Employee Termination Template (All Types Under Saudi Labor Law)

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, and it also touches systems such as the General Organization for Social Insurance (GOSI) and the Qiwa platform. It triggers final entitlements and clearance procedures, and it carries a risk of disputes if it is 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 voluntary resignation, and a probation-period dismissal. The result: fragile decisions and miscalculated entitlements.

This template untangles that mess. It separates the four core termination types under the Saudi Labor Law, identifies the governing articles for each (74, 77, 80, 81), clarifies the final entitlements due in each case, and gives you a downloadable termination letter in Word and PDF that your establishment fills in: contract details, the basis you rely on, the effective date, a list of final settlement items, a clearance log and an acknowledgment of receipt, plus a checklist to run before you issue it.

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 leads to the wrong notice and the wrong entitlement calculation.

1. Expiry of a Fixed-Term Contract

This is a natural end to the relationship. Articles 55 and 74 of the Saudi Labor Law govern this type. Notice under Article 75 of the Saudi Labor Law applies to indefinite contracts only, so the law sets no notice period for the expiry of a fixed-term contract. A written letter is still good practice. The employee is entitled to the end-of-service award under Article 84 of the Saudi Labor Law (half a month’s wage for each of the first five years, and one month’s wage for each year after that), pay for accrued leave that was not taken (Article 111), and any remaining financial dues.

2. Termination for Just Cause (Dismissal With Cause)

Governed by Article 80 of the Saudi Labor Law. The employer may rescind the contract without award, notice or compensation only in the nine cases listed in the article (assault, failure to perform essential obligations after a written warning, proven bad conduct, deliberate material loss, forgery, probation, unjustified absence, abuse of position, disclosure of secrets), and only on condition that the employer gives the worker the opportunity to state their objections.

3. Arbitrary Dismissal (Termination Without Just Cause)

Governed by Article 77 of the Saudi Labor Law. If the contract is ended for a reason that is not legitimate, and the contract does not fix its own compensation for termination, the party harmed by the termination is entitled to compensation: 15 days’ wage for each year of service for indefinite-term contracts, or the wage for the remaining contract period for fixed-term contracts, and in either case not less than two months’ wage.

4. Resignation (Termination by the Employee)

Resignation is governed by Article 79 bis of the Saudi Labor Law, added by M/44: the request is deemed accepted if 30 days pass without a reply, the employer may defer acceptance by up to 60 days by a written reasoned explanation given before the 30 days expire, the worker may withdraw it within 7 days unless the employer accepted it first, and the request may not carry a deferred date. A resigning worker is entitled to a graded portion of the end-of-service award under Article 85 of the Saudi Labor Law: nothing under 2 years, one third from 2 years up to 5, two thirds from over 5 up to under 10, and the full award from 10 years. Article 87 of the Saudi Labor Law overrides that scale in two cases: the worker leaves as a result of force majeure beyond their control, or a female worker ends the contract within 6 months of her marriage contract or 3 months of giving birth.

Comparison Table of Termination Types

The Difference Between Termination, Dismissal, and Resignation

The three terms are used interchangeably in everyday speech, but the Saudi Labor Law treats them differently, and the entitlements that follow are different. Every termination letter should use the correct term so that the basis of the decision is clear.

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 covers dismissal under Article 80 of the Saudi Labor Law, where no award, notice or compensation is due, and termination for a reason that is not legitimate (Article 77), where the harmed party is entitled to the compensation that article sets.

Resignation

A termination initiated by the worker. Article 79 bis of the Saudi Labor Law governs the request: it is deemed accepted if 30 days pass without a reply, the employer may defer acceptance by up to 60 days by a written reasoned explanation, and the worker may withdraw it within 7 days unless the employer accepted it first. The worker’s end-of-service entitlement is calculated under Article 85, with the exceptions in Article 87 of the Saudi Labor Law.

Mutual Termination

A bilateral agreement to end the contract. Under Article 74 of the Saudi Labor Law the worker’s consent must be in writing. Set out the end date and the final entitlements in the signed agreement.

Practical Differences at a Glance

Articles 55 and 74 of the Saudi Labor Law: End of a Fixed-Term Contract Upon Expiry

Under Articles 55 and 74 of the Saudi Labor Law, a fixed-term contract ends when its term expires. If both parties carry on performing it after the term, it becomes an indefinite contract (subject to Article 37 of the Saudi Labor Law for non-Saudi workers). If the contract contains a renewal clause it renews for the agreed term, but once renewals reach three consecutive times, or the original term plus renewals reaches four years, whichever is shorter, and the parties carry on, the contract converts to indefinite. Notice under Article 75 of the Saudi Labor Law does not apply to a fixed-term contract that simply expires.

