Article 77 of the Saudi Labour Law: compensation for ending a contract without a valid reason
Not changed by the 2025 amendments
Article 77 of the Saudi Labour Law entitles one party to compensation when the other ends the contract without a valid reason. If the contract sets no amount, it is 15 days’ wage per year of service on an open-ended contract, or the wage for the remaining term on a fixed-term contract, never less than two months’ wage.
This is general information to help you understand the topic. It is not legal advice. Rules and rates change: always check the official text on the relevant authority’s platform and consult a qualified adviser before acting.
What Article 77 says
When one party ends the employment contract without a valid reason, the other party is entitled to compensation:
- If the contract or an agreement sets an amount, that amount applies.
- If not, on an open-ended contract: 15 days’ wage for each year of service.
- If not, on a fixed-term contract: the wage for the period left on the contract.
- In both cases, the compensation may not be less than two months’ wage.
The rule works in both directions: a worker who leaves without a valid reason can owe the employer compensation on the same basis.
Worked example
An employee on an open-ended contract with four years of service and a monthly wage of 8,000 SAR is dismissed without a valid reason, and the contract sets no compensation.
- Daily wage: 8,000 ÷ 30 = 266.67 SAR
- Compensation: 4 years × 15 days × 266.67 = 16,000 SAR
- The two-month minimum is 16,000 SAR, so the compensation is 16,000 SAR.
The employee is also owed the end-of-service award, wages to the last day, unused annual leave, and notice pay if notice was not given (Articles 75 and 76).
What it does not cover
- Dismissal for one of the reasons in Article 80, such as serious misconduct, is a valid reason and carries no Article 77 compensation.
- A worker who leaves under Article 81 because the employer broke its obligations keeps all their rights; that is not a resignation.
- Ordinary resignation is governed by Article 85, which reduces the end-of-service award by length of service.
What HR should do
- Write down the reason for ending the contract and keep the evidence.
- Check the contract for an agreed compensation amount before calculating.
- Pay the compensation with the final settlement, within the deadlines of Article 88.
Disputes about whether a reason was valid are settled through the ministry’s amicable-settlement service and then the labour courts. This page is a general explanation, not legal advice.
Official sources
Frequently asked questions
Can a worker “resign under Article 77”?
Article 77 is not a way to resign. It sets the compensation owed when either party ends the contract without a valid reason. The phrase is often used when an employer ends a contract and agrees to pay Article 77 compensation; a worker who simply resigns is covered by Article 85 instead.
Is Article 77 compensation paid on top of the end-of-service award?
Yes. The compensation is separate from the end-of-service award under Article 84 and from any wages and leave pay still owed.
Does a worker whose contract is ended under Article 77 qualify for SANED?
SANED, the unemployment insurance run by GOSI, covers Saudi workers who lose their job for reasons outside their control, under conditions GOSI sets; resignation is not covered. Whether a particular termination qualifies depends on how it is recorded and on GOSI’s rules, so check with GOSI.
