Sunday, 20 December 2015

Article 77 of Saudi Labor Law – Good for Expats but Bad for Saudis

In the beginning of the Hijri year 1437, MOL made 38 amendments in Saudi Labor Law, Article 77 has also been amended by MOL.  Article 77 of Saudi Labor Law talk about the compensation in case of termination of contract due to invalid reasons. Before going into details, it is important to understand what is valid and invalid reason for termination of contract, we have already published an article upon this subject which can be read in this link “Completion of Contract under Saudi Labor Law”. According to Amended Article 77, if one party terminates the contact due to an invalid or illegal reason, aggrieved party will be entitled to compensate other party in the following manner;

  1. If this issue has already been addressed in the contract, the contract will apply.
  2. In case of fixed term contract, employer or employee whoever terminates the contract due to invalid reasons, would be required to compensate the other party with the salaries of the remainder period of the contract. The sum of compensation to be paid to aggrieved party cannot be less than 2 months salary.
  3. In case of termination due to invalid reason in indefinite contract, aggrieved party is entitled to 15 days wages for each year of service. The sum of compensation to be paid to aggrieved party cannot be less than 2 months’ salary.
  4. In order to better understand the concept of Fixed Term Contract and Indefinite Contract, read into this link “Fixed Term and Indefinite Contract under Saudi Labor Law

The minister reinforced the point that Article 77 provides that the labor contract must be in writing in the form of formal documentation, written  in Arabic and in duplicate and a copy each to be particular  the two parties. He added even if the law is not written it will be consider existent so that the employee alone may by all means of proof understands his rights, and either party may at any time think  that the contract may be put in written record.
This law provides the employer the rightful authority to dismiss any employee based on biased or invalid reason. This becomes a very easy task for the employer as he can manage to pay the amount as a penalty for the dismissal of the candidate. On the other hand this law has created a feeling of insecurity among the labor workers as they can be easily fired at any time by their employees.

According to one of the labor worker, “Article 77 implementation has created a sense of job insecurity among labor workers and very few workers are happy with the implementation of this law”. Using this any employer can simply harm any of the employees and the poor employee has no other choice and is doomed to un-employment. The Saudi owner will happily pay the small amount of money as the compensation without realizing the fact that the employee is only dependent on the current job.

Although every labor company tries to facilities its workers with the best salary packages and incentives but the implementation of Article 77 will not affect the good labor workers. But it will be a bad omen for the employees who are not productive enough to meet the future requirements of the set KPI’S by the company.The implementation of the article can cause alarming consequences for the labor class. They can easily lose their jobs as this law will accelerate dismissal cases and increase financial pressure on the employees. Firing a person on biased criteria can lead the person into dangerous track as a frustrated person can join any terrorist group to get financial income.  Without any doubts this article gives the employer complete liberty to enslave and disrespect employees.

Source: Saudi Gazette

Job Continuation under Saudi Labor Law
  1. Rules related to Annual Leave under Saudi Labor Law
  2. Rules related to Maternity Leave for working women under Saudi Labor Law
  3. 38 New Amendments in Saudi Labor Law effective from Hijri Year 1437
  4. When can an Employee ask for Leave from employer in Saudi Arabia?
  5. Rights of Expatriates in Saudi Arabia


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