When and How Employment Contracts Expire: Everything You Need to Know

By Mohammed Ameen

Updated on:

Employment-Contract-Termination

Termination Clauses in Employment Contracts

An employment contract is a legal agreement between an employer and employee, which outlines the terms and conditions of their working relationship. It is important for both parties to understand the provisions of the contract, including how the contract may be terminated. The contract may be terminated in various ways, as outlined in the labor law. In this article, we will explore the different ways that an employment contract may be terminated in Saudi Arabia.

Agreement between the Parties

If both parties agree to terminate the contract, and the worker’s consent is provided in writing, the contract may be terminated. This is the most straightforward way of terminating the employment contract, as both parties are in agreement.

Expiry of the Term

The contract may also expire when the term specified in the contract comes to an end. This is provided that the contract is not expressly renewed according to the provisions of the labor law. If the contract is renewed, it will remain valid for the renewed term.

Termination Based on the Will of One Party

If the contract is of indefinite term, either party may terminate it based on their will, according to what is mentioned in Article (75) of the labor law. In this case, the party that wishes to terminate the contract must provide written notice to the other party, indicating a legitimate reason for termination. The notice period must not be less than sixty days if the worker’s wages are paid monthly, and not less than thirty days for others.

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Retirement Age

The employment contract may also expire when the worker has reached the retirement age according to the provisions of the social insurance law. However, if the two parties agree to continue working after this age, the contract may be renewed.

Force Majeure

In certain situations, the contract may be terminated due to force majeure. This means that the contract may be terminated due to unforeseeable and uncontrollable circumstances, such as natural disasters or war.

Establishment Shutdown

The employment contract may also expire if the establishment shuts down entirely. This may occur due to bankruptcy or a change in business ownership.

Ending the Activity

If the activity that the worker is employed in comes to an end, the contract may expire unless otherwise agreed.

Other Situations

The contract may also expire due to any other situation stated by another law.

Completion of Specific Work

If the contract is for the performance of a specific work, it will end with the completion of such work as agreed.

In the case of indefinite-term contracts, if the party who terminates the contract does not observe the time limit set for the notice, they must pay the other party an amount equal to the worker’s wage for the same period unless the parties agree to more than that.

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Additionally, unless the contract includes specific compensation in exchange for its termination by one of the parties for an unlawful reason, the party affected by the termination of the contract shall deserve compensation as follows:

  • Wages of fifteen days for each year of the worker’s service if the contract is for an indefinite term,
  • Wage of the remaining term of the contract if the contract is of a limited term, and
  • The compensation should not be less than the worker’s wages for a period of two months.

Worker Rights During Notice Period

If the employer gives notice to terminate the worker’s employment contract, the worker has the right to be absent for one full day or eight hours per week to search for a new job. The worker can choose the day and hours of absence, as long as they inform the employer beforehand. The employer can allow the worker to be absent during the notice period, but must still pay their wages and consider the worker’s continuous service period.

Contractual Obligations in the Event of Death or Incapacitation

If the employer dies, the employment contract does not automatically end unless it was specified in the contract. However, if the worker dies or is unable to work due to a medical condition, the contract ends, as confirmed by a medical certificate from authorized health authorities or a doctor chosen by the employer.

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Employment Contracts with a Defined Scope of Work

When an employment contract is for a specific task or job, the contract ends upon completion of the work that was agreed upon.

Conclusion

In conclusion, understanding the expiration of employment contracts is crucial for both employers and employees. As an employee, it is important to know your rights and entitlements upon the expiration of your contract. Meanwhile, employers must ensure that they follow the appropriate legal procedures in terminating an employee’s contract. Whether it’s due to the completion of a specific task or the death of a worker, the termination of an employment contract can be a complex and delicate matter. By knowing the legal requirements and best practices, both parties can avoid potential legal disputes and ensure a smooth and fair transition for all involved. We hope that this article has provided you with the necessary information and insights to navigate the expiration of employment contracts effectively.

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