Article 74 of Saudi Labor Law: Contract Termination

Article 74 of Saudi Labor Law stipulates 7 conditions for the termination of a contract by an employee or employer in Saudi Arabia, including the unfinished job contract. Here are the details;

Article 74 of the Saudi Labor Law

An employment contract is deemed to be completed, expired, or terminated in the following scenarios;

1. Agreement of both parties

A contract can be terminated with the written agreement of a worker and employer under Article 74 (1) of Saudi Labor Law. For example, a resignation letter for an unfinished job contract accepted by the employer in Saudi Arabia.

2. Contract completion

If the period mentioned in the contract expires, it is deemed the termination of the agreement under Article 74 (2).

Note: A termination letter by the employer or resignation from the employee must be sent before the contract renewal in Saudi Arabia.

3. Termination of an Indefinite contract

Article 74 (3) states that an indefinite contract can be terminated due to a valid reason only;

• A 60-day notice period is required to terminate an indefinite contract under Article 75 of Saudi Labor Law.
• Valid Reason = Article 77 of Saudi Labor Law.

Note: A contract with an expatriate employee is always a fixed-term contract under Article 37 of Saudi Labor Law. In other words, Article 74 (3) does not apply to expatriate employees.

4. Retirement Age

If an employee reaches retirement age in Saudi Arabia, any party can request the termination of the contract with full benefits as per Article 74 (4).

• Retirement age for men: 65 years.
• The retirement age for women: 55 years.

5. Force Majeure

Force Majeure is those events that are out of the control of any party to the contract. For example, changes to the law, disasters, explosions, fires, floods, riots, terrorist attacks, coronavirus, and wars can lead to the termination of a contract under Article 74 (5).

During the coronavirus pandemic, the Ministry of Labor suspended Article 74 (5) of Saudi Labor Law for six months, from April 2020 to Oct 2020.

6. Closure of Business

A contract is automatically terminated under Article 74 (6) of Saudi Labor Law if the company or business has permanently closed down.

7. Closure of Activity

If the department or the branch where the employee used to work has ceased operations, it can lead to termination under Article 74 (7).