At a glance: termination of employment in Saudi Arabia

Legislation and agencies

What are the main statutes and regulations relating to employment?

Shariah, or traditional Islamic Law, forms the basis of the Saudi legal system. Shariah is derived from the Holy Quran and the Sunna (words and deeds) of the Prophet Mohammed, as interpreted by influential scholars of Islamic jurisprudence. Shariah forms the basis of the Saudi legal system and is supplemented by statutes. The main legislation governing employment in Saudi Arabia is the Labor Law issued by Royal Decree No. M/51 dated 23/08/1426H (corresponding to 26 September 2005) as amended (the Labor Law). The most recent Labor Law amendments came into force on 19 February 2025 (the Amendments). The Labor Law is supplemented by its Implementing Regulations and Ministerial Decisions and Resolutions issued by the Ministry of Human Resources and Social Development (MHRSD).

Is there any law prohibiting discrimination or harassment in employment? If so, what categories are regulated under the law?

The Saudi Labor Law provides that all citizens shall have equal right to work without discrimination based on gender, disability, age or any other form of discrimination, whether in the performance of work, upon employment or in the advertising thereof. The Amendments introduce an obligation on employers to:

refrain from doing anything that would invalidate or weaken the application of equal opportunity or treatment in employment and profession, whether by exclusion, differentiation, or preference among job applicants or workers based on race, color, gender, age, disability, marital status, or any other form of discrimination.

The Council of Ministers issued a national policy to promote equality of opportunities and treatment in employment and occupation in Saudi Arabia through Resolution No. 416, dated 17/06/1444H (corresponding to 10 January 2023) (the Policy). It defines discrimination in employment and occupation as:

any distinction, exclusion or preference based on race, colour, sex, national origin, social origin, disability or age, including discrimination based on social status, health, maternity, dress, employees (workers) with family responsibilities or any other discriminatory reason – whether direct or indirect – resulting in unequal opportunity or unequal treatment in employment or occupation.

The Saudi Anti-Harassment Law mandates that the concerned authorities in the governmental and private sectors must put in place the necessary measures to prevent and combat harassment within the framework of the work environment, including:

• a mechanism for receiving complaints within the entity;
• the necessary procedures to ensure the validity and seriousness of complaints and to maintain their confidentiality; and
• publicising those measures and making their employees aware of them.

The concerned authorities in the governmental and private sectors must enforce disciplinary accountability for employees who violate any of the provisions stipulated in the Anti-Harassment Law. Disciplinary accountability does not prejudice the right of the victim to file a complaint before the legally competent authorities.

What are the primary government agencies or other entities responsible for the enforcement of employment statutes and regulations?

The MHRSD is primarily responsible for the enforcement of employment statutes and regulations.

Worker representation

Is there any legislation mandating or allowing the establishment of employees’ representatives in the workplace?

Work councils, workers' committees, union representatives and employee representatives with the power to collectively bargain with employers are not permitted in Saudi Arabia.

What are their powers?

This is not applicable as they are not permitted in Saudi Arabia.

Background information on applicants

Are there any restrictions or prohibitions against background checks on applicants? Does it make a difference if an employer conducts its own checks or hires a third party?

The Saudi Labor Law does not address background or reference checks as many employers request these checks from applicants. The two most common checks an employer may require a local applicant (Saudi or foreign) to obtain are:

• a criminal record check – a 'No Previous Criminal Conviction Certificate', which can be obtained manually from the General Directorate of Public Security (the process varies slightly depending on whether the applicant is a foreign national residing in Saudi Arabia or a Saudi national) or electronically from the Absher portal; and
• a credit check – this is in the form of a credit report provided by the Saudi Credit Bureau (SIMAH). Applicants can contact SIMAH personally to request their own SIMAH credit report.

These checks are only available to Saudi and foreign nationals living in Saudi Arabia. An employer could request applicants residing abroad to carry out similar checks; the process would likely vary from country to country.

Are there any restrictions or prohibitions against requiring a medical examination as a condition of employment?

A foreign national being hired from abroad must undergo a medical examination at a centre that is certified by the Saudi Embassy or Consulate in their country of origin or residence. The foreign national will need to undergo a second medical examination at a centre that is certified by the Ministry of Health to carry out iqama (work or residency permit) tests. If the applicant tests positive on either medical examination for infectious diseases such as hepatitis, HIV or tuberculosis, their visa application or iqama issuance will be rejected.

There are no restrictions or prohibitions against requiring a medical examination as a condition of employment for local hires, although it is not particularly common in practice, subject to industry.

An employer can refuse to hire an applicant who refuses to undergo a medical examination.

Are there any restrictions or prohibitions against drug and alcohol testing of applicants?

There are no restrictions or prohibitions on asking applicants to take a drug and alcohol test and this is fairly common in practice. An employer can refuse to hire an applicant who refuses to take this test.

