Saudi labor law sets the rules every employer in the Kingdom must follow — from how you write a contract to how you calculate an employee's final settlement. Getting it right protects your business from disputes, penalties, and reputational damage, while building trust with your workforce.
This guide breaks down the essentials of the Saudi Labor Law in plain language for HR and business leaders. It pairs naturally with your Saudization and Nitaqat obligations to give you a complete compliance picture for 2026.
1Employment Contracts
A valid employment contract should be in writing, in Arabic (a translation may accompany it), and registered through the Qiwa platform. It must clearly state the wage, job title, work location, contract type, and probation period.
Fixed-Term Contracts
Run for a defined period and end automatically on the expiry date. For non-Saudis, the contract is tied to the work permit duration where one is not specified.
Indefinite Contracts
Available for Saudi nationals, with no fixed end date. Ending them requires lawful grounds and a proper notice period.
Probation Period
Probation must be in writing and generally cannot exceed 90 days, extendable to 180 days by written agreement. During probation, either party may end the contract without an end-of-service award.
2Working Hours & Overtime
The law caps standard working hours and requires premium pay for overtime.
| Item | Standard | During Ramadan |
|---|---|---|
| Daily hours | 8 hours | 6 hours (Muslim employees) |
| Weekly hours | 48 hours | 36 hours (Muslim employees) |
| Overtime rate | 150% of hourly wage | 150% of hourly wage |
| Weekly rest | Friday (min. 24 hours) | Friday (min. 24 hours) |
Accurate time tracking is essential for both overtime pay and remote and hybrid work arrangements, where working hours can be harder to monitor.
3Leave Entitlements
Saudi labor law guarantees several categories of paid and unpaid leave.
Annual & Sick Leave
- • 21 days annual leave (30 after 5 years)
- • Sick leave: 30 days full pay
- • Next 60 days at 75% pay
- • Remaining 30 days unpaid (per year)
Special Leave
- • Maternity leave: 12 weeks paid
- • Paternity / bereavement: defined paid days
- • Hajj leave: once during service
- • Exam leave for enrolled students
4End-of-Service Benefits
The end-of-service award (EOSB) is one of the most misunderstood parts of Saudi labor law. The base formula is:
EOSB Base Formula
½ month
per year for the first 5 years
1 month
per year after 5 years
When the employee resigns, the award is reduced on a sliding scale: one-third if service is between 2 and 5 years, two-thirds between 5 and 10 years, and the full amount after 10 years. Employer-initiated termination without a disqualifying cause pays the full award. Always calculate using the employee's last full wage including fixed allowances.
5Termination & Notice Rules
Ending employment lawfully requires the right grounds, the right notice, and proper documentation.
Article 80 — Dismissal Without Award
Lists specific serious causes (e.g. assault, fraud, repeated violations after warning) where an employer may dismiss without notice or award — but the burden of proof sits with the employer.
Article 81 — Employee Leaves With Rights
Lists cases (e.g. unpaid wages, unsafe conditions, employer breach) where an employee may resign while keeping full end-of-service entitlements.
Notice Periods
For indefinite contracts, monthly-paid employees are entitled to at least 60 days' written notice; others typically 30 days. Terminating without valid grounds may require compensation of at least 15 days' wage per year of service (or the contract terms, whichever is greater).
Reduce Disputes With Better Hiring
Competency-based hiring lowers mismatches that lead to early terminations
6Wage Protection & Records
The Wage Protection System (WPS) requires employers to pay salaries through approved channels and report them, so the government can verify that workers are paid in full and on time.
- Pay wages monthly (or as agreed) via WPS-compliant transfers
- Maintain accurate contracts, attendance, and leave records
- Keep a clear, documented disciplinary and warning process
- Register contracts and changes promptly on Qiwa
Clean records also support fair performance management, which is your best defense if a termination is ever challenged.
7Employer Compliance Checklist
Use this quick checklist to audit your own compliance before an inspection ever happens.
Contracts registered on Qiwa
Every active employee has a written, registered contract with correct details
WPS payments current
Salaries paid on time through approved channels and reported
Leave & overtime tracked
Accurate records of hours, overtime pay, and leave balances
Policies documented
Internal work regulations and disciplinary procedures approved and shared
8Frequently Asked Questions
How is end-of-service benefit calculated in Saudi Arabia?
End-of-service award is half a month's wage for each of the first five years and a full month's wage for each year after, based on the last wage. Resignation reduces the award on a sliding scale by length of service, while employer termination without a disqualifying cause generally pays the full amount.
What are the standard working hours under Saudi labor law?
Standard hours are 8 per day or 48 per week, reduced to 6 per day or 36 per week for Muslim employees during Ramadan. Overtime is paid at 150% of the normal hourly wage, with total hours capped by regulation.
How much annual leave are employees entitled to?
At least 21 days of paid annual leave per year, rising to 30 days after five years of continuous service. Sick leave provides full pay for 30 days, 75% pay for the next 60 days, and unpaid leave thereafter within a single year.
What is the maximum probation period in Saudi Arabia?
Probation must be stated in writing and generally cannot exceed 90 days, extendable to a maximum of 180 days by written agreement. During probation either party may terminate without notice or award unless the contract states otherwise.
What are the rules for terminating an employee?
Termination needs lawful grounds and proper notice — typically 60 days for monthly-paid employees on indefinite contracts. Terminating without valid reason may require compensation. Article 80 covers dismissal without award; Article 81 covers resignation with full entitlements.
9Your Next Steps
The best labor-law strategy is prevention: hire the right people, document everything, and treat employees fairly. Start by strengthening the front end of the employee lifecycle.
Build a Compliant, Fair Workplace
Hire Right
Assess candidates to reduce mismatches and early exits
Document Everything
Keep contracts, records, and policies audit-ready
Treat Fairly
Fair process is the strongest defense against disputes
Use the assessment as a starting point, then match the next step to the role, team, and business decision.
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PerformancePerformance Management Systems in Saudi Arabia
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