Thursday, July 31, 2014

Renewal of Contract under Saudi Labor Law

Is my contract a fixed term contract or indefinite contract under Saudi Labor Law?

Question by Visitor
Dear Steve, I am employed for more than 5 years now to a same company since I came in the K.S.A. and had renewed my contract in the midst of the above mentioned years. Lately I asked for another adjustment and fortunately they gave it, but with a conditioned to sign for three years. As per the Saudi Labor Law PART V, WORK RELATIONS, Chapter One under the Work contract Article (55) (2) "If the fixed-term contract incorporates a clause providing for its renewal for a similar term or a specified term, the contract shall be renewed for the period agreed upon. If the contract is renewed for two consecutive terms or if the original contract term and the renewal period amount to three years, whichever is less, and the two parties continue to implement it, the contract shall become an indefinite term contract." My queries are;

  1. As this is my second time to renew or to re-contract as they say, does my company has the right to enforce a three year contract?
  2. When will be the clause "the contract shall become an indefinite term contract?" will take effect?
  3. How the Saudi Labor Law defines "Renewal" and "Re-contract" is there any difference?

Answer by Steve
  1. If you have signed a contract for a period of 3 years after your initial contract, it does not mean renewal. It means you have signed a new contract, so please do not confuse yourself with the renewal.
  2. Now there are two conditions, if the renewal clause is not there in the terms of the contract for three years, Article 55 (1) will apply which states that; "The fixed-term contract shall terminate upon expiration of its term. If the two parties continue to implement it, it shall be deemed renewed for an indefinite period of time."
  3. If renewal clause is there in the terms of the contract, your contract will become a contract for indefinite contract as soon as it is renewed since you have already completed 3 years under the new contract. I have already published a separate article on this subject “Fixed Term and Indefinite Contract under Saudi Labor Law


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