Situations Where Articles 55 and 74 of the Saudi Labor Law Apply

• Fixed-term contract with a non-Saudi employee: a non-Saudi employee’s contract must be written and fixed-term (Article 37 of the Saudi 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.
• Renewal clause: a contract with a renewal clause renews for the agreed term, and the conversion rule in Article 55 of the Saudi Labor Law applies once renewals reach three consecutive times or four years in total, whichever is shorter. Every renewal counts as continuous service when computing the worker’s rights (Article 56 of the Saudi Labor Law).

Entitlements in the Case of Non-Renewal

The worker is entitled to the end-of-service award calculated under Article 84 of the Saudi Labor Law (half a month’s wage for each of the first five years and one month’s wage for each year after that, pro rata for a part-year, on the last wage), pay for unused accrued leave (Article 111), and, for a non-Saudi worker, the return ticket to the home country, which Article 40(1) puts on the employer at the end of the relationship unless Article 40(2) applies.

Non-Renewal Notice Template

A non-renewal letter should include: the employee’s name and ID number, contract start date and duration, the date of the letter, official end date, required clearance steps, and the list of final entitlements with the payment date. The law sets no notice period for it, but a written letter gives both sides a record. It is delivered by hand against signed receipt, or by official email.

Article 77 of the Saudi Labor Law: Termination Without Just Cause (Arbitrary Dismissal)

Article 77 of the Saudi Labor Law addresses termination for a reason that is not legitimate, which this page calls arbitrary dismissal. Unless the contract fixes its own compensation for termination, the party harmed by the termination is entitled to compensation. Either party can be the injured one, but every measure is priced on the worker’s wage and service.

What Counts as Arbitrary Dismissal

Article 77 of the Saudi Labor Law turns on whether the contract was ended for a legitimate reason. If you rely on Article 80 of the Saudi Labor Law, make sure the case and the article’s own conditions are met and documented: the written warning where the article requires one, and the employee’s opportunity to state their objections.

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.
• Pregnancy and maternity leave (Article 155 of the Saudi Labor Law): the employer may not dismiss a female worker, or give her notice of dismissal, during her pregnancy or during her maternity leave. The protection extends to illness arising from either, if the illness is proved by an accredited medical certificate and her total absence does not exceed 180 days in the year.

The Difference Between Compensation Under Article 77 of the Saudi Labor Law and End-of-Service Benefit

Many business owners mix the two. Compensation under Article 77 and the end-of-service award under Article 84 of the Saudi Labor Law are separate entitlements under separate articles, with separate formulas: Article 77 compensates a termination for a reason that is not legitimate, while the Article 84 award is half a month’s wage for each of the first five years and one month’s wage for each year after that, on the last wage. Calculate each under its own article. Payment in lieu of notice is a third item, under Article 76 of the Saudi Labor Law.

How to Avoid Arbitrary Dismissal

Keep a documented file before dismissing: any written warnings (Article 80 of the Saudi Labor Law requires one in two of its cases), a record of the employee’s objections, witness statements, and performance records.

Article 80 of the Saudi Labor Law: Dismissal With Just Cause and No Benefit

Article 80 of the Saudi Labor Law lists the cases in which the employer may rescind the contract without award, notice or compensation. It is a closed list of nine cases, and the employer’s right to rely on any of them is conditional on giving the worker the opportunity to state their objections to the rescission.

Cases Listed in Article 80 of the Saudi Labor Law

• Assault: by the worker on the employer, the responsible manager, a superior or a subordinate, during the work or because of it.
• Failure to perform essential obligations: failure to perform the essential obligations under the contract, or to obey lawful orders, or deliberate disregard of workplace-safety instructions posted by the employer in a visible place, despite a written warning.
• Bad conduct: proven bad conduct, or an act offending honour or honesty.
• Deliberate material loss: a deliberate act or omission by the worker intended to cause the employer material loss, provided the employer notifies the competent authorities of the incident within 24 hours of learning of it.
• Forgery: proof that the worker resorted to forgery to obtain the job.
• Worker under probation: a worker who is under probation is one of the nine cases listed in Article 80 of the Saudi Labor Law (see Articles 53 and 54 below).
• Unjustified absence: absence without a legitimate reason for more than 30 days in one contract year, or more than 15 consecutive days, provided the dismissal is preceded by a written warning from the employer after 20 days’ absence in the first case and after 10 days’ absence in the second.
• Abuse of position: proof that the worker unlawfully exploited their position for personal gain.
• Disclosure of secrets: proof that the worker disclosed industrial or commercial secrets of the business.

Required Procedures Before Dismissing Under Article 80 of the Saudi Labor Law

Article 80 of the Saudi Labor Law attaches one procedural condition to every case: the employer must give the worker the opportunity to state their objections to the rescission. Two cases also require a written warning (failure to perform essential obligations, and unjustified absence), and the deliberate material loss case requires notifying the competent authorities within 24 hours. Keep a written record of each step.

