Terminating an employee’s contract at your business is not just a piece of paper you sign and hand over. It is a legal, financial, and administrative decision governed by the Saudi Labor Law, the General Organization for Social Insurance (GOSI), and the Qiwa platform. It triggers final entitlements, clearance procedures, and sometimes litigation if not properly drafted.
Many business owners in Riyadh, Jeddah, Dammam, and Khobar fall into the trap of preparing a single generic termination letter that they use for every case: a fixed-term contract that has run its course, a project-based separation, a voluntary resignation, and a probation-period dismissal. The result: fragile decisions, miscalculated entitlements, and labor cases sitting open in the courts.
This template untangles that mess. It separates the four core termination types under the Saudi Labor Law, identifies the governing articles for each (75, 77, 80, 81), clarifies the final entitlements due in each case, and gives you a complete termination letter template that fits your business regardless of size or sector, alongside a customizable clearance and entitlements table, plus a checklist of common mistakes to avoid before signing the decision.
Employee Termination and End-of-Contract Template in Excel + Google Sheets
A complete termination letter template covering dismissal, resignation, and end of fixed-term contracts, with an end-of-service benefit calculation table, clearance checklist, and the governing articles of the Saudi Labor Law.
Types of Employment Contract Termination Under the Saudi Labor Law
The Saudi Labor Law does not recognize “dismissal” as a single term. It defines several different ways to end the contractual relationship between an employer and an employee, and each method has its own governing article, procedure, and financial impact on the final entitlements. Confusing these types is the number one reason labor cases are filed against businesses.
1. Expiry of a Fixed-Term Contract
This is a natural end to the relationship. It needs no termination letter and no prior notice if the contract explicitly states an end date. Articles 55 and 75 of the Saudi Labor Law govern this type. The employee is entitled to the full end-of-service benefit (one month per year after the first five, and half a month for each of the first five years), unused leave entitlements, and any remaining financial dues.
2. Termination for Just Cause (Dismissal With Cause)
Governed by Article 80. The employer may terminate the contract without paying end-of-service benefit if a documented cause from the closed list in the article applies (assault, gross breach of duties, deliberate absence, fraud, repeated violations after warning). The law requires that the dismissal take place within 15 days of the employer’s knowledge of the incident, and that the employee be given the opportunity to defend themselves in writing.
3. Arbitrary Dismissal (Termination Without Just Cause)
Governed by Article 77 of the Saudi Labor Law. If the employer ends the contract without just cause, or for a reason that does not fall under Article 80, the dismissal is deemed arbitrary. The employee is then entitled to compensation set by the law: 15 days’ wage for each year of service for indefinite-term contracts, or the wage for the remaining contract period for fixed-term contracts, with a minimum of two months’ wage. This compensation is paid in addition to the end-of-service benefit, not in place of it.
4. Resignation (Termination by the Employee)
The employee has the right to submit a written resignation with prior notice (30 days for monthly-paid employees, 15 days for weekly-paid). If the employee resigns voluntarily, they are entitled to a graded portion of the end-of-service benefit: one third for service between 2 and 5 years, two thirds for service between 5 and 10 years, and the full benefit for service beyond 10 years. Below 2 years, no benefit is due. This is set out in Article 85 of the Saudi Labor Law.
Comparison Table of Termination Types
| Termination Type | Article | End-of-Service Benefit | Additional Compensation | Prior Notice |
|---|---|---|---|---|
| Expiry of fixed-term contract | 75 | Full | None | Not required |
| Dismissal for just cause (Article 80) | 80 | Forfeited entirely | None | Not required |
| Arbitrary dismissal (Article 77) | 77 | Full | 15 days per year, or remaining wage | 60 days |
| Employee resignation | 85 | Graded by service length | None | 30 days |
| Termination with cause by employee (Article 81) | 81 | Full | Subject to case circumstances | Not required |
| Termination during probation | 54 | None | None | Not required |
The Difference Between Termination, Dismissal, and Resignation
The three terms are used interchangeably in everyday speech, but the Saudi Labor Law draws a sharp distinction between them, and the legal and financial impact is very different. Every termination letter must use the correct term, because the labor court looks at the legal description of the decision before it looks at its content.