Hiring of employees

Are there any legal requirements to give preference in hiring to, or not to discriminate against, particular people or groups of people?

The Saudi Labor Law provides that all citizens shall have equal right to work without discrimination based on gender, disability, age or any other form of discrimination, whether in the performance of work, upon employment or in the advertising thereof.

Despite this, the Labor Law also requires employers to train their Saudi employees to gradually replace foreign national employees and to keep a record of this, and the Ministry of Human Resources and Social Development (MHRSD) imposes varying Saudisation percentages on entities depending on their economic activities (for example, International Standard Industrial Classification of All Economic Activities, Revision 4 (ISIC4) licensed activities) and size (the Nitaqat system).

Saudisation applies to all private entities in Saudi Arabia except a multinational company's regional headquarters for the first 10 years. Where an entity employs five or fewer employees, at least one would have to be a Saudi national. Where an entity employs six or more employees, it would need to adhere to the relevant Saudisation percentages of its Nitaq activities (which correlate to its ISIC4 activities). Where an entity has multiple Nitaq activities, the MHRSD will apply the one with the highest Saudisation percentages.

Each entity receives a rating (red, low green, medium green, high green or platinum) depending on the level of Saudisation achieved. Those receiving the red rating are subject to penalties, including not only the loss of the right to recruit additional foreign personnel but also the possible loss of the ability to renew existing visas and work permits or to prevent their employees from transferring their employment to employers in the green or platinum categories. While the low green category is technically compliant, the entity would be unable to apply for new visas to hire additional foreign nationals or change foreign national employees' iqama professions; therefore, medium green or higher should be the target. Medium green and platinum categories can:

• apply for new visas to hire foreign nationals;
• change the occupation of foreign nationals;
• renew work permits of existing foreign nationals;
• transfer the sponsorship of foreign nationals from another entity; and
• receive instant calculation (assessment) in the Nitaqat programme.

Must there be a written employment contract? If yes, what essential terms are required to be evidenced in writing?

Yes, the Labor Law requires that the employment contract be in writing, in duplicate, with one copy to be retained by each of the two parties. However, a contract shall be deemed to exist even if not written. In this case, the employee must establish the contract and their entitlements.

Electronic employment contracts are mandatory. A local hire (Saudi or foreign) cannot be onboarded without one. E-contracts must be prepared on an employer's Qiwa portal using the MHRSD's standard online language. Qiwa's standard form includes the following clauses: title, term, renewal period (if the contract term is fixed), probation, working hours and days, employer's obligations, employee's obligations, expiry or termination of contract, end of service and applicable system and jurisdiction. The employer must fill in the blanks, such as days of probation, annual leave, salary and benefits. If a specific clause is not available on the Qiwa portal, an employer can manually add the clause in English and Arabic (or Arabic only). Examples of these clauses include intellectual property clauses or clauses excluding bonuses or commission from the end of service award calculation.

The employee must accept the electronic employment contract on the Qiwa portal (there is no signing per se; instead, the employee clicks a button to accept or reject the terms of the contract or request that clauses be modified).

For foreign nationals hired from abroad, the employer could submit its template paper employment contract in dual format (English and Arabic in parallel) to the Saudi Embassy or Consulate in the foreign national's country of origin or residence as part of the entry visa application process. Once the foreign national, hired from abroad, enters Saudi Arabia and obtains their work and residency permit (iqama), the employer must prepare an electronic employment contract on the Qiwa portal. The MHRSD's standard language includes a clause stating that the Qiwa contract supersedes all previous agreements.

To what extent are fixed-term employment contracts permissible?

Foreign national employees must be employed on a fixed-term (definite-term) basis. There is no minimum or maximum duration of a definite-term contract, although one year is common in practice. The 19 February 2025 amendments to the Labor Law (the Amendments) provide that a foreign national's term of employment (if not otherwise specified in the employment contract) shall be one year from the employee's actual start date. If employment continues after this period, the contract is deemed renewed for a similar period.

Saudi and Gulf Cooperation Council (GCC) country nationals can be employed on either a definite or indefinite-term contract. If a Saudi (or other GCC country) national is employed on a definite-term contract, it can become indefinite by force of law if the contract:

• does not incorporate a clause that provides for its renewal and the parties continue to implement the contract after its expiry. In this case, the contract shall be deemed renewed (by conduct) for an indefinite period; or
• incorporates a clause for a similar term or a specified term. If the contract is renewed for three consecutive terms or if the original contract term and the renewal period (or periods) amount to four years, whichever is less, and the two parties continue to implement it, the contract shall become indefinite.

The key differences between the two types of contracts are termination and compensation for unlawful termination.

What is the maximum probationary period permitted by law?

