Saudi Arabia: Contracts of employment
- Employers must issue employment contracts in writing to employees. (See General)
- Probationary periods are permitted. (See Probationary periods)
- Legislation provides that employment contracts may be either for a fixed term or open ended. (See Types of contract)
- Employment contracts must contain certain specified terms. (See Written contract of employment)
- The basic rule is that the parties to the employment contract must agree to any variation of the contract's terms (preferably in writing), unless the contract provides otherwise. (See Variation of contract)
Statute defines an employment contract as a contract concluded between an employer and an employee, whereby the latter undertakes to work under the management or supervision of the former for a wage.
Employment contracts must be in writing and contain certain specified terms (see Written contract of employment).
Employment contracts must be in Arabic and, if the contract uses another language alongside Arabic, the Arabic text prevails. If an employment contract is only in a language other than Arabic, this does not invalidate the contract and it will still be considered binding. However, non-compliance with the Arabic-language requirement may constitute a violation of employment legislation by the employer.
If the employment contract or the employer's "work organisation regulations" (see Saudi Arabia: Employee rights > Work organisation regulations) do not stipulate an employee's pay, the employee is entitled to the remuneration paid by the employer to other employees for the same type of work. If there are no other employees performing the same type of work, the employee is entitled to the remuneration normally paid for the job locally. In the absence of any such benchmark, the remuneration is set by the Commission for Settlement of Labour Disputes (see Saudi Arabia: Termination of employment > Contesting dismissals) in accordance with the "dictates of justice". The same procedure applies if the employment contract or work organisation regulations are silent on the type and scope of the work that the employee is required to perform.
An employer is defined by statute as any natural or corporate person employing one or more employees for a wage. An employee is defined as any natural person working for an employer and under its management or supervision for a wage, even if not under its direct control.
Statute provides that the employer has certain duties towards employees, including:
- not employing them without pay (see Saudi Arabia: Pay and benefits > Pay - general);
- not making deductions from their pay without legal authorisation (see Saudi Arabia: Pay and benefits > Deductions); and
- treating them with due respect and refraining from any action or utterances that may infringe on their dignity or religion.
Employees also have various statutory duties as part of the employment relationship. Notably, the employee must:
- perform the work in accordance with normal practice in the type of work concerned and the employer's instructions, provided that such instructions do not conflict with the employment contract, the law or public morality, and that they do not expose the employee to any undue hazards;
- take due care of the employer's machinery, tools, supplies and raw materials placed at the employee's disposal or in his or her custody, and return to the employer any unused materials;
- abide by "proper conduct and ethical norms" during work;
- provide all necessary assistance and help (without making this contingent on receiving additional pay) in the event of disasters or hazards threatening the workplace or the people working there;
- undergo, at the employer's request, any medical examinations required prior to or during employment, to ensure that the employee is free from occupational or communicable diseases; and
- keep confidential any technical, trade and industrial secrets related to the work or the business, if their disclosure is likely to damage the employer's interests.
Probationary periods are permitted. If the employment is to be subject to such a period, this must be expressly and clearly stated in the employment contract. Probationary periods must not exceed 90 days, excluding any period of sickness absence (see Saudi Arabia: Pay and benefits > Pay for employees not at work) and the Eid al-Fitr and Eid al-Adha public holidays (see Saudi Arabia: Employee rights > Holiday and holiday pay), unless the parties agree in writing to extend the probationary period for a further period of no more than 90 days.
An employee may not serve more than one probationary period with the same employer except by agreement between the employer and employee, in cases where a second period (of no more than 90 days) relates to another occupation or type of work, or where the employee returns to employment with that employer after a break in service of at least six months.
The employer or employee may terminate the contract without notice during the probationary period, though an employment contract may specify that only one of the parties is entitled to terminate without notice during probation. If the contract is terminated during a probationary period, neither party is entitled to compensation and the employee is not entitled to an end-of-service award (see Saudi Arabia: Termination of employment > Severance payments).
Employment is deemed to have been confirmed on the day after the end date of the probationary period, if neither party has informed the other of termination prior to this date.
Types of contract
Legislation provides that employment contracts may be either for a fixed term or open ended. The contracts of foreign nationals and part-time employees must be for a fixed term (see Saudi Arabia: Recruitment and selection > Foreign nationals). If the contract of a foreign national does not state its term, the contract is deemed to end when the employee's work permit expires.