Termination
A general term covering any end to the contractual relationship, whether it is natural (expiry of a fixed-term contract), unilateral (dismissal, resignation), or by mutual agreement. It is the broadest legal frame.
Dismissal
A termination decision issued unilaterally by the employer. It splits into: dismissal for just cause (Article 80), where the employee forfeits the end-of-service benefit, and arbitrary dismissal (Article 77), where the employee is entitled to the full benefit plus compensation. There is no such thing as a “friendly dismissal” in the law.
Resignation
A termination decision issued unilaterally by the employee. It must be written and signed, with prior notice, and the employee’s entitlements are calculated under Article 85. The employer cannot refuse a resignation once the notice period has ended, but may require the employee to complete handover tasks.
Mutual Termination
A bilateral written agreement signed by both parties, setting out the end date and final entitlements, and later registered on the Qiwa platform. This option is used when both parties want to end the relationship smoothly without litigation, and it is the most common path in restructuring scenarios.
Practical Differences at a Glance
| Criterion | Fixed-Term Expiry | Dismissal | Resignation | Mutual Termination |
|---|---|---|---|---|
| Initiating party | Natural end | Employer | Employee | Both parties |
| Cause required | No | Yes, for dismissal with cause | Not required | Per agreement |
| Prior notice | Not required | 60 days for indefinite contracts | 30 days | Per agreement |
| End-of-service benefit | Full | Varies by dismissal type | Graded by length | Per agreement |
| Registration on Qiwa | Mandatory | Mandatory | Mandatory | Mandatory |
Article 75: End of a Fixed-Term Contract Upon Expiry
Article 75 of the Saudi Labor Law provides that a fixed-term contract ends with the expiry of its term. If both parties continue to perform the contract after its term has ended, this is deemed an implicit renewal under the same conditions, for an indefinite period. The rule is both procedural and financial.
Situations Where Article 75 Applies
- Fixed-term contract with a non-Saudi employee: a non-Saudi employee’s contract must be fixed-term under the labor law, so ending the contract upon expiry is the natural step.
- Fixed-term contract with a Saudi employee: the employer and the Saudi employee may agree on a fixed-term contract, and at expiry the termination is natural with no dismissal.
- Project-based contract: ends with the completion of the project, and is treated like a fixed-term contract.
- Automatic renewal: if the contract includes an auto-renewal clause, the employee must be notified in writing of non-renewal at least 60 days before the expiry, otherwise it is deemed implicitly renewed.
Entitlements in the Case of Non-Renewal
The employee is entitled to a full end-of-service benefit calculated under Article 84 (half a month for each of the first five years, one month for every year beyond), plus unused leave entitlements, the remaining wage up to the end of the contract, and the cost of a return air ticket to the home country if the employee is non-Saudi and the contract was not renewed.
Non-Renewal Notice Template
A non-renewal notice should include: the employee’s name and ID number, contract start date and duration, notice date, official end date, required clearance steps, and the list of final entitlements with the payment date. It is delivered by hand against signed receipt, or by official email to the employee on the internal platform.
Article 77: Termination Without Just Cause (Arbitrary Dismissal)
Article 77 of the Saudi Labor Law addresses the most serious scenario for an employer: arbitrary dismissal. The article provides that if the contract is ended without just cause, the harmed party is entitled to compensation. The compensation is not a criminal penalty, it is reparation for the financial harm caused to the employee.
What Counts as Arbitrary Dismissal
Arbitrary dismissal occurs when the employer terminates the contract without one of the causes set out in Article 80, or without properly proving the cause, or outside the permitted window (15 days from the employer’s knowledge of the incident). Any procedural defect turns the dismissal from “just” into “arbitrary” and triggers compensation.
Statutory Compensation Amount
- Indefinite-term contracts: 15 days’ wage for every year of the employee’s service, with a minimum of two months’ wage.
- Fixed-term contracts: the wage for the remaining contract period, with a minimum of two months’ wage.
- Additional compensation for arbitrary dismissal of a pregnant or nursing employee: additional compensation of no less than two months’ wage, under Article 155.
- Additional compensation for dismissal due to union activity or a legitimate complaint: extended compensation determined by the judge based on the circumstances.