Probation must be included in the employment contract, and the Amendments provide that probationary periods shall not exceed 180 days. It is expected that parties will now agree to a probationary period of up to 180 days from the outset. Prior to the Amendments taking effect, probationary periods could not exceed 90 days but could be extended multiple times by a separate written agreement between the parties. These extensions had to occur after the commencement of employment and during the initial (or renewed) probationary period, with the total probationary period not exceeding 180 days. Probation is exclusive of all public holidays and sick leave.

Either party has the right to terminate the contract during this period, despite any provision in the employment contract to the contrary.

What are the primary factors that distinguish an independent contractor from an employee?

An independent contractor would not be registered as an employee on an entity's General Organization for Social Insurance or Qiwa portal.

A Saudi individual or entity (an entity would need to be licensed to provide the relevant services) can provide services to an entity. A foreign national residing in Saudi Arabia may not act as an independent (self-employed) contractor (unless they are on a special privilege iqama). The Labor Law prescribes that foreign nationals must be employed, sponsored, work for and be paid by their employer or sponsor (which must be the same entity) and may not work for anyone other than their sponsor. An entity may receive services from properly licensed local entities that employ foreign nationals, but in these cases the contract should be with the employing entity, not the individual.

The contractual relationship with an independent contractor should be structured accordingly, whereby the contractor should:

• generally work from their own business office. The nature of the services may require that the contractor sometimes work from the entity's office, but there should be a clear commercial rationale for this;
• ideally not have an employer email address;
• not be obliged to work exclusively for a particular entity;
• ordinarily receive an hourly or daily fee or a retainer for their services (not a monthly salary);
• not be entitled to allowances or benefits (eg, accommodation, transport or children's education allowance); or
• not be entitled to paid vacation.

If the relationship between the entity and the contractor is not structured in accordance with the above, the relationship may be deemed one of employer–employee, in which case the Labor Law would likely apply and the entity may incur the duties of an employer, including, but not limited to, duty to pay wages, an end of service award and pension contributions in the case of GCC country nationals.

Is there any legislation governing temporary staffing through recruitment agencies?

Employers can use manpower companies to support staffing requirements. While many companies hold themselves out as being manpower or recruitment companies, only a limited number of these are properly licensed (ie, whose objects are recruitment and they are a joint stock company, wholly Saudi-owned, properly capitalised and licensed by the MHRSD).

If a labour office inspection reveals that a foreign national employee is working for anyone other than their sponsor without a valid reason (such as the employer is a licensed manpower company or is performing services on an entity's premises, such as cleaning or maintenance (in both cases with an Ajeer certificate)), the entity could be subject to fines, a one-year ban on recruiting foreign workers and deportation of the responsible manager if they are a foreigner. However, the latter two sanctions are rarely imposed in practice, particularly for first-time offences. The Ajeer regime regulates and documents the temporary work of foreign national employees on non-sponsors' premises.

Foreign workers

Are there any numerical limitations on short-term visas? Are visas available for employees transferring from one corporate entity in one jurisdiction to a related entity in another jurisdiction?

An entity must be in at least the medium green category (which indicates a moderate level of compliance with the Saudisation targets) to apply for and obtain short-term visas and visas to enable them to hire foreign national employees from abroad, or to transfer the employment and sponsorship of a locally hired foreign national employee.

Are spouses of authorised workers entitled to work?

No, an employee's dependents (spouse and children) are not permitted to work on their dependent residency permit unless the employee is on a special privilege work and residence permit (iqama).

What are the rules for employing foreign workers and what are the sanctions for employing a foreign worker who does not have a right to work in the jurisdiction?

It is a fundamental Labor Law requirement that foreign national employees must be employed, sponsored for work or residency permits, and paid by the same entity, which must be licensed to do business in Saudi Arabia. A foreign national may not work for anyone other than their sponsor. If it is discovered that a foreign national is working for anyone other than their sponsor, they may be arrested and held until deported. Both the entity employing persons under others' sponsorship and the entity allowing their sponsorees to work for other parties are also at risk of penalties.

It is an employer's obligation to, among other matters, apply for and pay the fees of a foreign national employee's work and residence permit (iqama), their renewal, fines resulting from their delay, change of profession, exit and re-entry visas and return tickets to the employee's home country at the end of the employment relationship (unless the employee resigns without a legitimate reason(in which case the employee must bear the cost) or transfers employment and sponsorship to another local entity).

Is a labour market test required as a precursor to a short or long-term visa?

In the past, the government used a virtual labour platform called TAQAT that connected individual jobseekers (Saudi nationals only) with employers matching their interests and supported employers in finding candidates. An employer looking to fill a position was required to advertise the position online for 45 days. During this period, only Saudi nationals could apply. If a Saudi jobseeker with the requisite skills was not found within the 45-day period, the employer could fill the position with a foreign national (ie, the government would not permit an employer to apply for a visa to hire a foreign national from abroad if the employer had not gone through this process). The 45-day period was reduced to one week for entities in the platinum category for Saudisation purposes and two weeks for entities in the high green category. TAQAT is no longer used, but an employer must be in at least the medium green category to hire foreign nationals.

