork are in order before any termination.
Overview
Saudi Labor Law distinguishes between (1) termination with notice (open-ended contracts: typically 60 days for employer, 30 days for employee), (2) termination without notice for one of the Article 80 grounds after a proper disciplinary process, and (3) wrongful or constructive dismissal, which exposes the employer to compensation. Payment in lieu of notice is permitted if agreed or if the employer pays the notice-period salary. Employers must document every step; in labor court and Fawd proceedings the burden of proof lies with the employer.
Article 80: Exhaustive Grounds for Immediate Termination
Article 80 of the Saudi Labor Law lists the only grounds on which an employer may terminate an employee without notice and potentially without full ESG. The list is exhaustive — courts will not accept grounds outside it. All 10 are set out below.
| # | Ground |
|---|---|
| 1 | Assault on the employer, manager, or a colleague at work |
| 2 | Failure to perform basic job duties under the contract despite a written warning |
| 3 | Fraud or breach of trust in connection with work |
| 4 | Disclosure of work or trade secrets |
| 5 | Conviction of a crime involving dishonour or breach of trust |
| 6 | Absence without valid reason for more than 20 consecutive days or more than 30 non-consecutive days in one year |
| 7 | Joining another employer in breach of the contract or the Law |
| 8 | Being drunk or under the influence of drugs during working hours |
| 9 | Repeated violations of work instructions (provided they are lawful and in writing) despite a written warning |
| 10 | Absence from work for more than 30 days due to imprisonment (in cases permitted by the Law) |
Even when a ground applies, the employer must follow the disciplinary process (see below) before imposing termination. Using Article 80 without proper process can result in the termination being treated as arbitrary, with compensation due.
The Required Five-Step Disciplinary Process
Before imposing a sanction — including termination — the employer must follow a fair disciplinary process. HRSD and the labor courts expect at least the following steps:
- Investigation: Gather facts (witnesses, documents, written statements). Record dates and who was present.
- Written notice to the employee: Inform the employee of the allegation in writing and give them an opportunity to respond (in person and in writing).
- Hearing / meeting: Conduct a meeting with the employee (and a witness if possible). Document the outcome in minutes.
- Written warning(s) where required: For some Article 80 grounds (e.g. failure to perform basic duties, repeated violations), a written warning must be given first; termination is only justified if the conduct continues after the warning.
- Decision in writing: Issue a written termination letter stating the Article 80 ground relied on, the date of last working day, and reference to the investigation and process followed. Keep a copy in the personnel file and ensure Qiwa and internal records are updated.
Skipping any of these steps weakens the employer's position in a dispute. Saudi courts and the Fawd platform treat process failures as evidence of arbitrary dismissal.
Notice Periods
For terminations that are not under Article 80:
- Employer terminating (open-ended contract): Minimum 60 days' notice (or payment in lieu).
- Employee resigning: Minimum 30 days' notice (or as contractually agreed, not less than 30 days).
The employer may pay salary in lieu of notice instead of requiring the employee to work the notice period. The amount is the employee's basic salary (and contractual allowances if applicable) for the notice period. If the employee is required to work notice, they remain on payroll and entitled to benefits until the last working day; ESG and any accrued leave are paid within 7 days of that date.
Wrongful Termination Compensation
If a court finds that the termination was arbitrary (without a valid Article 80 ground or without proper process), the employee may be awarded compensation. Saudi practice often applies compensation of 2 months' salary per year of service (or similar formulae) in addition to or in lieu of reinstatement. The Labor Law also references compensation of 3 months' salary plus the notice period in certain wrongful-termination scenarios. Exact amounts depend on the court and the facts. The employer remains liable for unpaid ESG, accrued leave, and any unpaid wages. Ensuring a proper disciplinary process and documentation is the best defence.
Constructive Dismissal: Definition and Risks
Constructive dismissal occurs when the employer's conduct makes it unreasonable for the employee to continue (e.g. unilateral cut in salary, removal of duties, harassment, or forcing a transfer to an untenable role). The employee may resign and claim they were effectively dismissed, entitling them to full ESG and potentially wrongful-termination compensation. Employers should avoid unilateral changes to pay, role, or location without consent or a clear contractual right. Document any agreed changes in writing and update the Qiwa contract where appropriate to avoid constructive-dismissal arguments.
Fixed-Term Contract Early Termination
A fixed-term contract ends on the agreed end date. If the employer terminates before the end date without an Article 80 ground, the employee is generally entitled to salary for the remainder of the term (or a proportion of it as determined by the contract or court). If the employee leaves early, the contract may specify a penalty or notice obligation. When a fixed-term contract expires and is not renewed, the employee is entitled to ESG for the period worked as if the employer had terminated. Early termination of a fixed-term contract should be documented in the same way as an open-ended termination — with a clear letter and Qiwa closure.
Documentation Checklist for Safe Termination
Use this checklist before finalising any termination to reduce dispute risk:
- Written policy or work instructions that were violated (and proof they were communicated).
- Dated written warning(s) where the Law or policy requires a warning before termination.
- Investigation notes (dates, participants, summary of evidence).
- Letter inviting the employee to a hearing and their response (or proof they were given the opportunity).
- Minutes or summary of the disciplinary meeting.
- Written termination letter citing the specific Article 80 ground (or stating termination with notice and last working day).
- Proof of delivery of the termination letter (signed copy, email read receipt, or registered mail).
- Final settlement calculation (ESG, accrued leave, notice if applicable) and proof of payment within 7 days of last working day.
- Qiwa contract closure and WPS/GOSI updates so records match the exit date.
In Fawd and court proceedings, employers with complete files win far more often than those relying on oral evidence or incomplete records.