Demotion

What demotion is

Demotion (تخفيض الدرجة الوظيفية) is the move of an employee, by decision of the organisation, to a grade lower than the one they hold, or to a role carrying less responsibility than their current one. In practice the single name covers three different operations, and a different rule governs each: moving the employee down a grade on the pay scale, changing the content of their work to work at a lower level, and reducing their wage. One error in this area is to carry out all three in a single decision and then look for a single basis to support them.

The legal question at the centre of demotion is a narrow one: is demotion a disciplinary penalty that an employer may impose? The answer comes from two closed lists, set out in two different instruments, and not from analogy with measures that resemble it.

Demotion and the six penalties in Article 66 of the Labor Law

Article 66 of the Saudi Labor Law (نظام العمل) confines disciplinary penalties to the following six:

• A warning.
• A fine.
• Withholding a raise or deferring it, for a period not exceeding one year.
• Deferring a promotion, for a period not exceeding one year.
• Suspension from work without pay.
• Dismissal, in the cases the Labor Law provides for.

Demotion is not one of the six. The list is closed on its face, and a separate provision confirms that it is closed: Article 67 of the Labor Law bars the employer from imposing any penalty not provided for in the Labor Law or in the work regulation.

Two items on the list come close to demotion without reaching it. Deferring a promotion delays a step up that has not yet happened; it does not move anyone down from a position already held. Withholding or deferring a raise affects a periodic increase and leaves the grade untouched. Both items act on what is still to come, whereas demotion acts on what already exists. The difference lies in what the penalty acts on, not in how severe it is.

Demotion and the seven penalties in the model work regulation

A second list exists in a different instrument, and it should not be merged with the first. Article 58 of the model work regulation (النموذج الموحّد), the model on which establishments prepare their own work regulations, sets out seven penalties rather than six: a written warning; a fine; suspension from work without pay; withholding or deferring a raise, where the raise is one the establishment has set; deferring a promotion, on the same condition; dismissal with the end of service award; and dismissal without the award in the cases of Article 80 of the Labor Law. Article 58 of the model regulation closes with a general duty: the penalty must be proportionate to the type of the violation and its gravity.

Demotion is not among these seven either. The two lists differ in their number and in the detail of some items, but they agree that demotion falls outside each of them.

When an article in this area is cited, the instrument matters as much as the number. In the Labor Law, Article 58 deals with a different matter, the transfer of a worker from their place of work, while in the model regulation the same number holds the list of penalties. Articles 66 and 67 appear in both instruments, and in both they concern discipline, so nothing signals to the reader that the instrument has changed. A citation of any of these articles therefore names the instrument alongside the number in the same sentence, every time, rather than once at the start.

The work regulation: the only possible route to demotion as a penalty

None of this means the door is closed absolutely. Article 67 of the Labor Law names two sources of a penalty: the Labor Law, or the work regulation. Article 13 of the Labor Law requires every employer to prepare a work regulation following the model issued by the Ministry, allows the employer to add conditions provided they do not conflict with the Labor Law, its regulations and the decisions issued under it, and requires the regulation to be posted in a visible place. How the regulation is prepared, and the roles the Labor Law gives it, are set out in our guide to the Saudi work organisation regulation.

So the work regulation is the only lawful route to a penalty that Article 66 of the Labor Law does not name; an agreement with the worker is not such a route. The reason is Article 8 of the Labor Law, which voids any term that conflicts with the Labor Law, and also voids any release or settlement of a right the Labor Law gives the worker, made while the contract is in force, unless it is more favourable to the worker. A worker’s signature on a clause accepting a penalty from outside the two sources does not make the clause valid.

The prohibition and the nullity come from two different provisions. Article 67 of the Labor Law states the prohibition, and Article 8 of the Labor Law voids the conflicting term and the release of the right. What further follows from imposing a penalty outside the two sources is a matter for the competent authority, and it cannot be derived by analogy.

The route through the work regulation is itself limited, and the limit is the condition that additions must not conflict. Article 4(2) of the Implementing Regulation (اللائحة التنفيذية) addresses an establishment’s existing work regulation: articles in it that conflict with the model are deemed cancelled and of no effect, and the establishment must amend them. We found nothing in our sources to settle whether a clause creating demotion as a penalty falls inside that prohibition or outside it, and we take no position on it in either direction. The route is named in Article 67 of the Labor Law, and its limit in Article 13 of the Labor Law and in Article 4(2) of the Implementing Regulation; applying that limit to a particular clause in a particular establishment’s regulation is not something the definition of demotion decides.

Demotion as a change in the content of work

Beside the chapter on penalties sits a second matter, which can be confused with it. Article 60 of the Labor Law bars assigning the worker work materially different from the agreed work without their written consent, except in cases of necessity arising from exceptional circumstances, and for no more than thirty days in a year. That last condition is part of the text: the exception is temporary and limited to a counted period, not a standing licence.

