Article 77 of the Saudi Labor Law

What Article 77 of the Labor Law provides

Article 77 of the Saudi Labor Law (المادة 77 من نظام العمل) is the article that sets the compensation due when an employment contract is ended for a reason that is not legitimate. It attaches a financial consequence to a termination that takes place without a justification the law permits. Whether a particular ending had a legitimate reason is a separate question, covered under unlawful termination compensation.

Article 77 of the Labor Law opens with a rule that comes before its amounts: the compensation it sets applies unless the contract provides for another sum for ending the contract by either party for a reason that is not legitimate. Article 8 of the Labor Law makes void any term that contradicts the provisions of the law. A particular case is therefore referred back to the statutory text and to the competent authority.

The amount of compensation under Article 77 of the Labor Law

All three measures in Article 77 of the Labor Law use the word wage without a qualifier, and under the reading rule in Article 2 of the Labor Law an unqualified wage is the actual wage: the basic wage plus the other increases due to the worker, as Article 2 of the Labor Law defines them. That reading reaches the three statutory measures. A sum the contract fixes under the opening clause is the contract’s own figure.

An example of Article 77 of the Labor Law in a contract of indefinite duration

An employee on a contract of indefinite duration, with a monthly wage of SAR 8,000, has the contract ended for a reason that is not legitimate. In that case Article 77 of the Labor Law sets both an amount and a floor:

• The amount. It is the wage for 15 days for each year of service: the wage for 90 days after six years of service, and the wage for 15 days after a single year.
• The floor. It is two months’ wage, which comes to SAR 16,000 at this monthly wage.

The formula sets the amount, and the floor is a level below which the entitlement does not fall, whatever the length of service.

Who is paid compensation under Article 77 of the Labor Law

Article 77 of the Labor Law grants the compensation to the injured party, not to the worker alone. A contract can be ended for a reason that is not legitimate by either of its parties. That symmetry is confirmed by Article 76 of the Labor Law, under which the party that ends a contract of indefinite duration without observing the notice period owes the other party a sum, whichever party it is.

What Article 77 of the Labor Law does not cover

The following entitlements and cases fall outside Article 77 of the Labor Law, and each is distinct from it:

• The notice period under Article 75 of the Labor Law. It is a period of time, not compensation. It applies only to contracts of indefinite duration. Where the wage is paid monthly, the written notice is at least thirty days when the worker ends the contract and at least sixty days when the employer does; where the wage is not paid monthly, it is at least thirty days whichever party ends the contract. Article 75 of the Labor Law requires no notice period in a fixed term contract. The rule is set out under notice period.
• Compensation for the notice period under Article 76 of the Labor Law. It is a sum equal to the worker’s wage for the notice period, due when a contract of indefinite duration is ended without observing that period, unless the parties agreed on more. It is described under payment in lieu of notice.
• The end of service award. It is a separate entitlement governed by Articles 84 to 87 of the Labor Law. It is not part of the compensation under Article 77 of the Labor Law, and the compensation does not replace it. Its amount depends on how the relationship ended: it is reduced on resignation under Article 85 of the Labor Law, subject to the exceptions in Article 87 and Article 81 of the Labor Law, and in the cases in Article 80 of the Labor Law the law permits rescission without the award. The arithmetic is covered under end of service calculation.
• The cases in Article 80 of the Labor Law. The article bars the employer from rescinding the contract without an award, notice or compensation except in nine cases, and only on condition that the worker is given the opportunity to state objections to the rescission. Where one of those cases applies and its condition has been met, there is no compensation under Article 77 of the Labor Law at all. Both the cases and their conditions are examined in our guide to Articles 80 and 81 of the Labor Law.

Fixed term contracts carry a detail that matters. Under Article 74 of the Labor Law, the expiry of the stated term, unless the contract has been expressly renewed, is one of the grounds on which a contract ends. It is not a termination without a legitimate reason, so it gives rise to no compensation under Article 77 of the Labor Law. Ending a fixed term contract early without a legitimate reason, by contrast, gives rise to the compensation in Article 77 of the Labor Law, with no notice period. How the two contract types differ is covered in our guide to fixed term and indefinite contracts.

The provisions set out here follow the Saudi Labor Law, issued by Royal Decree M/51, as amended, including by Royal Decree M/44, whose amendments came into force on 19 February 2025. The updated text is published by the Ministry of Human Resources and Social Development. Royal Decree M/44 amended Articles 74 and 75 of the Labor Law. That decree did not amend Articles 76, 77 or 80 of the Labor Law, each of which was last amended by Royal Decree M/46.

When compensation under Article 77 of the Labor Law is paid, and the time limit for claiming it

Article 88 of the Labor Law sets the date for settling up. When the worker’s service ends, the employer must pay the wage and settle the worker’s entitlements within one week at most of the date the contractual relationship ended, whatever the reason the service ended. Where it was the worker who ended the contract, the period is two weeks at most. The employer may set off against the amounts due to the worker any debt owed to the employer that arises from the work.

A claim before the courts is governed by Article 234 of the Labor Law. No claim is admissible after twelve months from the date the employment relationship ended, unless the claimant offers an excuse the court accepts or the defendant acknowledges the right. Jurisdiction lies with the labour courts, after the amicable settlement stage, as our guide to amicable settlement and the labour court describes. To assess a particular case, consult a specialist or the amicable settlement service of the Ministry of Human Resources and Social Development.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.