Employment contract non-renewal in Saudi Arabia generally occurs when a fixed-term employment contract reaches its agreed expiry date and is not extended for another term. However, the expiry date alone does not always determine the outcome. The contract may contain a renewal clause, require advance notice of non-renewal, or continue to be performed by both parties after the stated expiry date.
For this reason, any assessment of contract non-renewal should begin with the type of contract, its expiry date, the renewal clause, any agreed notice period, and the rights that arise when the employment relationship ends.
What happens when an employment contract is not renewed?
A fixed-term employment contract generally ends when its agreed term expires, unless it is renewed under the contract or Saudi Labor Law. If the contract contains a renewal clause, or both parties continue performing it after expiry, the legal outcome may differ. The employee’s accrued rights and financial entitlements also remain subject to settlement.
1. What Does Employment Contract Non-Renewal Mean?
Non-renewal means that the employment relationship is not extended after a fixed-term contract reaches its agreed expiry date. It is different from terminating the contract before its expiry. In the first situation, the agreed term has run its course; in the second, the employment relationship is brought to an end while the contract is still in force.
Article 74 of the Saudi Labor Law provides that an employment contract ends when its specified term expires, unless it has been renewed in accordance with the law. Article 55 also addresses the effect of continued performance after expiry and the application of contractual renewal provisions.
Non-renewal falls within the broader framework governed by the new Saudi Labor Law in relation to employment contracts, termination of the employment relationship, and the rights arising from it.
Accordingly, non-renewal is only one form of ending an employment relationship and should not be treated as synonymous with every type of termination. The grounds for termination of an employment contract under Article 74 explain the distinction between expiry of the contractual term and other grounds for ending employment.
2. Who Can Decide Not to Renew the Contract: The Employee or the Employer?
The decision not to renew a fixed-term employment contract may come from either the employee or the employer. In practice, however, the legal effect depends less on which party made the decision and more on what the contract says about renewal and notice.
Where the employee does not wish to renew the employment contract, the employee should first check whether the contract requires advance notice to the employer. Choosing not to extend a contract that has reached its expiry date is not automatically the same as resignation, because resignation is governed by separate rules under Saudi labor law.
Likewise, non-renewal by the employer at the end of the agreed term does not, by itself, mean that the employee has been unlawfully dismissed. The position is different if the employer ends the contract before its expiry date, in which case the legality and consequences of the early termination must be assessed separately.
This is why it is important to distinguish non-renewal from employee resignation under Saudi labor law before determining the correct legal classification of the situation.
3. How Long Is the Notice Period for Employment Contract Non-Renewal?
There is no single statutory notice period that applies to every fixed-term employment contract in Saudi Arabia. The first step is to review the contract itself to determine whether it contains a renewal clause and whether non-renewal requires advance notice within a specified period.
Therefore, it is not correct to assume that the notice period for non-renewal of every fixed-term employment contract is always 30 or 60 days. The contract may provide for a different period, or it may contain no automatic renewal clause at all.
Before sending a notice of non-renewal, check:
- the contract expiry date;
- the wording of the renewal clause;
- the agreed notice period;
- the required method of giving notice; and
- evidence showing when the notice was delivered to the other party.
This should be distinguished from notice requirements for terminating an indefinite-term employment contract. Under Article 75, where wages are paid monthly, an employee terminating an indefinite-term contract must generally give at least 30 days’ notice, while an employer must give at least 60 days’ notice. Where wages are not paid monthly, the notice period is generally 30 days. Ministry of Human Resources and Social Development
For that reason, the notice rules under Article 75 of the Saudi Labor Law address a different situation from non-renewal of a fixed-term contract.
If a contract is approaching expiry and the renewal clause or notice period is unclear, BMS Legal’s labor law team can review the wording of the contract and explain the likely effect of the clause before notice is sent.
4. When Does an Employment Contract Renew Automatically?
Automatic renewal of an employment contract depends primarily on the wording of the contract and on what the parties do when the fixed term reaches its end.
If the contract contains a clause providing for renewal for an equivalent term or another specified period, the contract is renewed for the period agreed by the parties. It should therefore not be assumed that every fixed-term employment contract automatically renews for one year or for a term identical to the original contract.
Continued performance after the expiry date may also affect the legal status of the employment relationship.
Continued Employment After the Contract Expiry Date
Where the fixed-term contract expires and both parties continue performing it, Article 55 provides that the contract may be treated as renewed for an indefinite term, subject to the rules applicable to non-Saudi employees. Where renewal occurs repeatedly under the conditions set out in Article 55 and the parties continue to perform the contract, a fixed-term contract may also become indefinite. Ministry of Human Resources and Social Development
Accordingly, a contract should not be treated as having ended solely because the written expiry date has passed if the employee continues working and the employer continues accepting that performance.
5. What Are the Employee’s Rights When the Contract Is Not Renewed?
The expiry of an employment contract does not eliminate financial rights that accrued during the employee’s service. Employee rights upon contract non-renewal depend on factors such as salary, length of service, outstanding payments, and the manner in which the employment relationship ended.
