When an employer terminates a worker’s contract without a legitimate reason, this is an unfair dismissal, and Article 77 of the Saudi Labor Law grants the affected worker a defined financial compensation. This guide explains when a dismissal is unfair, how the compensation is calculated for both fixed-term and indefinite contracts, and the difference between the related articles (77, 80, and 81).
In this guide
1. When is a dismissal unfair?
Termination of a contract is considered unfair (unlawful) if the employer ends the worker’s service without a legal reason and without relying on the cases set out in Article 80 (the grounds that permit dismissal without compensation). Examples of unfair dismissal include: termination because the worker filed a legitimate complaint, dismissal on discriminatory grounds, or dismissal with no objective work-related justification.
2. Article 77 compensation
- Indefinite-term contract: a wage of 15 days for every year of service.
- Fixed-term contract: the wage for the remaining term of the contract.
- Minimum: in both cases the compensation is no less than two months’ wage.
- The compensation is computed on the last wage including fixed allowances, unless otherwise agreed.
3. Worked compensation examples
Example 1 (indefinite contract): a salary of SAR 8,000 and 4 years of service. Compensation = 15 days × 4 = 60 days ≈ two months’ wage (SAR 16,000).
Example 2 (fixed-term contract): a salary of SAR 10,000 with 5 months remaining on the contract. Compensation = 5 months’ wage = SAR 50,000 (because it exceeds the minimum).
Work out your last wage and end-of-service award using the end-of-service calculator and the salary calculator.
4. Difference between Articles 77, 80 & 81
| Article | Situation | Outcome |
|---|---|---|
| 77 | Dismissal without a legitimate reason | Compensation for the worker |
| 80 | Dismissal for a legitimate reason (gross misconduct…) | No compensation and no notice |
| 81 | Worker leaves because of the employer’s breach | Keeps full rights |
5. How to claim your rights
- Obtain the termination letter and its stated reason in writing.
- Document the contract, payslips, and length of service.
- File an amicable settlement request through the labor office or the Qiwa platform.
- If a settlement is not possible, file a case before the Labor Court.
Note: this article is for general information and is not a substitute for consulting a specialist lawyer based on the details of your case.
Frequently Asked Questions
How much is unfair-dismissal compensation in Saudi Arabia?
Under Article 77: for an indefinite-term contract the compensation equals 15 days’ wage for every year of service; for a fixed-term contract it equals the wage for the remaining term of the contract. In both cases the compensation is no less than two months’ wage, unless the two parties agree on more.
When is a dismissal considered unfair?
A dismissal is considered unfair when the employer terminates the worker’s contract without a legitimate reason and without relying on one of the cases set out in Article 80. In that case the worker is entitled to claim Article 77 compensation in addition to their other entitlements.
Does unfair-dismissal compensation include the end-of-service award?
No — the compensation is one thing and the end-of-service award is another. On unfair dismissal the worker is entitled to Article 77 compensation + the full end-of-service award + notice pay + the rest of their entitlements, as these are all separate rights.
What is the difference between Article 77 and Article 80?
Article 80 allows the employer to dismiss a worker without compensation or notice in specific cases (such as assault or gross misconduct). Article 77 applies when the dismissal is without a legitimate reason, so the worker is entitled to compensation.
Official sources
The figures and rules on this page are based on the following official references:
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