Article 74 of the Saudi Labor Law lists when a work contract ends: agreement, expiry, resignation, retirement, force majeure and more, and what each means.
Short answer: Article 74 of the Saudi Labor Law sets out the cases in which an employment contract ends, including: mutual agreement provided the employee consents in writing, expiry of a fixed-term contract, the will of either party in an indefinite contract under Article 75, resignation, reaching retirement age, force majeure, permanent closure of the establishment, ending the activity, and bankruptcy cases.
When employment ends, the first legal question is not "how much am I owed?" but "how did the contract end?". The way it ended decides whether you receive a full or reduced end-of-service award and whether compensation or notice is due. Article 74 is the provision that brings these routes together. It has been amended more than once, most recently by Royal Decree M/44 dated 8/2/1446 AH, which is why older versions still circulate online. This guide sets out the cases according to the amendments published by the Bureau of Experts and explains the practical effect of each. For a review of your situation, see our labor lawyer service.
What does Article 74 say after the amendments?
The Bureau of Experts publishes Article 74 together with its amendments, of which there are three: an amendment by Royal Decree M/46 dated 5/6/1436 AH, a replacement of paragraph 4 by Royal Decree M/134 dated 27/11/1440 AH, and the addition of two paragraphs by Royal Decree M/44 dated 8/2/1446 AH. Putting these amendments together, the cases in which an employment contract ends are, in translation:
"An employment contract ends in any of the following cases:
If both parties agree to end it, provided the employee's consent is in writing.
If the term specified in the contract expires, unless the contract has been expressly renewed in accordance with this Law, in which case it continues until its term.
By the will of either party in indefinite contracts, in accordance with Article 75 of this Law.
3 bis. Resignation.
The employee reaching retirement age as provided in the Social Insurance Law, unless both parties agree to continue working beyond that age.
Force majeure.
Permanent closure of the establishment.
Ending the activity in which the employee works, unless otherwise agreed.
7 bis. A final decision or judgment of the competent court ending the employee's contract in any bankruptcy proceedings opened under the Bankruptcy Law.
Any other case provided for in another law."
Note: many sources still state a retirement age of sixty for men and fifty-five for women, which is an earlier wording. The amended text links retirement age to the Social Insurance Law.
The cases explained, and the effect of each
The general rule in Article 84 is that when employment ends, the end-of-service award is due: half a month's wage for each of the first five years and a full month's wage for each year after. The two main exceptions are resignation (Article 85) and lawful termination under Article 80. With that in mind:
1. Termination by mutual agreement
The contract ends if both parties agree to end it, provided the employee's consent is in writing. This condition protects the employee: it is not enough for the employer to say "we agreed verbally". Equally, signing a "termination by agreement" document has serious consequences, so read what you sign: does it mention your dues? Does it include a waiver?
2. Expiry of a fixed-term contract
A fixed-term contract ends when its term expires, unless it has been expressly renewed in accordance with the Law, in which case it continues until its term. Expiry needs no reason and carries no compensation for termination, but it does not remove the award.
3. The will of either party in an indefinite contract
Either party may end an indefinite contract for a legitimate reason with written notice under Article 75: at least sixty days if the employer ends it and thirty days if the employee does, where the wage is paid monthly. We explain the details in our article on Article 75 of the Labor Law. If there is no legitimate reason, the question becomes compensation under Article 77.
3 bis. Resignation
The amendments added resignation as a separate case and set its rules in Article 79 bis: it is deemed accepted after thirty days without a reply, acceptance may be deferred for sixty days with a written explanation, and the employee may withdraw within seven days. On resignation, the award is calculated under Article 85: one third, two thirds or the full award depending on length of service. Details and a template are in our resignation letter template guide.
4. Reaching retirement age
The contract ends when the employee reaches retirement age under the Social Insurance Law, unless both parties agree to continue working beyond that age. Ending the contract on retirement is not one of the exceptions that reduce the award.
5. Force majeure
Force majeure is an exceptional event beyond both parties' control that makes continuing the contract impossible. Whether it exists is for the court to assess on the facts. It is useful to know that Article 87 grants the full award if the employee leaves because of force majeure beyond the employee's control.