The Difference Between Article 77 Compensation and End-of-Service Benefit
Many business owners mix the two. Article 77 compensation is paid in addition to the end-of-service benefit (Article 84), not as a substitute. An arbitrarily dismissed employee is entitled to: the full end-of-service benefit, plus Article 77 compensation, plus unused leave, plus the wage for any remaining period, plus payment in lieu of notice (if the 60-day notice was not given).
How to Avoid Arbitrary Dismissal
Make sure you have documented evidence before dismissing: prior written warnings, investigation minutes, witness statements, performance reports, and the employee’s written defense. If the case reaches the labor court, the burden of proof is on the employer, not the employee.
Article 80: Dismissal With Just Cause and No Benefit
Article 80 is the only article in the Saudi Labor Law that allows the employer to terminate the contract immediately, with no prior notice, and with no end-of-service benefit. It is a closed list of 9 cases (per the latest amendment), and it cannot be extended or applied by analogy.
Cases Listed in Article 80
- Assault on the employer, the responsible manager, or any superior: during work or because of it, and it must be proven.
- Failure to fulfill the essential obligations of the contract: after a written warning.
- Misconduct or breach of trust or honor: on the part of the employee, sometimes requiring a final court ruling.
- Intentional act causing material loss to the employer: provided the competent authorities are notified within 24 hours.
- Forging certificates or proven use of fraudulent means to obtain the job.
- Employee under probation: probation does not fall under Article 80 because it has its own article (54).
- Unjustified absence: more than 20 separate days in a year, or 10 consecutive days, conditional on a written warning after 5 days in the first case or 10 days in the second.
- Illegitimate use of the job: for personal benefit or to gain advantages.
- Disclosure of work secrets: where such disclosure harms the interests of the business.
Required Procedures Before Dismissing Under Article 80
The decision requires five steps: drafting a formal investigation report with the employee, receiving a written defense from them, forming an internal committee to review the case, documenting the decision within 15 days of becoming aware of the incident, and finally delivering the dismissal decision in writing to the employee. Any missing step turns the decision from Article 80 into Article 77.
Impact of Article 80 Dismissal on Entitlements
The end-of-service benefit is forfeited entirely, but the employee keeps their other rights: the wage for the days worked up to the dismissal date, unused leave, GOSI entitlements, and any bonuses or commissions due under the contract.
Article 81: The Employee’s Right to Terminate the Contract for Employer-Side Causes
Article 81 is the mirror image of Article 80, viewed from the other side. The employee may terminate the contract immediately while keeping all their rights (as if they had been arbitrarily dismissed), if one of the cases listed in the article applies. Many business owners overlook this article and find resignations turning, legally, into “termination with cause by the employee,” in which the full entitlements become due.
Cases Listed in Article 81
- Employer’s breach of essential obligations: repeated delays in paying wages, or failure to assign the agreed work to the employee.
- Assault on the employee or their family: by the employer or their representative, whether verbal or physical.
- Fraud by the employer at the time of contracting: regarding work conditions, wage, type of work, or location.
- Serious danger: a serious danger to the employee’s safety or health, provided the employer knew about it and failed to take the necessary steps to remove it.
- Degrading treatment: harsh treatment or improper conduct by the employer or the responsible manager.
Impact When the Employee Terminates Under Article 81
The employee is entitled to: the full end-of-service benefit, Article 77 compensation (15 days per year or two months’ wage as a minimum), unused leave, wage for the remaining period if the contract is fixed-term, payment in lieu of notice (60 days), and a return air ticket if non-Saudi. The burden of proof is on the employee, but if they prove one of the listed cases, the resignation shifts from “voluntary” to “with cause,” and the full entitlements become due.
How to Protect Your Business From Article 81
Make sure wages are paid on time through the Wage Protection System (Mudad), document any communication between management and the employee, set up formal internal grievance channels, enforce a zero-tolerance policy against harassment and degrading treatment, and provide a safe work environment supported by occupational safety certifications.
Components of a Complete Termination Letter
A termination letter is not a farewell note. It is a legal document used in the labor court, on the Qiwa platform, and in HR files. It must contain specific components, none of which can be skipped, otherwise the decision loses its legal weight and may be reclassified as arbitrary dismissal by operation of law.
