A notice of non-renewal of an employment contract is an essential legal step to ensure a clear and structured conclusion of the contractual relationship between an employee and an employer, while safeguarding financial and legal rights for both parties. Understanding the regulations surrounding non-renewal is crucial to prepare legally and protect your interests in accordance with Saudi Labor Law.
What is a Notice of Non-Renewal?
A notice of non-renewal informs the employee that the employer does not wish to extend the employment contract once it expires. The notice must be provided in writing and within the statutory period before the contract ends, ensuring transparency and giving the employee time to plan their next steps.
Importance for Employees and Employers
- For employees: Allows adequate time to prepare for future employment without unexpected surprises.
- For employers: Enables proper workforce planning and employee replacement.
- For both: Minimizes disputes and ensures compliance with Saudi Labor Law.
Statutory Notice Periods
Saudi Labor Law specifies the following notice periods for fixed-term contracts:
- 60 days prior to contract end for monthly-paid employees.
- 30 days for employees with non-monthly payment schedules.
Exceptions:
- If the contract explicitly states no notice is required, that clause prevails.
- Contracts tied to a specific project end automatically when the project concludes.
Failing to give timely notice may result in automatic contract renewal under the same terms or conversion to an open-ended contract.
Employee Rights upon Non-Renewal
Employees are entitled to:
- End-of-service benefits in line with Saudi Labor Law.
- Outstanding payments, including delayed salaries and unused vacation days.
- Work experience certificate, detailing employment duration.
- Compensation, in certain cases, if the non-renewal was deemed unjustified.
End-of-Service Benefit Calculation
- First five years: Half a month’s salary per year of service.
- Beyond five years: One full month’s salary per year.
The calculation is based on the employee’s last basic salary.
Sample Notice of Non-Renewal
Here is a practical example employers can use:
Date: ………
To: [Employee Name]
Position: ………
Subject: Notice of Non-Renewal of Employment Contract
Dear [Employee Name],
This is to inform you that your employment contract (Contract No. ….) which commenced on [Start Date] and is due to end on [End Date], will not be renewed. This notice is issued in accordance with Saudi Labor Law and the agreed notice period.
Your final settlement, including all outstanding wages and end-of-service benefits, will be processed upon completion of your contract.
Sincerely,
[Employer Name / Organization]
Signature & Stamp
Consequences of Failing to Provide Notice
If the employer fails to issue the notice within the legal period:
- The contract may be automatically renewed under the same conditions.
- Or it may convert to an open-ended contract, giving the employee full rights, including salary and benefits.
Distinguishing Termination and Non-Renewal
- Termination: Contract ends before its expiry date, potentially warranting compensation for the employee.
- Non-Renewal: Employee is notified before contract expiry, no cause required, with proper settlement of dues and end-of-service benefits.
Conversion to Open-Ended Contracts
If the employee continues working after contract expiry without receiving a notice of non-renewal, or if the contract is renewed repeatedly (typically three times or exceeding four continuous years), it may convert into an open-ended contract under Saudi Labor Law.
Steps for Settling Dues after Non-Renewal
- Pay any outstanding salaries and allowances up to the last day.
- Calculate and disburse end-of-service benefits correctly.
- Settle unused leave days.
- Issue a work experience certificate.
- Complete social insurance formalities and provide a clearance letter.
Filing Objections
Employees wishing to object can:
- Review contract terms for notice and non-renewal clauses.
- Attempt a friendly resolution with the employer.
- File a complaint with the Ministry of Human Resources through the amicable settlement platform.
- Escalate to the Labor Court if unresolved.
Employer Violations
Employers may be at fault if:
- They fail to issue notice within the legal timeframe.
- Termination occurs without a written notice.
- Termination involves discrimination or violates labor law.
Employees may claim compensation for the notice period or wages owed.
Legal Tips for Employees
- Keep a copy of the notice.
- Calculate due payments and end-of-service benefits carefully.
- Do not sign for settlements without reviewing entitlements.
- Consult a lawyer for disputes.
Conclusion: Understanding notice of non-renewal is critical for safeguarding employee rights and ensuring legal compliance for employers. Timely notifications and following statutory procedures guarantee fairness and protect both parties’ interests.