Article 74 of the Saudi Labor Law: When an Employment Contract Ends

Article 74 of the Saudi Labor Law lists the situations in which an employment contract comes to an end, from mutual agreement and the expiry of a fixed term to retirement, force majeure and the final closure of the business. If a contract ends in a way that fits none of these cases or any other provision of the law, the employer is exposed to a compensation claim. This guide explains each case in plain terms, how Article 74 differs from Articles 77, 80 and 81, and what an employer should do and document when a contract ends.

What Article 74 covers

Article 74 does not tell an employer how to dismiss someone; it lists the events that bring a contract to a lawful end. The rights that follow, such as the end-of-service award, wages still due and the service certificate, are set out in other provisions. Treat Article 74 as the starting point: before you end any contract, identify which case applies and keep evidence of it.

The cases in which the contract ends

The cases below follow the order in which Article 74 usually presents them. The wording here is a plain summary, not the legal text.

1. Agreement of both parties. Employer and employee agree to end the contract, and the employee’s consent must be in writing.
2. Expiry of a fixed-term contract. The contract ends on its stated end date, unless it was expressly renewed, in which case it runs to the end of the renewed term.
3. The will of one party in an open-ended contract. Either side may end a contract with no fixed term, but only under the notice rules the law sets for such contracts: a legitimate reason, stated in a written notice to the other party ahead of the end date.
4. Retirement age. The contract ends when the employee reaches the retirement age set under the social insurance rules, unless both parties agree that the employee will keep working.
5. Force majeure. An event outside both parties’ control that makes it impossible to continue the work. In practice this means a real impossibility, not a slowdown in business.
6. Final closure of the business. The establishment closes permanently. A temporary closure, a move to new premises or a change of owner is a different matter.
7. End of the activity the employee works in. The business stops the specific activity the employee works in, unless the parties agreed otherwise.
8. Any other case set by another law. Other legislation can also end an employment contract.

Other provisions of the Labor Law cover related situations, such as the employee’s death or a medically certified inability to work, and the effect of the employer’s death on the contract. Read them alongside Article 74.

Check the current text: the law has been amended

The Labor Law has been amended more than once since it was issued, and the provisions on ending a contract were among those that changed. The latest amendments added rules on how an employee’s resignation is submitted and handled, and changed the notice rules. Many websites still quote older versions. Before you rely on any case, read the current text of Article 74 and the articles around it in the official version published by the Ministry of Human Resources and Social Development, together with the implementing regulations.

Article 74 compared with Articles 77, 80 and 81

These four articles are often confused. By subject:

• Article 74 lists the cases in which the contract ends lawfully.
• Article 77 deals with compensation when one party ends the contract for a reason that is not legitimate, unless the contract itself sets that compensation. An employee relies on it after an unjustified dismissal, and an employer may rely on it when an employee walks out without a valid reason.
• Article 80 lists the cases in which the employer may end the contract without the end-of-service award, notice or compensation, mostly serious misconduct by the employee. The list is closed, the facts must be proven, and the employee must be given a chance to state an objection before the decision.
• Article 81 is the mirror image: the cases in which the employee may leave without notice and keep all statutory rights, mostly where the employer has failed in its obligations or mistreated the employee.

In short, Article 74 is the neutral route, Articles 80 and 81 are fault-based routes, and Article 77 applies when an ending has no legitimate basis.

What the employer should do when a contract ends

1. Name the case. Decide which case applies and write it down with the facts behind it: the agreement, the end date, the notice or the closure decision.
2. Put it in writing. For an agreed ending, have the employee sign a short agreement stating the last working day and the settlement. For a fixed-term contract, send a written note before the end date saying whether it will be renewed. For an open-ended contract, give written notice with the reason, within the required period.
3. Calculate the final settlement. Include wages up to the last day, the end-of-service award, pay for unused annual leave and anything else the contract promises. The award formula is in the Labor Law, so check your calculation against the current text.
4. Pay on time. The law sets short deadlines for paying final dues after the contract ends. Pay by bank transfer and have the employee sign a final settlement receipt.
5. Update Qiwa. Record the end of the contractual relationship on Qiwa so the employee’s record and your Saudization figures are correct. For a foreign employee, arrange either a transfer of services to a new employer or a final exit visa, which establishments subscribed to Muqeem can issue there.
6. Update GOSI. Register the end of the employee’s service with the General Organization for Social Insurance so contributions stop from the right date.
7. Hand over the papers. Give the employee a service certificate free of charge on request, and return any certificates or documents the employee deposited with you.

An Innovant HR advisor can review the case, the settlement and the platform steps with you before you act.

Documents to keep

• The signed employment contract and any renewal or amendment.
• The written agreement, notice or decision that ended the contract, with proof that the employee received it.
• For a closure or the end of an activity: the business decision and the related changes to the commercial registration or licenses.
• The settlement calculation, the proof of payment and the signed settlement receipt.
• Confirmations from Qiwa, GOSI and, for a foreign employee, Muqeem.
• Wage records, including the wage protection files submitted through Mudad.

The law sets a time limit for bringing labor claims after the relationship ends, but keep the file well beyond it.

Common mistakes

• Calling every exit an agreement. If the employee did not consent in writing, an “agreed” ending can be treated as a dismissal, and compensation under Article 77 may follow.
• Letting a fixed-term contract run past its end date. If the employee keeps working with no written renewal, you invite a dispute over whether the contract was renewed and on what terms.
• Using “closure” or “end of activity” loosely. These cases need a genuine, documented closure or end of activity. Closing one department while hiring for the same work elsewhere invites a challenge.
• Jumping to Article 80. Ending a contract without the award under Article 80 needs one of its listed cases, proof, and a chance for the employee to respond. A weak Article 80 file often ends as a compensation claim under Article 77.
• Forgetting the platforms. A contract that has ended on paper but is still active on Qiwa or with GOSI causes problems with Saudization counts, contributions and the employee’s next job.

Frequently asked questions

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