Meta Title: Saudi Labor Law Article 77 Explained (2026) | Compensation Rules & Examples
Meta Description: Learn how Saudi Labor Law Article 77 works, who is entitled to compensation, the difference between fixed-term and unlimited contracts, calculation examples, and important legal notes.
Saudi Labor Law Article 77 Explained
Saudi Labor Law Article 77 is one of the most discussed provisions among employees and employers in the Kingdom of Saudi Arabia. It explains the compensation payable when an employment contract is terminated without a valid legal reason, unless the employment contract itself specifies a different compensation clause.
Understanding Article 77 is essential for every expatriate and Saudi employee because it affects employment rights, financial compensation, and contract termination.
What Does Article 77 Say?
Article 77 states that if either the employer or the employee terminates the employment contract without a lawful reason, the affected party is entitled to compensation.
However, if the employment contract already specifies a compensation amount or formula, the contractual provision generally applies.
It is important to note that Article 77 compensation is separate from End of Service Benefits (EOSB).
When Does Article 77 Apply?
Article 77 may apply when:
- The employer terminates an employee without a valid legal reason.
- The employee resigns or terminates the contract without legal justification.
- The employment contract does not provide a different compensation arrangement.
Every case depends on the employment contract and the facts surrounding the termination.
Compensation for Unlimited (Indefinite) Contracts
For an Unlimited (Indefinite) Employment Contract, compensation is generally calculated as:
- 15 days’ salary for each completed year of service
- Minimum compensation: Two months’ salary
Example
Monthly Salary: 4,000 SAR
Years of Service: 4 Years
Calculation:
- 15 days × 4 years = 60 days’ salary
- 60 days = 2 months’ salary
Compensation = 8,000 SAR
Compensation for Fixed-Term Contracts
For a Fixed-Term Employment Contract, compensation is generally based on the wages for the remaining period of the contract, unless the employment contract provides otherwise.
Example
Monthly Salary: 5,000 SAR
Remaining Contract Period: 8 Months
Calculation:
5,000 × 8 = 40,000 SAR
Compensation = 40,000 SAR
Important Points to Remember
- Article 77 applies only when the contract is terminated without a lawful reason.
- If your employment contract contains a different compensation clause, that clause may apply.
- End of Service Benefits (EOSB) are calculated separately.
- Compensation depends on the employment contract and the circumstances of termination.
- Not every terminated employee automatically qualifies for Article 77 compensation.
Difference Between Fixed-Term and Unlimited Contracts
Fixed-Term Contract
Unlimited Contract
Has a specific end date.
No fixed expiry date.
Compensation may be based on the remaining contract period.
Compensation is generally 15 days’ salary per completed year of service (subject to the legal minimum).
Usually ends automatically on the agreed expiry date unless renewed.
Continues until terminated according to Saudi Labor Law.
Frequently Asked Questions (FAQs)
Can an employer terminate an employee without compensation?
Yes, in certain situations where Saudi Labor Law permits termination for legally recognized reasons. Article 77 is generally relevant when termination occurs without a valid legal justification.
Is End of Service Benefit included in Article 77?
No.
End of Service Benefits (EOSB) and Article 77 compensation are two separate legal entitlements.
Does Article 77 apply to expatriate employees?
Yes.
Article 77 applies to eligible employees working under the Saudi Labor Law, including expatriate workers, subject to the law and the terms of their employment contracts.
Does every terminated employee receive Article 77 compensation?
No.
Eligibility depends on:
- The reason for termination.
- The employment contract.
- The applicable provisions of the Saudi Labor Law.
Conclusion
Saudi Labor Law Article 77 provides a framework for compensation when an employment contract is terminated without a lawful reason. Whether you have a fixed-term or an unlimited contract, understanding your rights and reviewing your employment agreement are essential before making or responding to a termination decision.
If you are unsure about your situation, seek professional legal advice or consult the relevant Saudi labor authorities.
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