Mutual termination agreement template for Saudi Arabia
A mutual termination agreement ends an employment contract because both employer and employee agree to end it. Article 74 of the Saudi Labour Law allows this provided the worker’s consent is in writing. This mutual termination agreement sets the last working day and itemises wages, unused leave, the end-of-service award and any extra payment.
Replace everything in [square brackets] with your details.
Agreement to End an Employment Contract by Mutual Consent
This agreement is made on [DD/MM/YYYY] between:
First party (the Employer): [Company name], commercial registration number [CR number], represented by [Name of the authorised signatory] as [Job title].
Second party (the Employee): [Employee full name], a [Nationality] national holding [National ID / Iqama] number [Number], employee number [Employee number], working as [Job title] since [Start date].
The two parties agree as follows.
1. The two parties agree to end the employment contract between them dated [Contract date], in accordance with paragraph (1) of Article 74 of the Saudi Labour Law. The Employee gives written consent to this by signing this agreement.
2. The Employee’s last working day is [DD/MM/YYYY]. The contract ends at the end of that day.
3. The Employer will pay the Employee the following:
Wages from [DD/MM/YYYY] to the last working day: [Amount] SAR
Value of [number] days of unused annual leave: [Amount] SAR
End-of-service award for [years, months and days] of service, calculated on a last actual wage of [Amount] SAR on the basis of [Article 84 in full / Article 84 plus an agreed additional amount]: [Amount] SAR
Additional agreed payment: [Amount] SAR
Less: [Description of lawful deductions, such as an outstanding loan]: [Amount] SAR
Net amount due: [Amount] SAR
4. The net amount will be paid by bank transfer to the Employee’s account [IBAN] no later than [DD/MM/YYYY].
5. The Employee will hand over all work, documents, devices and company property and complete the clearance procedure by the last working day.
6. The Employer will issue the Employee an experience certificate, and will complete the procedures with the Qiwa platform and the General Organization for Social Insurance [and, for a non-Saudi employee: the final exit or transfer of services procedures] according to the regulations.
7. Each party will keep confidential the terms of this agreement and the other party’s confidential information.
8. This agreement is made in Arabic and English in two copies, one for each party. If the two texts differ, the Arabic text prevails.
First party (Employer)
Name: [Name of the authorised signatory]
Title: [Job title]
Signature and stamp: [Signature and company stamp]
Second party (Employee)
Name: [Employee full name]
Signature: [Signature]
Date: [DD/MM/YYYY]
When to use it
Use it when the employer and the employee both want to end the contract and agree on the date and what will be paid. It is often the cleanest way to part when neither side wants a dispute about notice, a valid reason or Article 77 compensation.
What the law requires
- Written consent of the worker (Article 74, paragraph 1). The contract ends by agreement of both parties only if the worker’s consent is written. A verbal agreement is not enough.
- No waiver of statutory rights during the contract (Article 8). A term by which the worker gives up a right the Labour Law grants is void unless it is more favourable to the worker. Pay at least what the law requires, and record any extra payment separately.
- Payment deadline (Article 88). Wages and entitlements are due within one week when the employer ends the contract and within two weeks when the worker does. Set a payment date in the agreement within those limits.
How to fill it in
- Set the last working day and calculate the figures from it.
- Itemise every amount: wages to the last day, unused leave under Article 111, the end-of-service award, any agreed extra payment, and each deduction.
- Write the end-of-service basis. Article 85 reduces the award only on resignation, so calculate it under Article 84 and state the amount and how it was worked out.
- Have the employee sign and give them a copy.
A worked example: 4 years of service, a last actual wage of 9,000 SAR and 12 days of unused leave. The award under Article 84 is 4 × 0.5 × 9,000 = 18,000 SAR. Leave pay is 12 × (9,000 ÷ 30) = 3,600 SAR. With an agreed extra payment of 9,000 SAR, the total before deductions is 30,600 SAR plus wages to the last day.
Common mistakes
- Writing that the employee “waives all rights” without paying what the law requires.
- Leaving the end-of-service figure out, which invites a later claim.
- Forgetting the government steps, such as updating Qiwa and GOSI.
In RafiqHR, the end-of-service award is calculated by reason for leaving, length of service and last wage, and the final settlement is tied to clearance.
Official sources
Frequently asked questions
Is a mutual termination valid without the employee’s signature?
No. Article 74 allows a contract to end by agreement of both parties only if the worker’s consent is in writing. The employee should sign the agreement, and keep a copy.
Is notice needed when a contract ends by mutual agreement?
The notice rules of Article 75 apply when one party ends an open-ended contract on its own. When both agree, they set the end date themselves, so state it in the agreement.
Which end-of-service award applies on mutual agreement?
Article 85 reduces the award only when the contract ends by the worker’s resignation. An agreement under Article 74 is not a resignation, so the safe basis is the full award under Article 84, or more if agreed. State the amount and how it was calculated. A clause giving up rights the law grants during the contract is void (Article 8).
Does the employee qualify for SANED after a mutual termination?
SANED is GOSI’s unemployment insurance for Saudi workers, with conditions GOSI sets, and resignation is not covered. Whether a particular termination qualifies depends on how it is recorded, so check with GOSI before signing.
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.