The main distinctions between fixed-term contracts and open-ended contracts relate to termination (see Saudi Arabia: Employee rights > Fixed-term workers). Fixed-term contracts expire at the end of their term. During their term, they may be terminated only by mutual consent, or summarily on certain grounds by either the employer (see Saudi Arabia: Termination of employment > Summary dismissal) or employee (see Saudi Arabia: Termination of employment > Resignation). Other than in these cases, if an employer terminates a fixed-term contract early, the employee may claim reinstatement or the payment of compensation, and if the employee terminates the fixed-term contract early, the employer may claim compensation from the employee. By contrast, open-ended contracts may be terminated with notice by either the employer or employee at any time for a "valid" reason (see Saudi Arabia: Termination of employment > General).
Employment legislation makes a number of distinctions between the entitlements of employees on full-time contracts and those on part-time contracts (see Saudi Arabia: Employee rights > Part-time workers).
Statute provides for a specific form of employment contract for maritime workers on board vessels, who are also subject to special rules in areas such as pay and working time.
Written contract of employment
Employment contracts must be in writing. Written employment contracts must be in duplicate, with one copy retained by each party.
Employment contracts must state at least:
- the name and address of the employer;
- the name, nationality and identification details of the employee;
- the wage;
- the type of work;
- the place of work;
- the date of commencement of employment; and
- in the case of fixed-term contracts (see Saudi Arabia: Employee rights > Fixed-term workers), the duration of the contract.
Employment contracts must, in addition, contain terms relating to:
- the normal days and hours to be worked by the employee and the statutory overtime rate that will apply (see Saudi Arabia: Employee rights > Hours of work);
- entitlement to annual leave (see Saudi Arabia: Employee rights > Holiday and holiday pay);
- the employer's obligation to provide medical insurance cover and to make social insurance contributions to the General Organisation for Social Insurance (see Saudi Arabia: Pay and benefits > Income tax and social security);
- in the case of employment of foreign nationals (see Saudi Arabia: Recruitment and selection > Foreign nationals), the employer's obligation to pay the costs:
- of recruitment, residence visa applications and renewals;
- associated with work and residence permits and entry/exit visas;
- of repatriating the employee at the end of employment; and
- on death, of internment in Saudi Arabia or of repatriating the body to the employee's country of origin;
- in the case of female employees, entitlement to paid maternity leave and rest breaks for breastfeeding (see Saudi Arabia: Employee rights > Maternity and pregnancy rights), and entitlement to bereavement leave on the death of the employee's spouse (see Saudi Arabia: Employee rights > Other leave);
- the employee's obligations to the employer during the employment relationship (see General);
- the parties' statutory rights to terminate the contract (see Saudi Arabia: Termination of employment > General);
- the governing law and jurisdiction for the contract; and
- the service of notices.
Variation of contract
The basic rule is that the parties to the employment contract must agree to any variation of the contract's terms (preferably in writing), unless the contract provides otherwise. Statute provides specifically that an employer may not, without the employee's written consent:
- assign an employee duties that are essentially different from the work agreed in the employment contract, except in cases of necessity dictated by temporary circumstances for no more than 30 days a year; or
- transfer an employee from his or her original place of work to another place that entails a change in his or her place of residence, except in cases of emergency for no more than 30 days a year provided that the employer pays the employee's costs and expenses during the period of the transfer.
Employees are entitled to resign without notice in certain circumstances (see Saudi Arabia: Termination of employment > Resignation), including where:
- the employer assigns the employee, without his or her consent, to perform work that is essentially different from the contractual work, except as permitted by law; and
- the employer, through its actions and particularly through unjust treatment or violation of the terms of the contract, has caused the employee to appear as the party terminating the contract.
In such cases, the employee retains his or her right to a full end-of-service award, where applicable (see Saudi Arabia: Termination of employment > Severance payments), and may be able to claim compensation from the employer at the Commission for the Settlement of Labour Disputes (see Saudi Arabia: Termination of employment > Contesting dismissals).
The main item of legislation relevant to employment contracts is the Labour Law (Royal Decree no.M/51 of 23 Sha'ban 1426/27 September 2005).