Termination of the contract
Article 77 of the Saudi Labour Law:compensation for unlawful termination
Article 77 sets a fixed formula for compensation: fifteen days' wage per year of service on an indefinite contract, or the wage for the remaining term on a fixed one, and never less than two months' wage.
- Article 77
- Explanatory guidance
Dismissed employees tend to read Article 77 straight away. Many employers only find it after they have dismissed someone.
Since the 1436H amendment, the compensation has been a set amount. The original text left it to the labour dispute body to decide. Now both sides can work out the figure before any decision is made.
First check whether the termination was unlawful at all. If it falls under Article 80 or under a ground in Article 74, no compensation is due. Article 77 applies only when the contract was ended without a lawful ground.
The text of the article
Unless the contract specifies a defined compensation for its termination by either party without a lawful ground, the injured party is entitled to compensation as follows:
- 01Fifteen days' wage for each year of the worker's service, if the contract is of indefinite term.
- 02The wage for the remaining term, if the contract is of fixed term.
- 03The compensation under paragraphs 1 and 2 shall not be less than the worker's wage for two months.
Status of the text: Amended by Royal Decree M/46 dated 5/6/1436H. The text below is the operative one.
The official reference is the Arabic text published by the Bureau of Experts at the Council of Ministers.
The English above is a working translation.
Three separate amounts
End-of-service gratuity (Article 84) pays for length of service. Notice pay (Article 76) covers a termination without the required notice. Article 77 compensation is for ending the contract without a lawful ground.
They are paid together. If an employee on an indefinite contract is dismissed suddenly and without a lawful ground, they are owed the gratuity, sixty days of notice pay if paid monthly (Article 75), and Article 77 compensation.
When the contract sets its own figure
The opening clause lets the contract set its own compensation for termination. The two-month minimum in paragraph 3 applies to compensation calculated under paragraphs 1 and 2. Where the contract sets a figure, that figure governs.
Worked example
An indefinite contract, a monthly wage of 10,000 riyals, six years of service and no lawful ground. Fifteen days a year is half a month a year, so the compensation is three months' wage: 30,000 riyals. That is above the two-month minimum, so 30,000 riyals is payable.
With the same wage and one year of service, half a month is 5,000 riyals. That is below the minimum, so the compensation rises to two months' wage: 20,000 riyals.
When a termination counts as unlawful
- Ending an indefinite contract with no ground under Article 80 and no case under Article 74.
- Ending a fixed-term contract before its term with no lawful ground.
- Dismissing under Article 80 without giving the employee a chance to object.
- Dismissing for absence without the written warning required by paragraph 7 of Article 80.
- Dismissing because of illness before the employee has used up the sick-leave periods, which Article 82 prohibits.
Common mistakes
Paying the gratuity and stopping there
Gratuity is owed for the years of service whether or not the ending was lawful. Paying it does not cover Article 77 compensation.
Calling a dismissal a resignation
If an employer pressures an employee to resign, it counts as termination by the employer. Paragraph 7 of Article 81 covers this case directly.
Ignoring the minimum
Compensation is never less than two months' wage, however short the service.
How Barez applies this article
A record you can rely on
Barez records the time and author of every warning, violation and approval in an audit trail that cannot be erased.
Warnings are in writing
The system issues the warning, sends it to the employee and files it with a date. Proof does not depend on a manager's memory.
The settlement separates the three
Gratuity, notice pay and any agreed compensation appear as separate lines, not one lump sum.
Sources
This page is explanatory guidance, not legal advice. In a dispute, rely on the official text and consult the Ministry of Human Resources and Social Development or a licensed lawyer.
Article 77
Frequently asked questions
How much is compensation for unfair dismissal in Saudi Arabia?
Fifteen days' wage for each year of service on an indefinite contract, or the wage for the remaining term on a fixed-term contract. In both cases it is never less than two months' wage, unless the contract sets its own compensation for termination.
Does it stack with end-of-service gratuity?
Yes. Gratuity is owed for length of service under Article 84. Article 77 compensation is owed because the contract was ended without a lawful ground. One does not replace the other.
Who decides that a termination was unlawful?
The labour court, if the case is disputed. Employers protect themselves by keeping records: the ground in writing, written warnings where the law requires them, and a record that the employee was given a chance to respond before the decision.
Labour law articles
Continue from here
Article 80: dismissal without gratuity
The cases where neither compensation nor gratuity is owed.
Article 74: how a contract ends
Settle the ground before asking about compensation.
Resignation versus dismissal
How each route changes what is owed.
Article 81: leaving with full entitlements
The employee's side: when leaving still carries full entitlements.
Article 155: no dismissal during pregnancy
The ban on dismissal during pregnancy and maternity leave.
Article 74 of the Saudi Labour Law: when an employment contract ends
Article 74 lists every ground on which an employment contract ends, including resignation and bankruptcy rulings, both added in 1446H. The ground decides what the employee is owed, so settle it first.
Article 80Article 80 of the Saudi Labour Law: nine cases for dismissal without gratuity
Article 80 is a narrow exception to employee protection. It lists nine cases that allow termination without gratuity, notice or compensation. In every case, the employee must first be given the chance to object.
Article 81Article 81 of the Saudi Labour Law: leaving the job with full entitlements
Article 81 is the employee's counterpart to Article 80. It lists seven cases in which an employee can leave without notice and lose nothing, including when the employer's conduct pushed them into appearing to end the contract themselves.
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