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Basic Statutory Conditions of Labour Relations in Saudi Arabia

Hany Kenawi

Author: Hany Kenawi
Senior Lawyer.

Guiding Principle

It is a common practice of non-Saudi and joint venture entities formed in Saudi Arabia not to observe strictly the local statutory conditions of labour relations. This happens as these entities either assume that the requirements are the same as in their home countries, or they act based on their experience from other Gulf country expecting it would be similar to the status in Saudi Arabia, or they merely do not bother to follow the developments of legislations in the Kingdom. In most cases, such practice indeed does not cause damage, as long as the labour relations are ongoing with no disagreements between its parties (the employer and the employee). However, serious consequences might occur in such case – for either party – if a dispute arises later. It is strongly advised to continuously keep an eye on the concerned regulations as amended and abide by its requirements. In this article, the basic statutory requirements are clarified concisely.

A. The Enforcement of Regulations in Saudi Arabia

Over the years, non-Saudi investors and their local partners in Saudi Arabia developed several approaches for practicing various activities, which violate some aspects of the concerned local regulations. This came as a result of the tolerance of the Saudi Government in enforcing the respective statutory requirements to allow these investors to try cooperating in the domestic market without many formalities.

However, this is not the case now as the Saudi Government changed its policy during the recent years. Several regulations including the companies[1] and the labour[2] laws were amended quite often to keep up with the developments in the country. The Saudi authorities are now applying all of the local requirements strictly and enforcing punishments on the violators when discovered.

This requires a commitment by the entities existing in the Kingdom to continuously observe the concerned local regulations as amended and abide by its requirements.

B. The Governing Regulations

The labour relations in Saudi Arabia are mainly governed by the Saudi Arabian Labour Law No. M/51 (“SA-LL”) as amended[3] and its Implementing Regulation (“SA-LLIR”)[4]. Additionally, the Saudi Arabian Companies Law No. M/3 (“SA-CL”)[5] is governing some aspects of the relations concerning the employees at high management positions.

C. The Statutory Conditions

The labour law has enforced several mandatory clauses that should be mentioned at the employment contracts. All the new contracts shall be concluded accordingly and the current contracts should be amended as well[6].

   I. Contract Term

The first thing to know that while the employment contract of a Saudi worker may be for a definite-term or indefinite-term, the contract of non-Saudi worker may only be for definite-term irrespective of the agreed period[7]. The difference this condition makes that definite-term contract only ends at the expiration of its term[8] or by the mutual consent of both parties. On the other hand, either party may terminate indefinite-term contracts for valid reason to be specified in a written-notice to be served to other party at least sixty (60) days prior to the termination date for monthly-paid workers and no less than thirty (30) days for others[9].

   II. Contract Language

Arabic is language to be used for all documents, and shall prevail if it is used in addition to any other language.

   III. Calendar

All periods are calculated according to Hegira calendar by default, unless it is stated in the employment contract that the used calendar is the Gregorian calendar. The Hegira year is less than the Gregorian calendar with 11 days. This could cause some disagreements if not already agreed upon, in particular for long periods services.

   IV. Probation Period

Probation period, if any, should be stated at the contract, and shall not exceed ninety (90) days. The period may be extended by a written agreement to a period no more than one hundred and eighty (180) days.

   V. Conditions Contradicting with the Law

Conditions at employment contract that deprive the worker from his/her rights as granted by the labour law shall be deemed null and void[10].

   VI. Changing the Profession of non-Saudi Workers and Working for Other Employer

The employer may not employ the worker in a profession other than the one specified in his work permit. Before following the legal procedures for changing the profession, a worker is prohibited to engage in a profession other than his[11].

Moreover, an employer may not allow his worker to work for others, and a worker may not work for other employers. Similarly, an employer may not employ workers of other employers; without following the legal procedures[12],[13].

   VII. Terminating the Contract

Employment contracts may be terminated by:

  1. a mutual written consent of the parties;
  2. the expiration of its term at definite-term contract;
  3. the decision of one of the parties at indefinite-term contract for valid reason;
  4. force majure.

   VIII. End of Service Benefit and Compensation

The End of Service Benefit is given based on the last monthly salary, where it is calculated on the basis of half the monthly salary for each of the first five years and a full monthly salary for each of the following years[14].

If the party who terminated the contract did not follow the statutory period for the notice, he shall compensate the other party with an amount equal to the worker wage for that period. If the termination was for invalid reason, the terminated party is entitled for a compensation equals to the worker wage for a period of fifteen (15) days for each of the service years of the worker at indefinite-term contracts, and for the rest of the contract period for definite-term contracts. The compensation shall not be less than two months wage.


[1] The former companies’ law of 1965 was amended several times recently before the new law was issued on 2015.

[2] The labour law of 2005 was amended on 2013 and 2015 and there is talks now about amending it again.

[3] The Saudi Arabian Labour Statute (Law), promulgated by the Royal Decree No. M/51 dated 23.08.1426 A.H. corresponding to 27.09.2005, as amended by the Royal Decree No. M/24 dated 12.05.1434 A.H. corresponding to 24.03.2013, and by the Royal Decree No. M/46 dated 05.06.1436 A.H. corresponding to 25.03.2015; abbreviated (“SA-LL”).

[4] The Saudi Arabian Labour Law Implementing Regulation, promulgated by the Ministerial Resolution No. 1982 dated 28.06.1437 A.H. corresponding to 06.04.2016; abbreviated (“SA-LLIR”).

[5] The Saudi Arabian Companies Statute (Law) promulgated by the Royal Decree No. M/3 dated 28.01.1437 A.H. corresponding to 10.11.2015; abbreviated (“SA-CL”).

[6] Art. 52, SA-LL

[7] Art. 37, SA-LL and Art. 13, SA-LLIR.

[8] Art. 55, SA-LL and Art. 74 – Pt. 2, SA-LL.

[9] Art. 75, SA-LL.

[10] Art. 8, SA-LL.

[11] Art. 38, SA-LL.

[12] Art. 39, SA-LL.

[13] This practice is further prohibited by the Saudi Arabian Anti-Concealment Statute (Law) promulgated by the Royal Decree No. M/22 dated 04.06.1425 A.H. corresponding to 22.06.2004; abbreviated (“SA-ACL”)

[14] Art. 84, SA-LL.

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