How do you terminate an employee in Saudi Arabia in 2026?

Under the Saudi Labor Law, an employer may terminate an indefinite-term contract by giving the employee 60 days written notice. Payment of notice is permissible in lieu of working the period. No stated reason is legally required for the termination, but an arbitrary dismissal triggers the Article 77 compensation right (see the EOSG section).

Grounds for immediate dismissal (no notice, no EOSG)

Articles 80 and 81 of the Saudi Labor Law allow the employer to dismiss without notice and without paying EOSG in specific cases only, including:

• Impersonation or submitting false documents at time of hiring
• Material breach of a core contractual duty after written warning
• Workplace assault on an employer, manager, or colleague
• Absence without valid excuse for more than 20 non-consecutive days or 10 consecutive days in a year, after written warning
• Disclosure of trade secrets causing material loss to the employer
• Criminal conviction for an offence involving dishonesty or a public morality violation

These grounds are exhaustive. Using a ground that does not fit the facts exposes the employer to an arbitrary dismissal claim even if the employee's conduct was genuinely poor. Always document the specific ground before acting.

The 2025 amendments

The February 2025 amendments formalised the 60 days notice requirement in writing and introduced a structured resignation acceptance process. They also raised the maximum probation period to 6 months. All of these rules now apply to contracts registered on the Qiwa platform.

1. Choose the correct termination ground

   Decide whether you are terminating with notice under Article 75 or for gross misconduct under Article 80. The ground determines whether EOSG is owed and whether an Article 77 claim is possible.

2. Issue written notice or dismissal letter

   Prepare a written notice stating the termination date. For notice terminations, the 60 days period begins when the letter is served. For immediate dismissal, set out the specific Article 80 ground in writing.

3. Calculate EOSG and final entitlements

   Use the last actual wage to compute EOSG across the two service bands. Add accrued leave pay and any unpaid wages. Confirm the total in the final settlement document before payment.

4. Settle final pay on time

   Pay all final entitlements within 7 days of the last working day. Late payment exposes the employer to penalties and employee claims.

5. Complete Qiwa exit registration

   Update the employee's record on the Qiwa platform to reflect the termination. This releases the employee's work permit and closes the employment relationship in the government system.

The 60 days notice requirement applies to monthly-paid employees on indefinite contracts. Fixed-term contracts expire at the agreed date. Terminating a fixed-term contract early without cause can give rise to a claim for wages up to the end of the term.

Payment in lieu of notice

An employer can pay the employee their wages for the 60 days notice period rather than require them to work it. This is common in Saudi Arabia. The payment is treated as ordinary wages and is subject to the same pay timeline rules as final settlement.

Resignation process

Under the 2025 amendments, if the employer does not respond to a resignation within 30 days, the resignation is automatically accepted. The employer may delay acceptance for up to 60 days for valid business reasons. The employee may withdraw the resignation within 7 days of submitting it.

Probation

The maximum probation period is 6 months under the February 2025 amendments. The contract must specify probation; it cannot be imposed after the employee starts. Either side may end employment during probation with no notice, but all accrued pay and benefits to the termination date must still be settled.

The calculation is based on the employee's last actual wage, including basic salary and all fixed allowances. Variable elements such as commissions and bonuses are generally excluded unless contractually defined as fixed.

Resignation: reduced fractions under Article 85

When an employee resigns rather than being dismissed, the EOSG entitlement is reduced. The fractions set by Article 85 are:

• Under 2 years of service: no EOSG on resignation
• 2 to under 5 years: one-third of the full award
• 5 to under 10 years: two-thirds of the full award
• 10 or more years: the full award (same as employer termination)

Arbitrary dismissal: Article 77 compensation

An arbitrary dismissal does not affect EOSG. It is paid on top of EOSG. Under Article 77, a court may award additional compensation of 8 weeks of total wages as a minimum floor, with the final amount determined by the court based on the circumstances. There is no qualifying period: an employee dismissed on their second week can bring an Article 77 claim. The law does not restrict the grounds on which an employee may bring the claim.

EOSG for dismissal without notice (gross misconduct)

Where the employer dismisses under the specific grounds in Article 80 (gross misconduct), EOSG is forfeited. All other entitlements (accrued salary, accrued leave pay) must still be paid. These cases are narrow and the grounds must be documented before the termination letter is issued.

The collective dismissal process

1. File notification with MHRSD at least 60 days before the proposed effective date, with a written business justification
2. Await Ministry review during the 45 days response window
3. Consider alternatives proposed by the Ministry, including transfers, reduced hours, or retraining
4. Proceed after clearance or after the window lapses without a rejection
5. Pay EOSG and final settlement within 7 days for each affected employee

Nitaqat and Saudization implications

Collective dismissal of Saudi national employees can affect the employer's Nitaqat (Saudization) band classification. Dropping below the required Saudi national ratio for your industry tier can restrict the employer's ability to issue new work visas for expatriate hires. Run the Nitaqat impact before finalising any collective action involving Saudi national employees.

Expatriate employees

Collective dismissal rules on notification to MHRSD apply specifically to Saudi national employees. Expatriate employees dismissed collectively are governed by the standard individual termination rules under the Labor Law and their individual contracts. Each expatriate employee dismissed must receive the standard notice, EOSG, and final settlement within the normal deadlines.

Mutual termination by agreement is common in Saudi Arabia, particularly for senior employees and expatriate professionals. The employer and employee negotiate a settlement that both sign. The settlement amount is typically based on contractual EOSG under Article 84 plus any additional ex-gratia payment agreed between the parties.

Key elements of a mutual termination agreement

• Written agreement signed by both parties, ideally witnessed
• Termination date and whether the employee will work notice or receive payment in lieu
• EOSG calculation set out clearly, including years of service and last wage used
• Accrued holiday pay and any outstanding bonus entitlements
• Waiver of claims, including any Article 77 arbitrary dismissal claim
• Reference terms, if applicable
• Final payment timeline, consistent with the 7 days deadline under Article 88

Fixed-term contracts

Mutual agreement to end a fixed-term contract early avoids the employer's exposure to wages for the unexpired term. Without mutual agreement, early termination of a fixed-term contract by the employer can result in a claim for the remaining salary. The parties can agree on a reduced settlement instead.

The Qiwa platform

Employment contracts in Saudi Arabia must be registered on the Qiwa government platform. Terminations are also recorded on Qiwa. A mutual termination agreement should be reflected on Qiwa to complete the employee's exit and release their work permit. Failure to update Qiwa correctly can prevent the employee from moving to a new employer and expose the employer to administrative penalties.

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The split of responsibilities under EOR for Saudi Arabia terminations:

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