Terms of employment

Are there any restrictions or limitations on working hours and may an employee opt out of such restrictions or limitations?

Full-time employees may not work for more than eight hours a day if the employer uses the daily work criterion, or more than 48 hours a week if the employer uses the weekly criterion (this is based on a six-day working week). For Muslims, hours are reduced during Ramadan to six and 36, respectively. Many employers reduce working hours for all employees (including non-Muslims) during Ramadan.

The number of working hours may be increased to nine hours a day for certain categories of employees or in certain industries and jobs where the employee does not work continuously, such as retail. It may likewise be reduced to seven hours a day for certain categories of employees or in certain hazardous or harmful industries or jobs. In entities where work is done in shifts, an employer may, with the Ministry of Human Resources and Social Development's approval, increase the number of working hours to more than eight hours a day, or 48 hours a week, provided that the average working hours over a three-week period do not exceed eight hours a day or 48 hours a week.

What categories of workers are entitled to overtime pay and how is it calculated?

Under the Saudi Labor Law, employees are entitled to be paid for overtime work. Overtime is compensated at the hourly wage plus 50 per cent of the basic hourly salary. The 19 February 2025 amendments to the Labor Law (the Amendments) retain this provision and payment rate, and introduce the option for the parties to agree to paid time off in lieu (TOIL) instead of compensation. TOIL must be agreed upon between the parties, specifying the duration of the overtime and the duration of the TOIL, provided that it is not less than one and a half hours for each working hour. The employer may specify when the employee can take the TOIL within a period of 60 days from the date of commencing overtime, unless the parties agree otherwise. The TOIL may not exceed 30 days per year. The employee is entitled to receive monetary compensation for TOIL if their employment is terminated prior to taking the TOIL.

All working hours performed above usual working hours and during weekends, annual leave and public holidays are deemed overtime despite any provision in employment contracts to the contrary.

Working hours and rest periods do not apply to:

• persons occupying high positions of authority in management and policy, if these positions grant these persons authority over employees;
• preparatory or supplemental works, which must be completed before or after the commencement of work;
• work that is intermittent by necessity; or
• guards and janitors, excluding civil security guards.

Can employees contractually waive the right to overtime pay?

Any waiver would be unenforceable. Under shariah, an individual cannot waive a right that has yet to accrue. Additionally, the Labor Law provides that any waiver of an employee's right arising from the Labor Law, such as overtime, would be deemed null and void unless it is more beneficial to the employee.

Is there any legislation establishing the right to annual vacation and holidays?

The Labor Law provides that an employee is entitled to prepaid annual leave of not less than 21 (calendar) days, to be increased to not less than 30 (calendar) days if the employee is employed for five consecutive years. In practice, most employers provide more than the statutory minimum.

Broadly speaking, there are no concerns to limit the number of unused annual leave days that an employee can carry forward to the following year. The Labor Law provides that an employee may, with the employer's approval, postpone their annual leave or days thereof to the following year. An employer implementing a policy to this effect may be deemed to approve the relevant number of carried-over days mentioned in the policy. However, an employee may not lose annual leave days, nor may they be paid out in lieu during their employment – only upon termination. This has been confirmed in several labor court decisions. These decisions have ruled that employers and employees can agree on the number of unused annual leave days that can be carried over to the following year, ensuring that employees do not take excessive leave in any given year (usual annual leave allowance plus agreed carried-over days). Unused leave can be 'banked' and paid out on termination; it will never be forfeited.

Is there any legislation establishing the right to sick leave or sick pay?

An employee whose illness has been proven is eligible for:

• full sick leave for the first 30 (calendar) days;
• three-quarters of their pay for the next 60 (calendar) days; and
• unpaid sick leave for the following 30 (calendar) days.

The above applies during a single year, whether the leave is continuous or intermittent. A single year means the year beginning from the date of the first sick leave.

In what circumstances may an employee take a leave of absence? What is the maximum duration of such leave and does an employee receive pay during the leave?

Yes, employees are entitled to fully paid absence for the following circumstances:

• five days for their wedding;
• three days at the birth of a male employee's child to be taken within seven days of the delivery;
• 12 weeks maternity leave; at least four weeks should be taken before the expected delivery date and six weeks must be taken immediately after the delivery (the remaining two weeks to be distributed at the female employee's discretion). A female employee may extend her maternity leave for one month without pay. A female employee may – if she gives birth to a sick child or a child with special needs whose health condition requires a permanent presence – extend her maternity leave for one month, with full pay. She may also extend her leave for another month without pay;
• five days upon the death of an ascendant or descendant or a male employee's wife;
• three days upon the death of a sibling;
• four months and 10 days upon the death of a Muslim employee's husband, which may be extended, without pay, until the birth of the child if the employee is pregnant;
• 15 days upon the death of a non-Muslim employee's husband;
• not less than 10 days and not more than 15 days, including Eid Al-Adha holiday, to perform Hajj only once during their service if they have not performed it before. To be eligible for this leave, the employee must have spent at least two consecutive years of service with the employer; and
• exam leave for an unrepeated academic year or an exam, based on the actual number of examination days.

