Employment Contract in Saudi Arabia: Essential Clauses to Include

An employment contract in Saudi Arabia should be in writing and clearly worded, and at a minimum it should cover: the details of both parties, the job title and place of work, the wage and its allowances, the contract term, working hours and leave, and the rules on probation and termination. The more specific the clauses are, and the more closely they follow the Labour Law, the lower the risk of a dispute between employer and employee.

What is an employment contract and why must it be in writing?

An employment contract is the agreement under which the employee undertakes to perform work for the employer, under the employer's management and supervision, in return for a wage. The Labour Law requires the contract to be written in two copies, one kept by each party. It must be in Arabic; if it is also drawn up in another language alongside the Arabic, the Arabic text prevails in the event of any discrepancy.

The Ministry of Human Resources and Social Development allows employment contracts to be documented electronically through its approved platforms. This gives the contract clearer evidential weight and makes it easier to rely on if a dispute arises.

What are the essential clauses in an employment contract?

The contract should cover the following points in wording that leaves no room for interpretation:

• Details of the parties: the establishment's name, commercial registration (CR) and address, and the employee's name, nationality and ID or residence permit (iqama) number.
• Job title and duties: a short description of the agreed work and where it will be performed, stating whether the employee may be transferred to another city.
• Wage: the basic wage and allowances (housing, transport and others), and when and how they are paid.
• Contract term: whether it is a fixed-term contract with start and end dates, or an indefinite-term contract.
• Working hours and weekly rest, within the statutory limits.
• Leave: annual, sick and other leave, with a reference to the Labour Law for anything the contract does not address.
• Probation period: its length and the right to terminate during it, provided it does not exceed the limit set by law.
• End-of-service award and termination provisions.

What is the difference between a fixed-term and an indefinite-term contract?

A fixed-term contract ends when its term expires and can be renewed by agreement of both parties; ending it early has financial consequences governed by the law and the contract. An indefinite-term contract continues until either party ends it for a legitimate reason, observing the required notice period. The rules on contract term may differ for non-Saudi employees, so it is advisable to check the current statutory text before choosing the type of contract.

Can a non-compete and confidentiality clause be added?

Yes. A clause preventing the employee from competing with the employer after the relationship ends may be included, provided it is in writing and limited in time, place and type of work, and only to the extent needed to protect the employer's legitimate interests. An unlimited or excessive clause may not be enforced. A confidentiality clause can also be added to protect client data, trade secrets and technical information.

How is the end-of-service award calculated?

When the relationship ends, the employee is entitled to an award calculated at half a month's wage for each of the first five years, and a full month's wage for each subsequent year, based on the last wage received. Resignations are subject to conditions and reductions set by the law according to length of service. The contract cannot reduce this entitlement, because terms that breach the law and are less favourable to the employee are not enforceable.

What should the termination clause include?

The contract should ideally set out the legitimate grounds for termination available to each party, the notice period required for an indefinite-term contract, how company property and documents are to be handed over at the end, and when final dues will be paid. It is also good practice to mention the employee's right to a certificate of service free of charge, and that anything the contract does not address is governed by the Labour Law and its regulations.

Common mistakes in employment contracts

1. Copying a ready-made template without adapting it to the role and the establishment.
2. Stating only a total wage without breaking down the basic wage and allowances, which later affects the calculation of entitlements.
3. Differences between the paper contract and the version documented on the official platform.
4. Failing to specify the place of work or the right to transfer.
5. Including penalty clauses or deductions that contravene the Labour Law.

You can find out more about our employment contract drafting service if you need a contract designed for your establishment rather than a generic template.

Frequently Asked Questions

Q: Is an employment contract that has not been documented electronically void? A: Not necessarily. Lack of documentation does not in itself make the contract void, but documentation on the approved platforms is required in many cases and strengthens both parties' position in proving their rights, so it is always recommended.

Q: Can the wage be changed after the contract is signed? A: The wage can be changed by written agreement of both parties. The employer may not reduce it unilaterally.

Q: Is a job offer letter enough instead of an employment contract? A: A job offer is a preliminary step. The written contract containing the essential clauses remains the reference document governing the relationship.

How can we help?

FATIMA AL ASMARI Law & Intellectual Property Company in Jeddah drafts and reviews employment contracts in line with the Labour Law and your establishment's needs, serving clients across all regions of Saudi Arabia. Book your consultation now or contact us on +966 56 685 9556.

Legal sources

This article is for general awareness and is not legal advice.