Impact of Dismissal Under Article 80 of the Saudi Labor Law on Entitlements

Under Article 80 of the Saudi Labor Law the employer is released from the end-of-service award, notice and compensation. The worker still receives the wage for the days worked and pay for accrued leave that was not taken (Article 111 of the Saudi Labor Law), and the employer must settle both within the period that Article 88 sets.

Article 81 of the Saudi Labor Law: The Employee’s Right to Terminate the Contract for Employer-Side Causes

Article 81 of the Saudi Labor Law gives the worker the right to leave the work without notice while keeping all statutory rights, in the seven cases the article lists. Many business owners overlook it: a departure that looks like a resignation can fall under Article 81 of the Saudi Labor Law instead, and where it does it is not treated as a plain resignation for the purposes of the reduction in Article 85.

Cases Listed in Article 81 of the Saudi Labor Law

• Employer’s failure to meet its essential obligations: its essential contractual or statutory obligations toward the worker.
• Deception at the time of contracting: proof that the employer or its representative deceived the worker as to the terms and conditions of the work.
• Materially different work: the employer assigns, without the worker’s consent, work materially different from the agreed work, contrary to Article 60 of the Saudi Labor Law.
• Violent assault or indecent conduct: a violent assault, or conduct offending public decency, by the employer, a member of the employer’s family, or the responsible manager, against the worker or a member of the worker’s family.
• Cruel, unjust or insulting treatment: by the employer or the responsible manager.
• Grave danger: a grave danger at the workplace threatening the worker’s safety or health, provided the employer knew of it and took no step indicating its removal.
• Being driven to appear as the party who ended the contract: the employer or its representative drove the worker, by its conduct and in particular by unjust treatment or breach of the contract terms, into appearing to be the party that ended the contract.

Impact When the Employee Terminates Under Article 81 of the Saudi Labor Law

The worker leaves without notice and keeps all statutory rights. Article 81 of the Saudi Labor Law states that principle and does not list amounts, so calculate the end-of-service award under Article 84 and leave pay under Article 111, and take legal advice before deciding whether any other amount is due.

How to Protect Your Business From Article 81 of the Saudi Labor Law

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 the written record of the decision and belongs in the employee file. It should contain the components below so that the decision is clear and can be shown if it is ever questioned.

Components to Include

• 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 (for example Article 74, 75 or 80 of the Saudi Labor Law), 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

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. Article 88 of the Saudi Labor Law sets one week from the end of the contractual relationship as the general deadline for paying the wage and settling the worker’s entitlements (details below).

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.
• Non-Saudi employees: Article 40(1) of the Saudi Labor Law puts the return ticket at the end of the relationship on the employer. Under Article 40(2) of the Saudi Labor Law the worker bears the cost where the worker is unfit for work or wishes to return without a legitimate reason.
• Social insurance (GOSI): update the employee’s GOSI record as the social-insurance rules require, and confirm the applicable deadline with GOSI.

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, whose fixed-term contract expired without renewal (Article 74 of the Saudi Labor Law). Remaining annual leave: 12 days, valued for this example at one thirtieth of the monthly salary per day (an assumption of the example, not a rule stated in the law). Outstanding advance: SAR 3,000. Economy return air ticket budget to home (Dhaka): SAR 2,800.

Payment Timeline for Final Entitlements

Article 88 of the Saudi Labor Law requires the employer, whenever the worker’s service ends, to pay the wage and settle the entitlements in full within one week at most of the date the contractual relationship ends, whatever caused the service to end. Where the worker is the one who ended the contract, the employer has a period of no more than two weeks. The employer may set off any debt owed to it arising from the work.

Termination During the Probation Period

The probation period is the window during which either party may terminate the contract (Article 53 of the Saudi Labor Law). Under Article 54 of the Saudi Labor Law, if the contract is terminated during probation neither party owes compensation, and the worker does not accrue an end-of-service award for that period. Article 80 of the Saudi Labor Law lists a worker under probation among the cases where the employer may rescind the contract without award, notice or compensation. Articles 53 and 54 of the Saudi Labor Law govern it, and the period is bounded by the rules below.

Core Rules of the Probation Period

• A single ceiling of 180 days: Since the M/44 amendment in force from 19 February 2025, Article 53 of the Saudi Labor Law sets a single ceiling of 180 days for the probation period in all circumstances. The earlier structure of 90 days extendable by written agreement to 180 is no longer the operative text. The Executive Regulation sets out the related provisions, including which leaves do not count toward the period.
• Express contract clause: probation applies only if the contract says so expressly, with its duration clearly specified (Article 53 of the Saudi Labor Law).
• No repeated probation: a worker may not be placed on probation with the same employer more than once. By written agreement of both parties, a further probation is allowed only if it is for another profession or job, or at least six months have passed since the previous relationship with that employer ended (Article 54 of the Saudi Labor Law).
• Entitlements during probation: the wage for days worked and pay for accrued leave under Article 111 of the Saudi Labor Law, but no end-of-service award accrues for the probation period (Article 54).