An employee may, subject to the employer's approval, take unpaid leave for a duration to be agreed upon by the two parties. The employment contract shall be deemed suspended for the duration of leave in excess of 20 days unless both parties agree otherwise.

What employee benefits are prescribed by law?

The Cooperative Health Insurance Law requires that employers provide medical insurance coverage to employees and their dependents.

The Amendments introduce the obligation on employers to provide:

• adequate housing for its employees or an appropriate cash allowance in lieu to be paid with the salary; and
• suitable transportation for employees from their residence to the workplace or an appropriate cash allowance in lieu to be paid with the salary.

It would appear that employers that have not historically provided employees with housing or transportation, or an allowance in lieu, will need to do so (perhaps apportioning the employee's wage differently (which would require employee consent) or paying the employee an additional amount). The new Implementing Regulations do not elaborate on this point and it remains to be seen how the MHRSD and labour court judges will interpret it.

In practice, many employers provide their employees with schooling allowance and provide foreign national employees with an annual return flight to their home country or a flight allowance; however, these benefits are not statutory.

Are there any special rules relating to part-time or fixed-term employees?

The Labor Law Implementing Regulations set out the requirements of a part-time employment contract:

• the part-time work contract shall be in writing and of a definite term, mentioning work hours that shall not exceed half the standard work hours adopted by the employer, irrespective of whether the work is performed on a daily basis or during specific days of the week;
• part-time work contracts may be extended for a similar period or for a period agreed to by the parties;
• if a part-time contract is terminated without just cause by one of the parties, the aggrieved party may claim compensation for the remaining contractual period unless the parties agree otherwise; and
• part-time employees are bound by the provisions of the Labor Law in relation to vacations, weekly rest periods, official holidays and overtime.

Must employers publish information on pay or other details about employees or the general workforce?

Employers must register each employee's wage with the General Organization for Social Insurance (GOSI), pay the relevant GOSI contributions and ensure wages are paid in accordance with the wage protection system. As such, the government has employee data (such as profession and wage) by virtue of employment, as these details are registered with the employer's Qiwa and GOSI accounts.

Post-employment restrictive covenants

To what extent are post-termination covenants not to compete, solicit or deal valid and enforceable?

The Labor Law addresses confidentiality and non-compete provisions. It provides that for these provisions to be enforceable, they must be in writing (in the employment contract), and limited in terms of time, place and type of work. The maximum period for a non-compete provision is two years. There is no minimum or maximum period for a confidentiality clause. While the Labor Law does not address non-solicitation clauses, the requirements for an enforceable restrictive covenant would likely apply by analogy.

Even where a restrictive covenant is sufficiently limited and technically enforceable, these factors alone may not be enough to ensure the employer's success in a potential case against an employee. It can be difficult to obtain effective injunctive relief from Saudi courts, which makes it challenging to prevent continued breaches; therefore, often, the only available remedy is damages. In general, only damages and losses that are actual, quantifiable and direct are compensable. If an employer cannot evidence loss, its claim against the employee is unlikely to be successful. Indirect or consequential damages, such as loss of anticipated profits, are not ordinarily recoverable under shariah. While liquidated damages clauses may be enforced, a court would have discretion not to do so if it were convinced that the liquidated damages were substantially out of line with the direct damages likely to have been suffered by the beneficiary of the clause.

However, the Civil Transactions Law (CTL) appears to expand the traditional scope of recoverable damages. The CTL explicitly recognises lost profits as recoverable compensation, but it does not explain the circumstances in which these profits are to be awarded. As such, it is unclear whether the CTL deviates from past practice and permits speculative future profits or it is simply a restatement of the traditional approach to damages. Given that Saudi courts have relatively wide discretion in interpreting legislative directives, it is not possible at present to opine on whether the CTL significantly expands the scope of recoverable damages.

Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

Consideration is not statutorily required to be offered to employees in return for them agreeing to a non-compete clause and is not particularly common in practice. All payments are typically settled on termination so the employer can obtain a release from the employee. The Labor Law provides that a terminated employee's entitlements must be settled within one week of their last day of service, or within two weeks if the employee ended the contractual relationship, failure of which could result in the employer being fined, if discovered.

Liability for acts of employees

In which circumstances may an employer be held liable for the acts or conduct of its employees?

If a foreign national employee is found working for a third party or their own account, the employer may be subject to a fine or a one-year ban on recruiting foreign nationals. If the manager is a foreign national, they may be deported. We have not seen bans or deportations imposed in practice.

