The new Saudi Labor Law is the cornerstone regulating the relationship between employees and employers in the Kingdom of Saudi Arabia. With the rapid economic and social developments under Vision 2030, the Labor Law has undergone a series of important amendments aimed at achieving balance between the interests of both parties, strengthening the labor market, attracting talent, and protecting the rights of all parties. In this comprehensive guide, we detail the most prominent amendments to the new Saudi Labor Law, the rights and duties of both employees and employers, and the practical procedures for applying regulatory provisions in contractual relationships.
The Saudi Labor Law was issued by Royal Decree No. (M/51) dated 23/8/1426 AH and has since undergone several important amendments, most recently in 2024-2025, aimed at keeping pace with labor market changes, achieving flexibility for the parties, enhancing worker protection, and encouraging Saudization and knowledge transfer. Understanding these amendments and their obligations has become a necessity for both employers and employees alike, whether Saudi or non-Saudi.
Overview of the Saudi Labor Law
The Saudi Labor Law is the legal framework regulating the relationship between employees and employers in the Kingdom. The law aims to achieve balance between the interests of both parties, regulate working conditions, define rights and duties, provide protection for workers, and promote stability in the labor market. The law applies to all workers in the Kingdom regardless of nationality, with certain specific exceptions such as government employees, military personnel, and domestic workers (who are subject to a separate law).
The law consists of 245 articles distributed across several chapters covering: definitions and general provisions, employment contracts, wages, leave, working hours, occupational safety, termination of service, end-of-service benefits, disciplinary actions, labor disputes, and inspection. The new law is characterized by its flexibility and alignment with international labor standards, enhancing the competitiveness of the Saudi labor market and making it more attractive to talent and investment.
Key Amendments in the New Saudi Labor Law
The Saudi Labor Law has undergone a series of important amendments aimed at keeping pace with labor market developments and achieving Vision 2030 goals. Below are the most notable amendments:
Regulation of Fixed-Term Contracts
One of the most prominent amendments is allowing fixed-term employment contracts for renewable periods, with regulation of their termination provisions. This amendment gives employers greater flexibility in managing their workforce while providing workers with clear legal protection defining their rights upon contract expiry. A fixed-term contract ends upon expiry of its term without the need for notice, unless the parties agree to renewal. If the relationship continues after the term ends without explicit renewal, the contract is considered renewed for an indefinite period.
Regulation of Remote Work and Flexible Work
With rapid technological development and the experience of remote work during the COVID-19 pandemic, the new amendments include provisions regulating remote work, flexible work, and part-time work. This amendment allows establishments to employ talent from outside their geographic area and provides workers with flexibility in organizing their working hours while retaining full legal protection under the law.
Leave Regulations
The amendments introduced improvements to the leave system, including changes to annual leave, sick leave, and maternity leave provisions. Notable developments include extending maternity leave duration, regulating paternity leave (paid leave for the father after the birth of his child), and parental leave for childcare. These amendments aim to achieve work-life balance and improve the working environment for working women.
Termination of Contractual Relationship
The new amendments regulate termination of the contractual relationship in greater detail, with clear identification of legitimate and arbitrary termination cases, the employee's right to compensation for arbitrary dismissal, and the employer's right to terminate the contract without compensation in certain cases (such as fraud, forgery, and intentional damage). The probation period provisions have also been amended to be more flexible.
Protection from Discrimination and Harassment
The new amendments strengthen protection from discrimination in the workplace based on gender, race, religion, or disability, and explicitly prohibit harassment in the workplace with deterrent penalties for violators. These amendments align with international human rights standards and promote a safe and stimulating working environment for all.
Sponsorship Transfer and Job Mobility
Among the most important amendments related to expatriate workers is the regulation of service transfer (sponsorship) provisions to facilitate worker mobility between employers while complying with regulatory controls. The employer's right to prevent service transfer has been restricted, and workers now have the right to request service transfer after contract expiry or with the employer's consent. This amendment enhances labor market competitiveness and improves the Kingdom's attractiveness to foreign talent.
Employee Rights Under the Saudi Labor Law
The Saudi Labor Law guarantees employees a wide range of rights aimed at protecting them and ensuring their dignity in the workplace. Below are the most notable rights:
- Right to fair wages: The law sets a minimum wage (currently SAR 4,000 for Saudi workers, varying for non-Saudis by activity), requires the employer to pay wages on their specified dates, and prohibits wage reduction without employee consent.