Depending on the circumstances, the employee’s entitlements may include unpaid wages, accrued leave-related rights under the law, end-of-service benefits, and any other entitlement established by the contract or Saudi labor law. At the end of the employment relationship, the employer must also provide a service certificate upon request and return documents deposited by the employee. Ministry of Human Resources and Social Development
Article 84 provides that end-of-service benefits are generally calculated at half a month’s wage for each of the first five years of service and one month’s wage for each subsequent year, using the employee’s final wage as the basis for calculation, with partial years calculated proportionately. The end-of-service benefit rules under Article 84 explain this calculation in greater detail.
Article 88 also distinguishes between different ways in which employment ends. Where the employee’s service ends, the employer must generally settle wages and entitlements within no more than one week. Where the employee is the party ending the contract, settlement must generally take place within no more than two weeks. Ministry of Human Resources and Social Development
6. Does Non-Renewal Entitle the Employee to Compensation or Amount to Dismissal?
The non-renewal of a contract that has reached its agreed expiry date does not automatically amount to dismissal or unlawful termination. Compensation becomes relevant when the facts go beyond the simple expiry of the contractual term.
If the fixed-term contract expires on the agreed date and is not renewed, the employment relationship generally ends because the contractual term has expired. If the contract is ended before that date, however, the reason for termination and the contractual terms must be examined to determine whether compensation rules apply.
Article 77 regulates compensation where a contract is terminated for an unlawful reason and the contract itself does not specify compensation. In the case of a fixed-term contract, compensation may be calculated by reference to the wages for the remaining contractual period, subject to the minimum set by the article. Ministry of Human Resources and Social Development
This is different from terminating a fixed-term employment contract before its expiry, because a decision not to extend a contract beyond its expiry date does not automatically constitute unlawful dismissal.
| Situation | General legal characterization |
|---|---|
| Contract expires and is not renewed | Expiry of the agreed contractual term |
| Employee resigns | Separate legal process governed by resignation rules |
| Contract ends before its expiry | Reason for early termination must be assessed |
| Alleged unlawful dismissal | Facts and contractual terms require review |
7. How Should Non-Renewal Notice Be Given, and What Should You Do If a Dispute Arises?
A notice of employment contract non-renewal should preferably be clear and in writing. It should identify the relevant contract, state its expiry date, and clearly express the notifying party’s intention not to renew it. It is also advisable to use a method that allows the date of delivery to be proven.
A concise notice from an employee may read:
I hereby notify you that I do not wish to renew the fixed-term employment contract entered into on [date], which expires on [expiry date]. Please treat this letter as notice of non-renewal in accordance with the terms of the contract.
A notice from the employer may read:
We hereby notify you that the company does not intend to renew the fixed-term employment contract expiring on [date], in accordance with the renewal and notice provisions set out in the contract.
Even a well-drafted notice does not replace the need to review the employment contract. If the contract specifies a notice period or a particular method of notification, those requirements should be taken into account.
If a dispute arises concerning renewal, notice, or outstanding entitlements, the employee should gather the employment contract and any amendments, relevant correspondence, proof of notice, and salary records. Where the matter requires specialist assessment of the contract, calculation of entitlements, or consideration of the appropriate claim, consulting a labor lawyer in Jeddah at BMS Legal can help clarify the facts and documents before proceeding to amicable settlement or the Labor Court where appropriate.
Saudi Labor Law-Based Legal Content
This article explains employment contract non-renewal in Saudi Arabia using the Saudi Labor Law and relevant official sources, with a focus on notice, renewal, employee rights, and compensation.
Published by BMS Legal Law Firm and Legal Consultations — License No. 7053637679.
Frequently Asked Questions About Employment Contract Non-Renewal
Can an employer choose not to renew an employment contract?
Yes. A fixed-term contract may end when its agreed term expires, subject to any renewal and notice provisions in the contract.
Can an employee choose not to renew the contract?
Yes. An employee may decide not to continue after the fixed term ends, but any contractual notice requirement should be checked first.
What is the notice period for non-renewal of a fixed-term contract?
There is no single notice period for all fixed-term contracts. The contract itself should be reviewed to determine whether advance notice is required and for how long.
What happens if the employee continues working after the contract expires?
Continued performance after expiry may affect the legal status of the contract under Article 55, including possible renewal or conversion in certain cases.
Is the employee entitled to end-of-service benefits if the contract is not renewed?
Generally, end-of-service benefits may be due when the employment relationship ends, subject to the employee’s service period and the applicable provisions of Saudi Labor Law.
Is non-renewal considered unfair dismissal?
Not automatically. If a fixed-term contract simply expires and is not renewed, this is different from terminating the contract before its expiry without a lawful basis.
Conclusion
In summary, employment contract non-renewal in Saudi Arabia involves 7 key rules, beginning with identifying the type of contract and ending with notice requirements, employee rights, and the appropriate steps if a dispute arises. Looking only at the written expiry date is therefore not enough to determine the legal position.
The outcome may change depending on the renewal clause, continued performance after expiry, an agreed notice period, or termination occurring before the contractual end date. Likewise, entitlement to compensation or final financial settlement depends on how the employment relationship actually ended, rather than the label used by either party.
Where the renewal provision is unclear, or there is a dispute concerning outstanding entitlements or compensation, reviewing the employment contract and correspondence before sending a final notice or signing a settlement can help establish the legal position more accurately.
Where broader advice is required on the contract, employee entitlements, or available legal options, BMS Legal, a law firm in Jeddah provides legal services for individuals and businesses, including review of relevant documents and clarification of the available legal steps before action is taken.