Taxation of employees

What employment-related taxes are prescribed by law?

None. There is no personal income tax in Saudi Arabia.

Employee-created IP and confidential business information

Is there any legislation addressing the parties’ rights with respect to employee inventions?

The Saudi Patent Law provides that the right to a patent must be assigned to the employer if the invention was the result of the implementation of a contract or an obligation providing for carrying out inventive activities. The right is also assigned to the employer if it proves that the inventor would not have achieved the invention had they not used the facilities, means or information made available through their employment.

This may not prejudice the employee's right to receive special remuneration to be determined by a competent authority in the country where the invention is made and in light of the circumstances of the contract or the obligation, and the economic significance of the invention. Any agreement depriving an employee of these rights shall be void. This is also applicable to government employees. A patent application filed by an employee inventor within two years of termination of their services shall be considered as having been filed during their employment.

Is there any legislation protecting trade secrets and other confidential business information?

There is a general obligation under shariah to protect a person's confidential information; any unauthorised disclosure would be actionable. There are also a number of statutes that protect trade secrets and other confidential business information, such as the Protection of Confidential Commercial Information Regulations.

Typically, employers include a confidentiality provision in employees' employment contracts. The Labor Law provides that for a confidentiality provision to be enforceable, it must be in writing (in the employment contract) and limited in terms of time, place and type of work.

Data protection

Is there any legislation protecting employee privacy or personnel data? If so, what are an employer’s obligations under the legislation?

Specific requirements for employee data do not exist from a Labor Law perspective. However, from a data protection perspective, general rules and limitations regarding cross-border personal data transfer exist under the Saudi Personal Data Protection Law (PDPL). The PDPL (and its Implementing Regulations) came into effect in September 2024. The Saudi Data & AI Authority (SDAIA) also published new Data Transfer Regulations in September 2024 setting out the data transfer framework. Under the PDPL, controllers may transfer personal data only in limited circumstances described under article 29 of the PDPL and article 2 of the Data Transfer Regulations.

Data controllers may transfer personal data to jurisdictions deemed to offer an adequate level of protection by the SDAIA without the need to implement any additional measures. The SDAIA's list of adequate jurisdictions is yet to be published. Conversely, data controllers may transfer personal data to non-adequate jurisdictions only by implementing appropriate safeguards as detailed in the Data Transfer Regulations. In particular, standard contractual clauses, binding corporate rules and certificates of accreditation can be used by data controllers, but only in certain scenarios.

In addition, data controllers must conduct risk assessments for data transfers based on exceptions or when involving large amounts of sensitive data. Risk assessments should include:

• purpose and legal basis of the transfer;
• description and scope of the transfer;
• safeguards and measures for data protection;
• data minimisation measures;
• potential impact and harm to data subjects; and
• mitigation measures for identified risks.

The National Data Governance Regulations by the National Data Management Office (NDMO) (the NDMO Regulations) set out more specific details on the topic of cross-border personal data transfers and introduce mechanisms for achieving compliance, including obtaining consent from the relevant authority before the transfer. The NDMO Regulations only apply to public entities, and overlap and expand upon the requirements under the PDPL.

Do employers need to provide privacy notices or similar information notices to employees and candidates?

Yes. The PDPL provides that controllers need to provide a privacy notice to the data subject at the time of collection. The privacy notice should include:

• the legal justification for collecting the personal data;
• the purpose of collecting personal data and whether collecting all or a portion of it is mandatory or optional, as well as informing the data subject that the data will not be subsequently processed in a manner inconsistent with the collection purposes;
• unless the collection is for security purposes, the identity of the person collecting the personal data and their address;
• the entity or entities to which the personal data will be disclosed and whether the personal data will be transferred, disclosed or processed outside Saudi Arabia;
• the potential consequences and risks of not completing the personal data collection;
• the data subject's rights provided under the law;
• the data controller's identity and contact details;
• the data protection officer's contact details (if applicable);
• the period for which personal data will be stored or the criteria used to determine that period; and
• an explanation on how to withdraw consent to process personal data and how to exercise the data subject's rights.

If the controller's activities require continuous and large-scale processing of the personal data of individuals that lack legal capacity (whether fully or partially), or continuous monitoring of data subjects, adoption of new technologies or automated decision-making, the controller should also include the following in the privacy notice:

• means and methods of collecting and processing sensitive data (where applicable);
• means and procedures taken to protect personal data; and
• an indication of whether decisions will be made based solely on automated processing.

What data privacy rights can employees exercise against employers?