- Right to leave: Employees are entitled to annual paid leave of no less than 21 days (increasing to 30 days after 5 years), sick leave (30 days full pay, 60 days three-quarters pay, 30 days unpaid), maternity leave of 12 weeks full pay, paternity leave of 3 days, and Eid holidays.
- Right to a safe work environment: The law requires the employer to provide a safe and healthy work environment, take occupational safety measures, provide necessary protective equipment, and compensate workers for work injuries and occupational diseases.
- Right to terminate service: Employees have the right to terminate service according to prescribed procedures, with entitlement to end-of-service benefits if they have completed two or more consecutive years of service.
- Right to non-discrimination: The law prohibits discrimination in wages and employment benefits based on gender, race, religion, or disability.
- Right to join unions: The law guarantees workers the right to form and join trade unions and professional cooperative societies.
Employee Duties Under the Saudi Labor Law
In return for rights, the law imposes a set of duties on the employee that must be observed:
- Perform work personally: The employee must perform the agreed-upon work personally, with the required care, and in accordance with the employer's instructions.
- Comply with employer's orders: The employee must comply with the employer's orders related to work, unless these orders are unlawful or violate the law's provisions.
- Safeguard employer's property: The employee must safeguard the tools, machinery, and equipment entrusted to them and use them in the prescribed manner.
- Maintain confidentiality: The employee is obligated to maintain the confidentiality of work-related secrets learned by virtue of their position and may not disclose them even after the employment relationship ends.
- Adhere to working hours: The employee must adhere to prescribed working hours and not absent themselves from work without a valid excuse.
- Maintain good conduct: The employee must maintain good conduct and behavior in the workplace and not engage in any activity that disrupts order or public morals.
Employer Rights
The law also guarantees the employer rights that balance the employee's rights, most notably:
- Right to management and direction: The employer has the right to manage their establishment, issue instructions and internal regulations, and direct employees.
- Right to discipline employees: The employer has the right to impose disciplinary penalties stipulated in the law and internal regulations on violating employees after investigation.
- Right to terminate service: The employer has the right to terminate an employee's service in cases permitted by law, while paying prescribed compensation and statutory entitlements.
- Protection from unfair competition: The employer has the right to include a non-competition agreement in the employment contract after service ends, provided it is limited in duration, scope, and geography.
Employer Obligations
The law imposes fundamental obligations on the employer that must be fulfilled towards employees:
- Conclude a written employment contract: The employer must conclude a written employment contract with each employee, containing basic data such as wages, duration, and job duties. The employee has the right to receive a copy of the contract.
- Register employee in insurance: The employer is obligated to register the employee with the General Organization for Social Insurance (GOSI) for Saudis and with health insurance for all.
- Provide a safe work environment: The employer must provide occupational safety and health measures, and compensate workers for work injuries.
- Pay wages on time: Wages must be paid in full on their specified date, and the employee must be provided with a statement showing wages and deductions.
- Grant leave: Employees must be enabled to take their annual, sick, and holiday leave according to the law's provisions.
- Settlement upon termination: The employee's entitlements must be settled within one week of termination (or two weeks if the employee initiated the termination).
End-of-Service Benefits Under the Saudi Labor Law
End-of-service benefits are among the most important employee rights upon termination of the employment relationship. They are calculated based on the last month's wage the employee was receiving and are payable if the employee has completed two or more consecutive years of service. The benefit is calculated as follows: half a month's wage for each of the first five years, and one month's wage for each subsequent year, based on the final wage. The employee is entitled to the full benefit if service ends for any reason not attributable to the employee. It is reduced to half if the employee resigns before reaching retirement age (if service is less than 10 years), reduced to one-third after 10 years and before 20 years, and payable in full after 20 years.
Establishment Classification by Number of Workers
| Classification | Number of Workers | Special Obligations |
|---|---|---|
| Very Small | 1-5 | Basic obligations only |
| Small | 6-20 | Internal regulations, worker register |
| Medium | 21-100 | All statutory obligations |
| Large | 101-500 | All obligations + labor committee |
| Very Large | 500+ | All obligations + labor committee + savings fund |
Frequently Asked Questions About the New Saudi Labor Law
Can an employer terminate an employee without notice?
