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Thursday, 7 August 2014

Completion of Contract under Article 74 of Saudi Labor Law

There are a lot of confusions among the expatriates regarding the completion of their contract. We are writing this article to remove these confusions regarding completion of contract from the minds of expatriates. In this article, I will be providing in detail the circumstances when a contract deems to be completed and hence terminated. Saudi Labor Law uses the words of termination even in the case of completion of contract but we shall be using the word completion for better understanding for our fellow expatriates. According to Article 74 of the Saudi Labor Law, a contract deems to be completed / terminated in the following cases.
  1. If both parties agree to terminate the contract and employee has given his consent in writing, the contract is treated to be terminated or completed. When an employee resigns and employer accepts his resignation, this is an example of this kind of completion or termination of the contract – Article 74 (1) of Saudi Labor Law.
  2. If the term mentioned in the contract is expired, the contract is treated to be terminated or completed. However, if an employee continues to work even after the completion of an initial period of the contract, this contract becomes an indefinite contract under Saudi Labor Law subject to some conditions. – Article 74 (2) of Saudi Labor Law. Recommended: Fixed Term and Indefinite Contract under Saudi Labor Law
  3. In the case of an indefinite contract, either party can terminate it subject to Article 75 of Saudi Labor Law. Article 75 states that an indefinite contract can be terminated by either party based upon a valid reason after giving 60 days’ notice period. Now the question arises, what is the valid reason to terminate the contract under Article 74 (3) of Saudi Labor Law? We have covered these reasons in detail in this link – Article 74 (3) of Saudi Labor Law. Recommended: Valid Reasons for Employer to Terminate the Contract
  4. If an employee reaches the retirement age, the contract is treated to be terminated or completed unless both parties agree otherwise – Article 74 (4) of Saudi Labor Law. Recommended: What is the Retirement Age in Saudi Arabia?
  5. Natural events like death, insane mind of the employee, closure of business, closure of department or any other event causing the employee to become unfit for the job, terminate the contract – Article 74 (5) of Saudi Labor Law.
  6. As we have seen, an indefinite contract can only be terminated due to a valid reason as specified in Article 74 (3) above. If an employer wants to terminate an indefinite contract without a valid reason, he will have to seek termination under Article 77 of Saudi Labor Law. Recommended: Article 77 of Saudi Labor Law
  7. Any party who wants to terminate the contract under Article 74 of Saudi labor Law will have to provide proper notice to the other party. We have covered it in detail in this link. Recommended: Notice Period under Saudi Labor Law




Resignation /Termination under Saudi Labor Law
  1. End of Service Benefits (ESB) Calculation
  2. Notice Period under Saudi Labor Law
  3. Resignation without Notice Period under Saudi Labor Law
  4. Can I request Transfer of Sponsorship within Probation Period?
  5. 4 kinds of Death Compensations of Workers in Saudi Arabia


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