The PDPL provides that employees, as data subjects, have the right to:

• be informed, which includes informing the data subject of the legal justification for collecting their personal data and the purpose for it;
• access their personal data as retained by the data controller in accordance with the controls and procedures specified in the PDPL Implementing Regulations;
• request a copy of their personal data as retained by the data controller in a readable and clear format, in accordance with the controls and procedures specified in the PDPL Implementing Regulations;
• request correction, completion or updating of their personal data as retained by the data controller;
• request the destruction of their personal data as retained by the data controller, which is no longer needed, unless otherwise permitted under the applicable law; and
• lodge a complaint with the competent authority (SDAIA) if they believe that the employer is not correctly applying the PDPL's provisions.

Business transfers

Is there any legislation to protect employees in the event of a business transfer?

If there is a change of shareholder, there are no protections, as the employer remains the same. If, however, there is a business transfer that includes the transfer of the employee's employment and sponsorship (in the case of foreign national employees), the employee must consent to the transfer. There is no concept of automatic transfer as there is in some jurisdictions (unless it is a merger by absorption), and the transfer is technically treated as a termination and re-hire, but the employee's service is deemed continuous for seniority and end of service and must transfer on terms that are no less favourable than their existing terms.

Termination of employment

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

The Labor Law does not recognise 'at-will' employment. The law recognises definite-term and indefinite-term contracts, and the rules governing termination differ depending on the type of contract.

Definite-term contracts are terminable:

• by non-renewal (parties can agree on a non-renewal notice period);
• for any of the reasons listed in article 74 of the Labor Law (such as mutual agreement, resignation, retirement, firm wind-up, cessation of the activity in which the employee is involved or employer bankruptcy);
• for cause by the employer for any of the reasons listed in article 80 of the Labor Law; or
• for cause by the employee for any of the reasons listed in article 81 of the Labor Law.

'Resignation' is defined as the employee's written notice of their desire, without coercion, to terminate a definite-term employment contract without conditions or stipulations, and the employer's acceptance thereof. A resignation will be deemed accepted if the employer does not respond within 30 days. An employer may defer acceptance of the resignation for up to 60 days if the business needs require, with a written explanation to the employee, which must be communicated before the expiry of the 30-day period. The employment contract will end with the employer's resignation acceptance, lapse of the 30-day period or after the deferral period. An employee can withdraw their resignation within seven days of its submission unless the employer has already accepted their resignation.

Indefinite-term contracts are terminable:

• with at least:
  • 30 days' prior written notice if the employee initiates the termination; or
  • 60 days' prior written notice if the employer initiates the termination, where the employee is paid on a monthly basis, unless the contract provides for a longer notice period for a legitimate reason or payment in lieu of notice;
• for any of the reasons listed in article 74 of the Labor Law (such as mutual agreement, retirement, firm wind-up, cessation of the activity in which the employee is involved or employer bankruptcy);
• for cause by the employer for any of the reasons listed in article 80 of the Labor Law; or
• for cause by the employee for any of the reasons listed in article 81 of the Labor Law.

The term 'legitimate reason' is not defined in the Labor Law so is therefore determined on a case-by-case basis. Because the Saudi labor courts have no system of binding precedent or case reporting system, it is often difficult to predict with certainty whether a legitimate reason for termination may exist in a given case. However, it is clearly intended to be a less stringent standard than 'cause'.

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

Yes, for definite-term contracts, parties can agree on the non-renewal notice period; for indefinite-term contracts, an employer should provide a legitimate reason for the termination and give an employee at least 60 days' prior written notice – unless the contract provides for a longer notice period – or pay in lieu of notice.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

An employer may dismiss an employee without notice (or payment in lieu), or an end of service award for any of the reasons listed in article 80 of the Labor Law, provided it gives the employee a chance to object to the termination. These reasons are if:

• during or by reason of the work, the employee assaults the employer, the manager in charge or any of their superiors or subordinates;
• the employee fails to perform their essential obligations arising from the employment contract, or obey legitimate orders, or if, in spite of written warnings, they deliberately fail to observe safety instructions;
• it is established that the employee committed misconduct or an act infringing honesty or integrity;
• the employee deliberately commits any act or default with the intent to cause material loss to the employer, provided that the employer reports the incident to the appropriate authorities within 24 hours of becoming aware of the occurrence;
• the employee resorted to forgery to obtain the job;
• the employee is hired on probation;
• the employee is absent without valid reason for more than 30 days in one contractual year or for more than 15 consecutive days, provided that the dismissal is preceded by a written warning from the employer to the employee if the employee is absent for 20 days in the first case and for 10 days in the second;
• the employee unlawfully takes advantage of their position for personal gain; or
• the employee discloses work-related industrial or commercial secrets.

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

On termination (subject to certain exceptions), employees are entitled to an end of service award equal to half a month's (gross) wage for each of the first five years and one month's (gross) wage for each subsequent year, pro-rated to time employed. 'Wage' is broadly defined to include not just base salary but also the value of every cash or in-kind allowance or benefit payable to the employee on a regular basis pursuant to their employment contract or as an 'acquired right'. The only elements of the 'wage' that it is permissible to exclude by contract from the end of service award calculation are commissions 'and similar elements of the wage that by their nature are subject to increase and decrease'.

