Saudi Labour Law: Employment Contract Essentials in Saudi Arabia

Introduction to Saudi Labour Law: Understanding the Foundations 

Navigating the complexities of employment in any country can be a challenge. In Saudi Arabia, the rules and regulations governing employment are set out in the Saudi Labour Law. An employment contract in Saudi Arabia isn't merely a formality. It is a key document that safeguards the rights and duties of both employers and workers. Ensuring your contract aligns with the outlined guidelines guarantees a -legally compliant working environment. 

This article provides a comprehensive overview of what should be included in an employment contract in Saudi Arabia. 

Key Elements of an Employment Contract in Saudi Arabia: What Every Employee and Employer Should Know 

According to Article 50 of Saudi Labour Law, an employment contract is an agreement where a worker commits to perform duties under the direction or oversight of an employer in exchange for a wage.

Notably, Article 51 emphasizes that a contract is valid even if it is unwritten, which means a contract is considered legitimate if it's agreed upon verbally. In such situations, the worker can validate the contract and his/her ensuing rights using any method of proof. 

Types of Employment Contracts: Fixed-Term vs. Non-Fixed Contracts  

Contracts can be divided into two categories based on duration: fixed-term and non-fixed contracts. Each one of them has their unique roles to deal with termination, compensation, renewal of contract and end of service reward. Read our latest blog to learn more about The Key Differences Between Fixed and Non-Fixed Contracts. 

What to Include in The Employment Contract 

Employer and Employee Details: Within Saudi employment contracts, it's essential to incorporate specific details, including the employer's name, job location, the worker's personal information, nationality, ID number, and national address, ensuring thorough documentation and clarity.   

Role and Job Description: In Saudi employment contracts, it's vital to define the employee's role, along with a comprehensive description of their responsibilities, ensuring clarity and mutual understanding. 

Start Date and Duration: All contracts must indicate the start date clearly. For fixed-term agreements, the end date should also be mentioned. The contract should typically specify a notice period, usually ranging between 30 to 60 days, and outline compensation terms in case of unlawful termination. 

Salary Breakdown: In Saudi Arabia, when detailing the salary in an employment contract, it's essential to itemize not only the basic salary but also any additional allowances, ensuring the entire compensation package is outlined comprehensively. 

Working Hours and Overtime: Layout standard hours, overtime policies, and days off. The maximum working period is six days a week and 8 hours a day, which doesn’t include the break time. The worker should not work for more than 5 hours continuously.  

 Probation Period: In Saudi Arabia, the probation period in employment should be mentioned in the contract. Typically, it's set at 90 days but can be extended to a maximum of 180 days if both the employer and employee mutually agree. Any extension beyond this is not permissible. Importantly, during the probation period, either party has the right to terminate the contract without providing compensation at any point. 

Holiday Entitlements: In Saudi Arabia, employees are entitled to annual leave and public holidays as part of their holiday entitlements. The minimum annual leave is set at 21 days per year. However, after an employee completes 5 years with the same employer, this entitlement increases to 30 days annually. For a deeper understanding of these provisions and more insights into Saudi's private sector leave policies, refer to our blog titled Saudi Labour Law: Navigating Private Sector Leave Policies.  

End-of-Service Award: In Saudi Arabia, upon terminating an employment relationship, the employer must provide the employee with an end-of-service award. This is structured as a half-month's wage for each of the first five years of service and a full month's wage for every subsequent year. When determining the 'wage' for this award, if not explicitly defined in the employment contract, it's comprehensively interpreted under Saudi labour law to include not just the salary but also commission benefits. Hence, to avoid ambiguities and potential disputes, employers are advised to clearly specify in contracts what constitutes the 'wage' for the end-of-service benefits calculation. 

Confidentiality and Non-Compete Clauses: In Saudi employment contracts, the ‘Confidentiality Clause’ serves to protect a company's proprietary information, ensuring employees refrain from disclosing or misusing confidential data. The obligation often persists beyond the employment's termination. Conversely, the ‘Non-Compete Clause’ restricts employees from joining competitors or initiating a comparable business for a specified duration and within a certain geographical range, post-employment. While these clauses are standard in Saudi Arabia, their enforceability hinges on their reasonableness concerning duration, scope, and region. Courts may rule a particularly restrictive clause unenforceable. Clarity and explicit employee consent for both clauses bolster their enforceability. 

Additional Considerations for Employment Contracts 

• Ensure that added clauses do not contradict the Saudi Labour Law

• Contracts for specific tasks should terminate upon task completion

• Employers cannot change the workplace without the employee's written consent

• Employers must provide a work experience certificate post-contract expiration

• All contracts must be primarily written in Arabic

Navigating Saudi Employment Contracts? TASC is Here to Streamline Your Hiring and Staffing Process 

Understanding the nuances of fixed and non-fixed employment contracts in Saudi Arabia is crucial. Equally vital is keeping up-to-date with the constantly shifting labour and recruitment scenario. TASC, with its 15-year legacy in the sector, stands as your reliable ally in crossing these complex waters. 

If you need hands-on assistance to establish an HR and staffing structure that's in complete alignment with Saudi's distinctive criteria, TASC's GRO and recruitment professionals are ready to help. Our on-ground GRO experts, backed by their vast experience, boast deep insights into Saudi labour regulations, visa steps, and licensing procedures. Leveraging their knowledge not only simplifies your dealings with governmental entities but could also lead to potential savings in GRO operational costs by as much as 60%. 

Reach out to us today for guaranteed compliance. 

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