Riyadh, Saudi Arabia - September 25, 2026 - Saudi labor law changed in February 2026, and a lot of employment contracts have not caught up.
If an employee’s understanding of their rights is based on a contract signed several years ago, some of its provisions may no longer reflect the current rules. This becomes particularly important when employment ends, as final payments must be calculated according to the rules currently in force rather than outdated provisions.
The framework
The Labor Law issued under Royal Decree M/51 governs private-sector employment in the Kingdom. The Ministry of Human Resources and Social Development administers it. It covers Saudi nationals and expatriate workers alike, though some categories, domestic workers among them, fall under separate regulations.
Contracts for non-Saudi employees have to be written and fixed-term. Where no term is stated, the contract runs for the duration of the work permit.
Contracts, probation and notice
Item
Standard position
Probation period
Up to 180 days where agreed in writing
Notice, indefinite contract
60 days from employer, 30 days from employee
Standard working week
48 hours, reduced to 36 during Ramadan for Muslim employees
Annual leave
21 days, rising to 30 days after 5 years' service
Overtime
150% of the hourly wage
The February 2026 amendments tightened several of these, particularly around resignation procedure, probation and the grounds for ending a contract. Plenty of employers are still working from template contracts drafted before that, which is where a good share of disputes start.
End of service award
This is the entitlement employers get wrong most often.
The award is based on the employee's final wage, and in Saudi Arabia wage generally means basic salary plus regular allowances. That is a wider base than the UAE uses, and employers sometimes quietly apply the narrower one.
Length of service
Award per year
First 5 years
Half a month's wage per year
After 5 years
One month's wage per year
Resignation has historically resulted in a reduced end-of-service award, with lower entitlements for employees with less than five years of service and full entitlement after ten years or more. Recent reforms have affected this area, so the applicable rule may depend on when the employment actually ended. The relevant provisions should therefore be confirmed rather than assumed.
The award is separate from payment for unused leave, outstanding wages and any additional benefits provided for under the employment contract. Disputes over what constitutes wages for the purpose of calculating the award are common, and employment and labour lawyers in Riyadh regularly deal with such claims.
Termination and wrongful dismissal
An employer can end a contract for a valid reason, on notice, or during probation. Ending it without a valid reason costs them: typically 15 days' wages per year of service on an indefinite contract, or the wages left on a fixed-term contract, unless the contract sets something higher.
Article 80 sets out when an employer may dismiss with no notice and no award. Assault, serious breach of duties and unexplained absence past defined limits are on that list. The grounds are narrow and the employer has to prove them.
Article 81 operates differently. It allows an employee to leave without notice while retaining full entitlements where the employer has breached the employment relationship first, for example by failing to pay wages. The manner in which an employee resigns can affect the entitlements due, making it advisable to obtain legal advice on employment rights in Riyadh before submitting any resignation or related statement in writing.
Wage protection and unpaid salary
Employers must pay salaries through approved banking channels under the Wage Protection System, which lets MHRSD monitor payments. Failing to comply brings penalties and can block a company from issuing or renewing work permits.
That system is useful if wages go unpaid. A missing WPS payment is a hard thing for an employer to explain away.
How to file a labor claim
Raise it internally first, in writing, and keep a copy. A surprising number of disputes end here once someone realises the claim is documented.
If that fails, file with MHRSD through the Ministry's electronic services. An amicable settlement stage comes first. Where settlement does not work inside the statutory period, the case goes to the specialised Labor Courts.
Watch the limitation period, which runs from the end of the employment relationship. Late claims get rejected on that basis alone, however strong the underlying case.
Labor cases in Saudi Arabia carry no court fees, so cost rarely stops anyone. Delay does.
Frequently asked questions
Does Saudi labor law apply to expatriate workers? Yes. It covers private-sector employees regardless of nationality, though some categories such as domestic workers sit under separate regulations.
Can my employer keep my passport? No. Holding an employee's passport without consent is not permitted.
What is the maximum probation period? 180 days, where the contract says so in writing.
How is the end of service award calculated if I resign? Resignation has historically produced a scaled award based on years of service. Recent amendments affect this, so check the rule that applied on the end date.
Is overtime compulsory? Overtime must be paid at 150% of the hourly wage, and total working hours stay subject to statutory limits.
Before signing anything
The costliest mistake in a Saudi employment dispute is signing a final settlement before the calculations have been properly reviewed. A common error involves the wage figure used to calculate the end-of-service award, particularly when regular allowances have been incorrectly excluded.
Lawzana lists verified law firms in Riyadh that handle employment matters. Employees should provide their employment contract, recent payslips, WPS records and any settlement proposed by the employer for review before signing.
About the company
Lawzana is a professional legal services directory. The company provides legal guidance and support to individuals and businesses dealing with employment and labour matters. Its team helps clients understand their rights, assess their legal position and navigate disputes under the applicable UAE employment framework. The company focuses on providing practical, clear and professional legal assistance tailored to each client's circumstances.
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