If the employment relationship ends due to the employee's resignation:

• before completing two years of service, there is no end of service award;
• after completing two but before completing five consecutive years of service, the employee receives one-third of the standard end of service award;
• after completing five but before completing 10 consecutive years of service, the employee receives two-thirds of the standard end of service award; and
• after completing 10 years of service, the employee receives the full end of service award.

There are three exceptions to the above rules on reduction of the end of service award due to resignation:

• the employee will be entitled to the full end of service award if they abandon the work because of a force majeure event that is beyond their control;
• a female employee is entitled to the full end of service award if she resigns within six months of marriage or three months of giving birth; and
• an employee is entitled to their full end of service award if they resign due to misconduct by the employer.

If termination is deemed unlawful, an employee would be entitled to compensation. The amount depends on whether the employee is on a definite or indefinite-term contract. Unless the contract provides for a specific indemnity, an employee on:

• a definite-term contract would be entitled to their (gross) wage for the remaining period of the contract or two months' wage, whichever is greater; or
• an indefinite-term contract would be entitled to 15 days' (gross) wage for each year of service or two months' (gross) wage, whichever is greater.

Compensation is in addition to the employee's wage until their last day, end of service, pay for unused annual leave and any other approved unpaid expenses.

Are there any procedural requirements for dismissing an employee?

If an employer terminates an employee for cause, which is without notice or an end of service award, it must give the employee the chance to object to the termination. This is achieved by inviting the employee to a disciplinary meeting where they are given the chance to object to the allegations. Minutes of the meeting must be taken. After the meeting, once the employer has had the chance to consider the employee's defence, it can issue the termination notice.

A notice to the Ministry of Human Resources and Social Development (MHRSD) regarding terminations is only required 60 days prior to a collective dismissal. 'Collective dismissal' is defined as termination of a group of Saudi employees, without any wrongful act on their part and for reasons attributed to the employer, at a rate of 1 per cent of the total employees at the entity or a total of 10 employees, whichever is higher, within one year of the entity's last dismissal.

In what circumstances are employees protected from dismissal?

An employer cannot terminate an employee's employment on account of illness prior to availing the statutory sick leave. The employee may request that their sick leave be combined with their annual leave.

An employer cannot threaten female employees with termination when they are pregnant or on maternity leave, including when they are ill due to these circumstances, provided that her illness is duly proven through an approved medical report and that her absence does not exceed 180 consecutive or non-consecutive days per year.

Are there special rules for mass terminations or collective dismissals?

Yes, employers may not collectively dismiss Saudi nationals for any reason (other than bankruptcy of final closure) without giving prior notice to the MHRSD, at least 60 days prior to the effective date of the dismissal. 'Collective dismissal' is defined as termination of a group of Saudi employees, without any wrongful act on their part and for reasons attributed to the employer, at a rate of 1 per cent of the total workers at the entity or a total of 10 employees, whichever is higher, within one year of the entity's last dismissal.

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Generally speaking, employees may only assert labour claims on an individual basis.

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

The new Social Insurance Law that came into effect in July 2024 staggers retirement age, between 58 and 65 (Gregorian), depending on a contributor's age when the Law came into force. However, the parties may agree that the employee continues employment past the retirement age.

Dispute resolution

May the parties agree to private arbitration of employment disputes?

Yes, they can, although this is unusual in practice. One of the Qiwa portal's standard clauses in its electronic employment contract provides that if a dispute arises between the two parties, the judicial jurisdiction rests with the authority competent to hear labour cases in Saudi Arabia, which is the labour courts, by default.

May an employee agree to waive statutory and contractual rights to potential employment claims?

Under shariah, an individual cannot waive a right that has not accrued. Similarly, the Labor Law provides that any waiver of an employee's rights arising from the Labor Law during their employment is deemed null and void, unless it is more beneficial to the employee. Therefore, a valid waiver to a particular right (eg, to an end of service award) would only be enforceable on termination when the right has accrued.

What are the limitation periods for bringing employment claims?

The limitation period for bringing employment claims is 12 months from termination.

Update and trends

Are there any emerging trends or hot topics in labour and employment regulation in your jurisdiction? Are there current proposals to change the legislation?

The Amendments to the Labor Law and the new Implementing Regulations came into force on 19 February 2025.

The emerging trends and hot topics tend to be around Saudisation, as the requisite percentages are occasionally updated, and the nationalisation of professions. The Minister of Human Resources and Social Development frequently issues ministerial resolutions to exclusively or partially nationalise professions, which involves reserving certain jobs for Saudi nationals.

What emergency legislation, relief programmes and other initiatives specific to your practice area has your jurisdiction implemented to address the pandemic? Have any existing government programmes, laws or regulations been amended to address these concerns? What best practices are advisable for clients?

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