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.” Send the decision while the probation period stated in the contract (capped at 180 days by Article 53 of the Saudi Labor Law) is still running.

The Qiwa Platform and Employment Contract Documentation

The Qiwa platform is the Ministry of Human Resources and Social Development service through which employment contracts are created, documented and certified electronically: the establishment creates the contract, the worker approves, rejects or requests amendment from their Qiwa Afrad account, and once both agree the contract is certified by the Ministry. Since 15 April 2026, Saudization percentages in Nitaqat have been computed from contracts documented electronically on Qiwa, so an establishment whose contracts are not documented on Qiwa risks its Nitaqat classification. This template does not state a deadline or a penalty for recording a termination on Qiwa; check the requirement that applies to you on your establishment’s Qiwa account.

What to Keep Straight Around Qiwa

• Contract documentation: Qiwa is where the contract is documented. A downloadable Word or PDF template can help the two sides agree terms; it does not enter anything into Qiwa.
• Nitaqat: since 15 April 2026 Saudization percentages are computed from contracts documented electronically on Qiwa (Cabinet Resolution 195).
• Service certificate (Article 64 of the Saudi Labor Law): on the worker’s request and free of charge, the employer gives the worker a service certificate stating the start date of employment, the end date, the profession and the last wage. The employer may not include anything that could harm the worker’s reputation or reduce the worker’s job opportunities. Article 64 of the Saudi Labor Law sets no deadline for it and does not name a platform that issues it.

Other Systems to Check: GOSI and the Wage Protection System

A termination also touches other systems, including GOSI for social insurance and Mudad, the platform through which wage protection is filed. Check that the employee’s file is properly closed in each system you use. This template does not assume that one system passes the information on to another.

The Most Common Mistakes in Termination Decisions

These are recurring mistakes that turn a sound decision into a costly one.

Common Mistakes Checklist

• Failing to identify the governing article in the decision: leaving the basis of the decision unclear for the employee and for any later review.
• Skipping the conditions in Article 80 of the Saudi Labor Law: Article 80 allows dismissal without award, notice or compensation only in its nine cases, and the cases that require a written warning or a 24-hour notification to the competent authorities need them first.
• Failing to give the employee the opportunity to state their objections: the opportunity to state objections to the rescission is a condition inside Article 80 of the Saudi Labor Law.
• Relying on verbal warnings: Article 80 of the Saudi Labor Law requires a written warning in the essential-obligations case and in the absence case.
• Paying entitlements late: Article 88 of the Saudi Labor Law sets one week at most from the end of the contractual relationship as the general rule for any end of service, and two weeks at most only where the worker ended the contract.
• Leaving contracts undocumented on Qiwa: since 15 April 2026 Saudization percentages in Nitaqat are computed from contracts documented electronically on Qiwa.
• Mixing probation with the regular contract period: relying on probation after the probation period stated in the contract (maximum 180 days) has ended.
• Calculating the end-of-service award on the basic salary alone: the award under Article 84 of the Saudi Labor Law is computed on the last wage, which is the actual wage, not the basic salary alone.
• Overlooking the return ticket for a non-Saudi employee: Article 40(1) of the Saudi Labor Law puts the return ticket at the end of the relationship on the employer, subject to Article 40(2).
• Ignoring the resignation clock in Article 79 bis of the Saudi Labor Law: a resignation request is deemed accepted if 30 days pass without a reply, and a deferral needs a written reasoned explanation given before the 30 days expire.

This page is a general template and not legal advice. Check the facts of each case against the law and your establishment’s work regulation before you issue a decision.

How Qoyod HR Handles End-of-Service Entitlements

Manual calculation of end-of-service entitlements is prone to errors, especially when a business has dozens of employees with different start dates, different salaries, and scattered leave balances. Qoyod HR is a standalone Saudi HR system on its own subscription. The connection to Qoyod Accounting is now available.

What Qoyod HR Covers

• End of service: calculated from the employee’s length of service, salary and unused leave balance, together with the reason service ended that you record. End-of-service, overtime and leave-balance calculations are built into the system.
• Leave balances: the balance of every employee with the full leave record, and approved leave is deducted from the balance automatically.
• Payroll run: salary components, allowances, deductions and advances per employee, with the wage protection file ready from the payroll run itself.
• Employee file: one file holding the contract, the documents and their expiry dates, the attendance record, leave, salary and end-of-service entitlements.