Yes, in certain specified cases the employer may terminate the employee's contract without notice or compensation, including: if the employee assaults the employer or responsible manager, if the employee fails to comply with instructions stated in the employment contract, if the employee engages in misconduct or an act prejudicial to honor, if the employee is proven to have submitted forged certificates or documents, or if the employee is proven to have disclosed industrial or commercial secrets. In these cases, the employer must prove and document the violation in a statutory manner to avoid an arbitrary dismissal claim.
What constitutes arbitrary dismissal under Saudi Labor Law?
Dismissal is considered arbitrary if it occurs without a legitimate reason, based on a trivial or false reason, or if the termination decision results from discrimination or abuse of rights. In case of arbitrary dismissal, the employee has the right to file a complaint with the competent labor court within 12 months of dismissal. If the court finds that arbitrary dismissal occurred, it may either order reinstatement or award compensation for damages (up to a maximum of two years' wages). The court determines compensation based on length of service, type of work, and circumstances of dismissal.
What is the annual leave entitlement under Saudi Labor Law?
An employee is entitled to annual paid leave of no less than 21 days for each of the first years of service, increasing to 30 days annually if the employee has completed 5 or more consecutive years of service with the same employer. The annual leave duration may be increased by agreement in the employment contract or internal regulations. The employee must take their annual leave during the year it is earned, and it may be carried over to the following year by agreement of both parties. The employer has the right to determine leave dates according to work requirements, while considering employee preferences.
How is end-of-service benefit calculated in Saudi Arabia?
End-of-service benefit is calculated based on the employee's last month's wage. The employee is entitled to half a month's wage for each of the first five years, and one month's wage for each subsequent year. If the employee's service is terminated for an unjustified reason, the full benefit is payable. If the employee resigns, the benefit is reduced according to length of service: after 2 to 5 years reduced to half, after 5 to 10 years reduced to one-third, after 10 years the full amount is payable. The basic wage is calculated as the actual wage plus allowances and benefits that the employee receives on a permanent basis.
Can an employee work for another employer during their employment?
An employee may not work for another employer during the term of their employment contract without the original employer's consent. If the employee is proven to be working for a third party without the employer's consent, the employer has the right to terminate the contract without notice or compensation. This provision does not prevent the employee from engaging in freelance work or personal business activities outside official working hours, provided they do not conflict with the original employer's interests and do not affect the employee's performance of their job duties.
Conclusion and How Nova Legal Can Help
The new Saudi Labor Law represents an advanced legal framework regulating the relationship between employees and employers in a fair and balanced manner, aligned with best international labor market practices. The recent amendments aim to achieve flexibility for the parties, enhance worker protection, encourage Saudization, attract talent, and improve the working environment in general. Understanding these provisions and amendments is a shared responsibility falling on both employers and employees alike.
Engaging a specialized legal consultant in labor law is a necessary step for employers to ensure compliance with statutory obligations and avoid fines and labor disputes, and for employees to protect their rights and ensure receipt of their full entitlements. With the increasing complexity of labor relations under continuous amendments, specialized legal consultation has become an indispensable tool for managing labor relations efficiently and effectively.
We recommend employers and employees in Saudi Arabia take the following steps:
- For employers: review and update employment contracts and internal regulations to comply with the latest Labor Law amendments.
- For employees: educate themselves about their rights and duties under the law, and retain copies of employment contracts and wage statements.
- Document all work-related agreements and instructions in writing to avoid disputes.
- Resort to amicable settlements and mediation in labor disputes before filing a case with the labor court.
- Engage specialized legal consultants from licensed law firms such as Nova Legal for guidance on the law's provisions and rights protection.
Nova Legal for Law and Legal Consulting — your trusted legal partner in Saudi Arabia. We offer integrated services in the field of labor law and employment contracts including: legal advisory for employers on compliance with labor law and internal regulations, drafting and reviewing individual and collective employment contracts, representing employers and employees in labor disputes before labor courts and amicable settlement centers, advisory on end-of-service benefits, leave, and compensation, and preparing internal work regulations and human resources policies. Our specialized team of lawyers experienced in labor law ensures sound and compliant management of employment relationships. Contact us today to begin your journey.