Saudi Arabian employment contracts are governed by the Labour Law (2005), with additional limits for benefits and entitlements applied by the Ministry of Human Resources and Social Development (MHRSD), formerly the Ministry of Labour and Social Development (MLSD). The Law protects all workers in Saudi Arabia, but to different degrees depending on the type of worker.

Additionally, employers must follow the rules set by the Saudization program – also known as Nitaqat – which enforces quotas on how many foreigners can be hired compared with Saudis or citizens from the other five Gulf Cooperation Council (GCC) nations, the United Arab Emirates, Bahrain, Qatar, Oman and Kuwait.

Thanks to our Professional Employer Organisation (PEO) and Employer Of Record (EOR) solutions, we can provide compliant labour contracts for your employees in Saudi Arabia, including local benefits. Our team keeps track of Saudi Arabian laws and regulations daily to be duly aware of updates that can be implemented in working contracts and to ensure a smooth entry for your business into the Saudi economy.

The different types of Saudi Arabian Employment Contracts

Open-ended, indefinite employment contracts: Only Saudis and Gulf Cooperation Council (GCC) citizens can be placed on these contracts at the start of their employment. Either party can terminate the agreement by following the correct procedures under the Labour Law.

Fixed-term employment contracts: They can apply to Saudi, GCC or foreign nationals. When the contracts for Saudi and GCC employees have been renewed three times or four years, they become open-ended. Fixed-term contracts for foreigners can be renewed if they contain a clause to that effect, with employees’ rights and benefits extended throughout the entire service period. However, they cannot be converted to an open-ended contract. If the fixed-term period is not specified, it equals the visa or work permit length.

Probation periods: These must be included in the contract, usually for 90 days, although the employee can give a written agreement for an extension to a maximum of 180 days. Either party can terminate without reason.

Saudi Arabian Employment Contracts Requirements

General considerations include:

  • Under the Labour Law, only Saudi Arabians and GCC nationals can be employed on indefinite, open-ended contracts at the start of employment. They can also be on fixed-term contracts.
  • If a Saudi Arabian has a fixed-term contract that is renewed three times, or the total period reaches four years, their contract becomes indefinite.
  • Employer or employee can terminate an open-ended contract by giving a valid reason, in writing, 60 days of notice before the termination date if employees are paid monthly, with 30 days’ notice for others.
  • If a non-Saudi contract does not specify the fixed term, it will equal the length of their work visa or permit.
  • Under Article 55 of the Labour Law, the fixed term can be renewed for the same or similar period if specified in the original contract. Under Article 56, it is added to the service period in terms of the employee’s rights.
  • Non-Saudi Arabians can work only in a profession/company specified in their permit.
  • Any probation periods must be included in the contract, usually to a maximum of 90 days. However, in writing, the employee can permit a maximum extension of 180 days. Either party can terminate without providing a reason.


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