Article 77 of the Saudi Labor Law (المادة 77 من نظام العمل) sets the compensation due when an employment contract is ended for an illegitimate reason. It is the article most often asked about by employees who have been dismissed without warning, and by employers who want to end a contract without facing a claim. This guide explains what it says, how the compensation is calculated with examples, and how it relates to the end-of-service award.
Article 77 in brief
Unless the contract specifies a particular compensation for termination by either party for an illegitimate reason, the party harmed by the termination is entitled to compensation as follows:
- Open-ended (indefinite) contract: fifteen days' wages for each year of the employee's service.
- Fixed-term contract: the wages for the remaining period of the contract.
- In both cases: the compensation must not be less than two months of the employee's wages.
The article protects both sides. If an employee leaves for an illegitimate reason before a fixed-term contract ends, the employer may be the harmed party entitled to compensation.
Examples of Article 77 compensation
| Contract | Monthly wage | Period | Calculation | Compensation |
|---|---|---|---|---|
| Open-ended | SAR 8,000 | 10 years | 15 days × 10 = 150 days = 5 months | SAR 40,000 |
| Open-ended | SAR 10,000 | 4 years | 15 days × 4 = 60 days = 2 months | SAR 20,000 |
| Open-ended | SAR 9,000 | 1 year | 15 days, below the minimum | SAR 18,000 (2 months) |
| Fixed-term | SAR 6,000 | 7 months remaining | Wages for the remaining period | SAR 42,000 |
These examples assume the contract does not set its own compensation. If the contract specifies a particular amount, that is what applies.
Compensation is not the same as the end-of-service award
Article 77 compensation is due in addition to the end-of-service award, not instead of it. An employee dismissed without a legitimate reason usually claims three things: the award under Article 84, Article 77 compensation, and any unpaid wages or leave. Work out the award with the end-of-service calculator.
What counts as an "illegitimate reason"?
The law does not give a closed list of illegitimate reasons; the Labor Court decides in each case. In general, termination is usually legitimate if it rests on one of the grounds in Article 80 and was proven through the correct procedure, or if a fixed-term contract simply expired. It is usually illegitimate if the employee was dismissed with no clear reason, for a reason that was not proven, or for a reason unrelated to the work.
How to claim Article 77 compensation
- Gather your documents: the contract, the termination letter or proof of termination, payslips, and correspondence.
- File a labor complaint through the competent platform, where it first goes through an amicable settlement stage.
- If settlement fails, the case is referred to the Labor Court.
Watch the time limit: the Labor Law provides that claims relating to an employee's rights will not be heard after twelve months from the date the employment relationship ended, so do not delay your claim.
Proceedings are conducted in Arabic, so documents in other languages will need an Arabic translation. Our team can advise you in English.
Frequently asked questions
Is an employee on probation entitled to Article 77 compensation?
Usually not, because the law allows either party to end the contract during the probation period without compensation, unless the contract says otherwise.
Is compensation calculated on the basic salary only?
It is calculated on the wage, and the usual practice is to use the actual wage, which includes fixed allowances. Details can vary with the contract and the nature of the allowances.
Can an employer claim compensation from an employee?
Yes. If the employee leaves for an illegitimate reason before a fixed-term contract ends and the employer is harmed, the employer can claim under the same article.
Dismissed from your job?
The Usus Law Firm team handles labor cases from amicable settlement through to judgment and enforcement, in Riyadh and Tabuk. See also our guide to the Saudi Labor Law.
Read also: Article 74 explained.
Read also: Article 81 explained.
Read also: Filing a labor case.
Read also: Calculate compensation with the Article 77 calculator.
This article is general legal information and is not a substitute for advice on your specific case. Court proceedings in Saudi Arabia are in Arabic; the official Arabic text of each law prevails.
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