6 and 7. Permanent closure or ending the activity
The contract ends on permanent closure of the establishment, or when the activity in which the employee works is ended, unless otherwise agreed. What is meant is an actual, final closure or ending, not a temporary reduction or a relocation of the activity.
7 bis. Bankruptcy proceedings
The amendments added the case of a final decision or judgment of the competent court ending the employee's contract in any bankruptcy proceedings opened under the Bankruptcy Law.
8. Other cases in other laws
The article remains open to any case provided for in another law. Article 79 also provides that the contract ends on the employee's death or inability to work as shown by an approved medical certificate, and does not end on the employer's death unless the employer's person was a consideration in concluding the contract.
How do Articles 74, 77 and 80 differ?
Article 74 answers the question: how does the contract end?
Article 77 answers the question: what is the injured party owed if the contract ends without a legitimate reason? We explain it in Article 77 of the Labor Law.
Article 80 sets out the exhaustive cases in which the employer may terminate without award, notice or compensation, explained in Articles 80 and 81 of the Labor Law.
So a contract that ends correctly under one of the Article 74 cases does not give rise to Article 77 compensation. But if the employer claims an Article 74 case, such as ending the activity, and it is not true in fact, the matter may become a termination without a legitimate reason. If it is the employee who left because of the employer's breach, the relevant text is Article 81 of the Labor Law.
Illustrative example: how the way the contract ends changes what you receive
The figures below are for illustration only. An employee served eight years and his last actual wage was SAR 12,000. The full award under Article 84 = (5 × 6,000) + (3 × 12,000) = 30,000 + 36,000 = SAR 66,000.
Expiry of the term, agreement or retirement: full award = SAR 66,000.
Resignation: service between five and ten years, so two thirds = SAR 44,000.
Employer ends an indefinite contract without a legitimate reason: award of SAR 66,000, plus Article 77 compensation = 8 × 6,000 = SAR 48,000, and notice compensation if notice was not observed.
Lawful termination under Article 80 with its conditions met: no award, no notice and no compensation.
To estimate your award, use the end-of-service calculator and read our end-of-service award guide.
What to do when your contract ends
Ask for written proof of how it ended: a termination letter, an acceptance of resignation or a signed agreement.
Check that the stated case is true in fact, especially where closure of the establishment or ending of the activity is claimed.
Do not sign a termination agreement or a release before reading the terms and confirming your dues.
Calculate your dues: the award, leave pay, late wages and any compensation.
Follow up the settlement: Article 88 requires the employer to pay wages and settle dues within a week at most if the employer ended the relationship, and within two weeks if the employee ended it.
If there is a dispute, start with amicable settlement at the Ministry of Human Resources, bearing in mind that the Ministry requires the complaint to be filed within twelve months.
Frequently asked questions
Can a contract be ended by verbal agreement?
Not under the text, since paragraph 1 requires the employee's consent to termination by agreement to be in writing.
Am I entitled to an award if my fixed-term contract expired and was not renewed?
Yes, as a rule. Expiry is one of the cases in which the contract ends, and the award is due under Article 84 when employment ends; the recognised exceptions are resignation and lawful termination under Article 80.
What is the retirement age under the Labor Law now?
After paragraph 4 was amended, the Law links retirement age to the Social Insurance Law, so refer to that law for the age that applies in your case.
Does closing a single branch count as permanent closure of the establishment?
The text refers to permanent closure of the establishment or ending the activity in which the employee works.
What is the difference between Article 74 and Article 77?
Article 74 lists the ways a contract ends, while Article 77 sets compensation where termination has no legitimate reason. A contract that ends under a valid Article 74 case does not give rise to Article 77 compensation.
Has your contract ended and you doubt how it was done?
How the termination is characterised is the basis for calculating everything that follows. Our licensed lawyers review contracts and termination letters and represent individuals and companies in labor cases across all regions of Saudi Arabia, in person and remotely.
Request a case review
Official source: Labor Law — Bureau of Experts at the Council of Ministers
Note: this article is general information about the Saudi Labor Law and is not legal advice for any specific case. Outcomes depend on the contract, the facts and the documents, so we recommend consulting a qualified lawyer before taking any action.