Mandatory Components
- Party details: business name, commercial registration number, unified number, employee name, ID or Iqama number, employee number.
- Contract details: contract type (fixed-term, indefinite-term), start date, end date if fixed-term, job title, basic salary and allowances.
- Legal cause: identification of the governing article (75, 77, 80, 81, 85), with a concise and precise explanation of the factual reason.
- Effective date of termination: the actual date on which the employee is off the payroll, and the last working day.
- Final entitlements: a detailed table of every entitlement and its amount (end-of-service benefit, leave, wage, payment in lieu of notice, return ticket).
- Clearance procedures: a list of company property to be returned, signatures required, and internal departments the employee must visit.
- Signatures and witnesses: signature of the direct manager, signature of the HR officer, signature of the employee acknowledging receipt of a copy, and the date of each signature.
Termination Letter Components Table
| No. | Component | Mandatory? | Impact if Omitted |
|---|---|---|---|
| 1 | Full party details | Yes | Decision is formally void |
| 2 | Identification of the governing article | Yes | Reclassification is left to the court |
| 3 | Explanation of the factual cause | Yes for Articles 80 and 81 | Reclassified as arbitrary dismissal |
| 4 | Effective date of termination | Yes | Contract is treated as still in force |
| 5 | Entitlements table | Yes | Open claim for entitlements |
| 6 | Clearance checklist | Procedural | Difficulty recovering company property |
| 7 | Employee signature | Evidentiary | Difficulty proving delivery |
| 8 | Registration on Qiwa | Yes | Administrative fines |
Clearance Procedures and Final Entitlements
Clearance is the execution step that follows the termination decision. Many businesses focus on the decision and neglect the clearance, then find themselves with unreturned company property, open bank signatories, unpaid balances, and later claims because of delays in paying out entitlements. The law obliges the employer to pay all entitlements within one week of the contract end date.
General Clearance Checklist
- Return of physical company property: laptop, phone, company car, access card, office keys, and any work equipment.
- Return of digital assets: email accounts, internal system logins, passwords, electronic files, and backups.
- Handover of tasks and correspondence: formal handover to the direct manager or replacement, documentation of ongoing tasks, and closure of client correspondence.
- Settlement of advances and loans: settle any salary advance or loan from the business, and deduct it from the final entitlements.
- Closing shared bank signatories: if the employee was a signatory on the business’s accounts, the authority must be revoked and documented with the bank.
- Sponsorship close-out (for non-Saudis): update the residency file on the Absher platform, issue the exit visa, if the employee is non-Saudi.
- Deregistration from GOSI: register the work termination on GOSI within 15 days.
Final Entitlements Table With a Worked Example
The table below applies to an employee who served 6 years on a SAR 12,000 monthly salary, terminated under Article 75 (fixed-term contract not renewed). Remaining annual leave: 12 days. Outstanding advance: SAR 3,000. Economy return air ticket budget to home (Dhaka): SAR 2,800.
| Item | Calculation Method | Amount (SAR) |
|---|---|---|
| Wage for days worked in the final month | 12,000 x (15/30) | 6,000 |
| End-of-service benefit, first five years | 12,000 x 0.5 x 5 | 30,000 |
| End-of-service benefit, sixth year | 12,000 x 1 x 1 | 12,000 |
| Cash value of unused annual leave | (12,000 / 30) x 12 | 4,800 |
| Return air ticket to home country | One economy ticket | 2,800 |
| Total entitlements before deductions | , | 55,600 |
| Deduction of outstanding advance | , | (3,000) |
| Net final entitlements | , | 52,600 |
Payment Timeline for Final Entitlements
Article 88 of the Saudi Labor Law requires payment of final entitlements within one week of the contract end date if the termination is by the employer. If the termination is by the employee (resignation), the employer has up to two weeks to complete clearance procedures and calculate the entitlements. Exceeding these periods exposes the business to administrative fines and entitlement claims.
Termination During the Probation Period (90 Days)
The probation period is the window during which either party may terminate the contract without prior notice and without paying a benefit. Articles 53 and 54 of the Saudi Labor Law govern it. But this freedom is not absolute, and it follows rules that cannot be overstepped without turning the termination into arbitrary dismissal.