Article 60 of the Labor Law describes the difference as material but sets no measure for it, and we found nothing in our sources that sets out how materiality is to be judged.

Against this prohibition stands a provision that gives the worker a way out. Article 81 of the Labor Law allows the worker to leave work without notice while keeping all their statutory rights in seven cases, the third of which is that the employer, without the worker’s consent, assigns work materially different from the agreed work, contrary to Article 60 of the Labor Law.

Moving an employee to a lower role is therefore not a single question. As a penalty, it falls outside both lists. As a change in the content of work, it needs written consent, and the absence of that consent opens Article 81 of the Labor Law to the worker. An organisation that makes the move as a penalty falls under the rules on penalties; one that makes it as a reorganisation falls under the rules on a change in the content of work. In both cases the move is judged by the text that governs it, not by the intention of whoever issued it.

Demotion and the wage

Demotion does not in itself require a reduction in the wage, and a reduction in the wage does not in itself amount to demotion. An organisation can move an employee down a grade and keep their pay where it is. Where the pay then sits above the ceiling of the range for the new grade, that situation is known as red circling, and moving an employee to a lower role while keeping their pay is one of the ways in which it can arise. Reducing the amount itself is a question about the wage, not about the grade. It has separate sources, and it does not follow from whether demotion is permitted or barred.

The same applies to the end of service award and to the wage on which it is calculated. The effect of a demotion on either turns on the provisions governing the wage and the award, in their own terms, and not on the definition of demotion.

What demotion is not

The measures that sit nearest to demotion can be sorted along two questions: does the measure fall on a person or on a job, and does it keep the relationship in a lower position or end it?

• An acting assignment. The employee takes on the duties of another role for a time while remaining in their own post. Demotion moves the employee down from that post. The two run in opposite directions and differ in nature.
• Grade placement. Placing employees means putting each person into a grade, and at a point within its range, for the first time, once the jobs themselves have been ranked. It is carried out once, on people. Demotion is a later move of someone who has already been placed.
• Job evaluation. This exercise measures the job regardless of who holds it, and job classification is one approach to it. When a job moves down a grade, its range moves down for everyone in it. That is not demotion in the sense the term carries, because it does not fall on a particular person or on any conduct of theirs.
• Unfair dismissal. Dismissal ends the employment relationship, while demotion keeps it, in a lower position.

Duties that apply to demotion imposed as a penalty

Whatever basis an organisation relies on, a measure imposed as a penalty remains subject to the rules on penalties. Article 71 of the Labor Law bars imposing a disciplinary penalty on a worker until the worker has been notified in writing of what is alleged against them and questioned, and their defence has been investigated, with all of this recorded in a minute placed in their own file, the employee file. The same article allows the questioning to be oral only for minor violations whose penalty goes no further than a warning or a fine of no more than one day’s wage, and even then the minute is required. Article 71 of the Labor Law states the duty and does not state the consequence of breaching it, so we draw no consequence from it.

Article 70 of the Labor Law contains a rule that bears directly on demotion: no more than one penalty may be imposed for a single violation. An organisation that suspends an employee and then follows the suspension with a further measure for the same incident has imposed two penalties for one violation.

Statutory sources on demotion

The provisions relied on are those of the Saudi Labor Law as published by the Ministry of Human Resources and Social Development: Article 8 (terms and releases that conflict with the Labor Law), Article 13 (the work regulation), Article 58 (cited only to show that the number means something different in each instrument), Article 60 (work materially different from the agreed work), Article 66 (the closed list of penalties), Article 67 (no penalty outside the Labor Law or the work regulation), Article 70 (one penalty for one violation), Article 71 (the procedure before a penalty), Article 80 (cited because the model regulation refers to it) and Article 81 (leaving without notice while keeping all rights). Also relied on are Article 4(2) of the Implementing Regulation and Article 58 of the model work regulation annexed to it. Royal Decree M/44 of 1446H, in force since 19 February 2025, did not amend Articles 8, 13, 58, 60, 66, 67, 70, 71, 80 or 81 of the Labor Law.

Before a demotion decision is issued

The first question is not whether the move is allowed but what exactly the decision is. If the aim is to respond to a violation, the decision belongs to the list of penalties, and a measure that is not on that list does not enter it through good intentions. If the aim reflects a view that the employee is in the wrong position, the decision is a change in the content of work, subject to the written consent requirement described above. If the aim reflects a view that the job itself was graded higher than it warrants, the decision is job evaluation, and it falls on the job rather than on the person holding it.

All three can produce the same picture in the organisational structure, yet none of them supplies the basis for another. A decision that does not know which of the three it is will not know which text it will be measured against when the first objection is raised.

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

Related terms

• Job Classification
• Peter Principle
• Career Path Ratio
• Performance Standards
• Employee File