Article 77 of the Saudi Labor Law sets compensation for termination without a valid reason: when dismissal is unfair and how the amount is calculated.
Short answer: Article 77 gives the party harmed by termination for an invalid reason a right to compensation, unless the contract sets its own amount: fifteen days' wage per year of service for open-ended contracts, or the wage for the remaining term for fixed-term contracts, and never less than two months' wage.
If you were told your job is ending without a clear reason, or you are an employer who wants to know your exposure before ending someone's contract, Article 77 is the provision that sets compensation for termination without a valid reason, commonly called "unfair dismissal". This guide covers its current wording, when it applies, how compensation is calculated, and how it fits with Articles 74, 75 and 80. If you need your situation reviewed, see our labor lawyer service.
What does Article 77 say?
Article 77 was amended by Royal Decree No. M/46 dated 5/6/1436H. Its current text, as published by the Bureau of Experts, provides that unless the contract specifies compensation for termination by either party for an invalid reason, the harmed party is entitled to:
fifteen days' wage for each year of service, if the contract is of indefinite duration;
the wage for the remaining period, if the contract is fixed-term;
in both cases, no less than two months' wage.
Three points stand out. Compensation goes to the harmed party, which may be the employer if the employee walks out without a valid reason. A contractual clause on compensation takes priority. And there is a two-month minimum.
When is termination "for an invalid reason"?
The Labor Law does not use the phrase "unfair dismissal"; it refers to termination without a legitimate reason. Read Article 77 together with:
Article 75 (as amended by Royal Decree M/44 of 1446H): either party may end an open-ended contract for a legitimate reason with written notice of at least sixty days if the employer terminates, or thirty days if the employee does, where pay is monthly.
Article 80: lists exhaustively the cases in which the employer may terminate without award, notice or compensation, after allowing the employee to state objections.
Article 82: an employer may not terminate for illness before the employee has used up the statutory sick-leave periods.
Situations commonly argued as termination without a valid reason include ending the contract with no stated reason, relying on a reason that cannot be proven, invoking Article 80 when its conditions are not met, or ending a fixed-term contract early without justification. Whether a reason is legitimate is ultimately decided by the labor court on the facts.
What is the difference between Articles 74 and 77?
Article 74 lists how a contract ends: written mutual agreement, expiry of a fixed term, resignation, retirement age, force majeure, permanent closure and so on. Article 77 answers a different question: what the harmed party receives when a contract ends for an invalid reason. A contract that ends properly under Article 74 does not trigger Article 77.
How is compensation calculated?
Open-ended contract: fifteen days' wage per year of service, which in practice equals half a month's wage per year if a day's wage is taken as the monthly wage divided by thirty.
Fixed-term contract: the wage for the remaining term.
Minimum: if the result is below two months' wage, it is raised to two months.
Contract clause: if the contract sets a specific amount or method, that clause is the starting point.
How does it look in numbers? (illustrative only)
Example 1: open-ended contract, six years, monthly wage SAR 9,000. Fifteen days = 4,500; 6 × 4,500 = SAR 27,000, above the two-month floor of 18,000.
Example 2: open-ended contract, two years, wage SAR 7,000. 2 × 3,500 = 7,000, below the floor, so compensation rises to SAR 14,000.
Example 3: fixed-term contract terminated with five months left, wage SAR 8,000: 5 × 8,000 = SAR 40,000.
Does Article 77 include a notice period?
No. Notice is governed by Article 75, and Article 76 covers failure to give it: the party who ends an open-ended contract without observing notice must pay the other an amount equal to the employee's wage for the notice period, unless a higher amount was agreed. Under Article 78, when the employer gives notice, the employee may take one day a week or eight hours during the notice period to look for work, on full pay.
Is compensation paid on top of the end-of-service award?
Yes. The end-of-service award is earned by length of service under Article 84; Article 77 compensation is for the harm of unlawful termination. See our guide to end-of-service benefits or use our end-of-service calculator.
Can an employee "resign under Article 77"?
Article 77 is not a resignation route; it is a compensation rule that applies to whoever ends the contract without a valid reason. If you are leaving because the employer breached essential obligations or mistreated you, the relevant provision is Article 81, covered in our article on Articles 80 and 81.
What should you do if you think your dismissal was unjustified?
Ask for the termination decision in writing, with the reason and date.
Do not sign a final release before reviewing it.
Keep evidence: contract, payslips, appraisals, messages and emails.
Calculate the end-of-service award, notice pay if notice was not given, and Article 77 compensation.
Start with amicable settlement at the Ministry of Human Resources and Social Development, the first stage before a labor court. The Ministry requires claims within twelve months.
Frequently asked questions
Does Article 77 apply during probation?
Article 80 allows termination without award, notice or compensation for an employee on probation, and Article 53 lets either party end the contract during probation, so Article 77 does not normally apply to a proper probation termination.
Can an employer claim compensation from an employee?
Yes. If the employee ends the contract without a valid reason, the employer is the harmed party and the same rules apply unless the contract says otherwise.
Which wage is used?
The actual wage: basic pay plus allowances and entitlements, as defined in Article 2.
How long do I have to claim?
The Ministry's amicable-settlement service requires filing within twelve months. Start early.
Do you believe your contract was ended without a valid reason?
Kawkaba Law reviews termination cases and represents individuals and companies in labor disputes across Saudi Arabia, in person and remotely.
Request a case assessment
Official sources: Saudi Labor Law – Bureau of Experts · Amicable settlement service – HRSD
Disclaimer: This article is general information about the Saudi Labor Law and is not legal advice for any specific case. Outcomes depend on the contract, facts and documents, so please consult a qualified lawyer before taking action.