Core Rules of the Probation Period
- Maximum 90 days: this includes sick leave and emergency leave periods, and it may be extended in writing by mutual agreement for up to a further 90 days, with a total cap of 180 days.
- Written requirement: the probation clause must be in writing in the employment contract. If it is not in writing, neither party can rely on it.
- No repeated probation: an employee cannot be placed on probation with the same employer more than once, unless it is in a different occupation or after 6 months have passed since the end of the prior employment.
- Entitlements during probation: wage for days worked, pro-rated annual leave, and GOSI entitlements, but no end-of-service benefit.
Wording of a Probation-Period Termination Letter
The decision is brief: “Based on the probation clause set out in the employment contract dated [X], management has decided to terminate the contract effective [Y], with payment of the final entitlements consisting of the wage for days worked and the pro-rated leave allowance.” There is no need to give detailed reasons. But if the number of working days exceeds 90, the decision loses its probation status and is reclassified as a dismissal, which may be deemed arbitrary.
The Qiwa Platform and the Official Termination Record
The Qiwa platform, operated by the Ministry of Human Resources and Social Development, is the official statutory register for any employment movement in the Kingdom. Every termination must be documented on Qiwa within specific time windows, otherwise the business is exposed to fines and a negative impact on its Saudization rating (Nitaqat).
Procedures on the Qiwa Platform
- Recording the termination: the employer must record the termination on Qiwa within 30 days of the end date.
- Selecting the termination reason: Qiwa offers a fixed list of reasons (contract expiry, Article 80 dismissal, resignation, mutual termination, retirement). Selecting the wrong reason opens the door to a later court claim.
- Issuing the experience certificate: the employee has the right to obtain an experience certificate from Qiwa setting out the employment period and job title, within 7 days of request.
- Final exit for non-Saudis: sponsorship transfer or final exit is processed after the termination is documented on both Qiwa and Absher.
Integration With GOSI and the Wage Protection System
When a termination is recorded on Qiwa, the notice is automatically passed to GOSI to stop the employee’s subscription, and to the Wage Protection System (Mudad) to register the last paid month. There is no need for a separate registration in each system, but each system should be checked to confirm the file has been properly closed.
The Most Common Mistakes in Termination Decisions
We have reviewed hundreds of termination decisions across Saudi businesses, and we have collected the recurring mistakes that turn a sound decision into an arbitrary dismissal costing the business tens of thousands of riyals.
Common Mistakes Checklist
- Failing to identify the governing article in the decision: leaving the classification to the labor court, which usually reads ambiguity in favor of the employee.
- Dismissing more than 15 days after becoming aware of the incident: Article 80 requires action within 15 days, and delay forfeits the right to rely on it.
- Failing to give the employee a written opportunity to defend themselves: required to invoke Article 80, and omitting it turns the dismissal into arbitrary.
- Relying on verbal warnings: the rule in the labor court is that what is not written does not exist. Warnings must be written and signed for upon receipt.
- Paying entitlements more than 7 days after the end date: a breach of Article 88 that exposes the business to fines.
- Failing to register the termination on Qiwa within 30 days: an administrative fine and an impact on Nitaqat.
- Mixing probation with the regular contract period: using probation flexibility after 90 days have passed.
- Failing to include allowances in the end-of-service benefit: the benefit is calculated on the actual wage (basic plus fixed allowances), not on the basic salary alone.
- Failing to pay the return air ticket for a non-Saudi employee: an entitlement under Article 40, and omitting it is a legal breach.
- Verbal resignation: accepting a verbal resignation and then treating the employee as having “abandoned work” opens the door to an arbitrary dismissal claim.
How Qoyod Calculates End-of-Service Entitlements Automatically
Manual calculation of end-of-service entitlements is prone to errors, especially when a business has dozens of employees with different start dates, varying allowances, and scattered leave periods. The Qoyod payroll system calculates all of this automatically at the moment of termination, with no need for Excel sheets or external calculators.
What Qoyod Calculates Automatically
- End-of-service benefit: calculated under Article 84 (half a month for each of the first five years, one month for every year thereafter), with the rate adjusted by termination type (contract expiry, dismissal with cause, resignation, arbitrary dismissal).
- Accrued annual leave: Qoyod tracks each employee’s leave balance and converts the unused balance into a cash amount based on the latest salary.
