The renewal and termination of Fixed Term and Indefinite Contract

What is Fixed Term Contract?

All of us sign a fixed term contract at the beginning of our job. There are certain conditions for the termination and the renewal of a fixed-term contract in Saudi Arabia.

The renewal of a fixed-term contract in Saudi Arabia

The renewal of a fixed-term contract in Saudi Arabia can be explicit or implicit. 

1. If there is no clause in the initial contract (fixed term contract) for the renewal and your employer does not terminate you at the end of the fixed term contract, it is automatically renewed and becomes an indefinite contract.

However, it is important to note that the employment contract with non-Saudi employees will always be a fixed-term contract. In case an employment contract does not mention the term of the contract, the duration of the work permit (iqama expiry) shall be deemed the contract term.  – Article 37 of the Saudi Labor Law

2. If the initial fixed term contract contains a clause for the renewal of contract in Saudi Arabia for the same term or any specified term, the renewal of the fixed-term contract in Saudi Arabia will be for that period only. Source: Article 55 (2) of the Saudi Labor Law.

The termination of a fixed-term contract

A fixed-term contract can only be terminated under some special conditions which have been explained below;

1-A Fixed term contract is terminated at the end of the term of the contract under Article 74 of Saudi Labor Law.

2-If your employer wants to terminate you at the end of the contract, he just has to give you notice as mentioned in the contract or one month notice if it is not mentioned in the contract.

It also means that your employer cannot terminate you within the term of the contract except as provided in Article 80 of Saudi Labor Law. Recommended: Termination without Notice Period under Article 80 of Saudi Labor Law

3-Similarly, you also can leave your employer until the end of the contract by giving the same notice period. Recommended: Completion of Contract under Article 74 of Saudi Labor Law

4-If an employer wants to terminate your fixed term contractor you want to resign within fixed term contract in any other way, the initiator will have to indemnify the aggrieved party for that under Article 77 of Saudi Labor Law. Recommended: Article 77 of the Saudi Labor Law

What is Indefinite Term Contract? 

All of us sign a fixed term contract at the beginning of our job. However, the contracts of Saudi employees are converted into indefinite contracts under some conditions whereas the contracts of expatriates always remain fixed-term.

There are certain conditions for the termination and the renewal of an indefinite contract in Saudi Arabia.

The renewal of an indefinite contract in Saudi Arabia

There are two conditions under which a fixed-term contract becomes an indefinite contract.

1-If there is no clause in the initial contract (fixed term contract) for the renewal and your employer does not terminate you at the end of the fixed term contract, this contract becomes an indefinite contract for Saudi employees only.

There is no need to sign the renewal of an indefinite contract in writing – Article 55 (1) of Saudi Labor Law.

2-If a fixed-term contract is renewed for 3 consecutive times or the total period of fixed-term contract and renewal equals to 4 or more years, the contract becomes an indefinite contract. Source: Article 55 (2) of the Saudi Labor Law.

The termination of an indefinite contract

1-In the case of an indefinite contract, either party can terminate it subject to Article 75 of Saudi Labor Law. Article 75 states that an indefinite contract can be terminated by either party based upon a valid reason after giving 60 days’ notice period.

Now the question arises, what is the valid reason to terminate the contract under Article 74 (3) of Saudi Labor Law? We have covered these reasons in detail in this link – Article 74 (3) of Saudi Labor Law. We have covered it in detail in this link. Recommended: Completion of Contract under Article 74 of Saudi Labor Law

2-An indefinite contract can always be terminated under Article 80 of Saudi Labor Law. Recommended: Termination without Notice Period under Article 80 of Saudi Labor Law

3-If an employer wants to terminate your indefinite term contract he will have to indemnify you for that under Article 77 of Saudi Labor Law. Recommended: Article 77 of Saudi Labor Law

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