- Wage for days worked in the final month: daily-rate calculation based on the month’s salary, accounting for official holidays and weekends.
- GOSI subscription: calculates the GOSI contribution for the final month and updates the employee’s file on Qiwa for the statutory exit.
- Return ticket for non-Saudis: allocates the home-country ticket budget per the business’s policy and adds it to the final entitlements.
- Deduction of advances and withholdings: Qoyod keeps a record of advances and loans granted to the employee and deducts them automatically from the final entitlements.
Qoyod Integration With Qiwa and GOSI
Qoyod generates a termination report ready to upload to Qiwa, including the statutory termination reason, the last working day, the breakdown of final entitlements, and the clearance status. It also produces a GOSI-format deregistration report, so there is no need to re-key the data into each system.
Post-Termination Reporting
Qoyod retains the full employee record after termination: payslips, leave history, experience certificate, and the final entitlements breakdown. When the employee later requests any document, the HR manager pulls it in seconds without digging through closed files. All Qoyod plans include payroll and end-of-service calculation.
Frequently Asked Questions
Can an employer dismiss an employee immediately without prior notice?
Yes, but only in two specific situations: dismissal for one of the causes listed in Article 80 (with all its procedural requirements met), and termination during the probation period (90 days) if it is stated in the contract. In every other case, a 60-day prior notice is required for indefinite-term contracts, otherwise the termination is deemed arbitrary and the employee is entitled to payment in lieu of notice.
Is the full end-of-service benefit due on resignation?
No. Under Article 85, a resigning employee is entitled to one third of the benefit if their service is between 2 and 5 years, two thirds if between 5 and 10 years, and the full benefit if they have served more than 10 years. Below 2 years, no benefit is due. However, if the resignation is for one of the causes listed in Article 81 (late wages, assault, fraud), the employee is entitled to the full benefit plus Article 77 compensation.
What is the difference between payment in lieu of notice and arbitrary dismissal compensation?
Payment in lieu of notice is the wage for the notice period (60 days) when the contract is ended without notice. Arbitrary dismissal compensation is an additional damages amount (15 days per year of service or two months’ wage as a minimum). An arbitrarily dismissed employee is entitled to both: payment in lieu of notice, Article 77 compensation, and the full end-of-service benefit.
Can the employee refuse mutual termination?
Yes. Mutual termination requires the written consent of both parties. If the employee refuses, the employer may end the contract on any other statutory basis (Article 75 for expiry of a fixed-term contract, Article 80 for just cause, or arbitrary dismissal with its cost). The employer cannot force the employee to sign a mutual termination.
What are fixed-term contracts for non-Saudis?
Under the labor law, the contract of a non-Saudi employee must always be fixed-term. If the term is not stated in the contract, the contract is deemed to be for one year, renewable. At the end of the term, the termination is natural under Article 75, and the employee is entitled to the full end-of-service benefit, a return air ticket to the home country, and all accrued entitlements.
How long does it legally take to settle final entitlements?
Under Article 88: one week if the termination is by the employer, and two weeks if it is by the employee (resignation). Delay in paying the entitlements beyond these periods exposes the business to an administrative fine and an entitlement claim in the labor court, which may be ruled in the employee’s favor with late-payment interest.
Is the employee entitled to an experience certificate after dismissal under Article 80?
Yes. The experience certificate is a statutory right of the employee regardless of the termination reason. It must include only: the employment start date, the end date, the job title, and the latest salary. The reason for termination and any negative remarks may not be included. The Qiwa platform issues the certificate automatically on request.
What happens if the employee refuses to sign the termination decision?
Refusing to sign does not invalidate the termination decision. It is enough to send the decision by registered letter with acknowledgment of receipt to the employee’s address, or by official email with proof of sending, or to deliver it by hand in the presence of two witnesses who sign in their place. The rule in the labor court is actual delivery, not signature, and the Qiwa registration is additional evidence of the termination.
Start organizing termination decisions and end-of-service entitlements today
Calculate the end-of-service benefit, accrued leave, return ticket, and advance deductions automatically. Qoyod integrates with Qiwa, GOSI, and Mudad, and generates the termination decision ready for signature and statutory registration in minutes.