Cases of employee dismissal in the private sector: main reasons and procedures

Cases of employee dismissal in the private sector are something both employers and employees need to understand precisely, because mistakes are costly for both sides. The Saudi Labour Law does not treat every dismissal the same way: some cases allow dismissal without the end-of-service benefit or notice, some require notice and the benefit, and dismissal for an illegitimate reason requires compensation.

This article explains the ways an employment contract ends by the employer's decision, the nine cases in Article 80, where common reasons for dismissal such as poor performance and restructuring sit in the law, the difference between lawful and unfair dismissal, and the steps to follow before and after the decision.

What does dismissing an employee mean?

Dismissal is the employer ending the employment contract by its own decision. Under the Saudi Labour Law there are three routes, and the employee's rights differ greatly between them:

1. Termination for a legitimate reason with notice: under an indefinite contract, the employer may end it "for a legitimate reason" with prior written notice (Article 75), and the employee is entitled to the end-of-service benefit. You can estimate it with the end-of-service calculator.
2. Termination without the benefit, notice or compensation: allowed only in the nine cases set out in Article 80, and only if the employer gives the employee the opportunity to state their reasons for objecting.
3. The contract ending by operation of law: Article 74 lists situations in which the contract ends, including the permanent closure of the establishment, the end of the activity in which the worker is employed (unless agreed otherwise), and any other case provided for by another law.

Confusing the first route with the second is what most often leads companies into unfair dismissal: dismissing an employee without the benefit or notice for a reason that is not one of the Article 80 cases.

When can a company dismiss an employee without the benefit or notice?

Article 80 of the Labour Law states: "The employer may not terminate the contract without the worker's end-of-service benefit, notice or compensation, except in the following cases, and provided that he gives him the opportunity to state his reasons for objecting to the termination". The cases are:

1. If the worker assaults the employer, the manager in charge or one of his superiors or subordinates during work or because of it.
2. If the worker does not perform the essential obligations arising from the employment contract, does not obey legitimate orders, or deliberately does not follow the instructions on work and worker safety that the employer has posted in a visible place, despite a written warning.
3. If it is proved that the worker has behaved badly or committed an act that violates honour or integrity.
4. If the worker deliberately commits any act or omission intended to cause the employer a material loss, provided the employer reports the incident to the competent authorities within twenty-four hours of learning of it.
5. If it is proved that the worker used forgery to get the job.
6. If the worker is appointed on probation.
7. If the worker is absent without a legitimate reason for more than thirty days during one contract year, or for more than fifteen consecutive days, provided the dismissal is preceded by a written warning from the employer after twenty days of absence in the first case and ten days of absence in the second.
8. If it is proved that the worker abused his position unlawfully to obtain personal results and gains.
9. If it is proved that the worker disclosed industrial or commercial secrets of the work in which he is employed.

These nine cases alone allow dismissal without the end-of-service benefit. Poor performance, restructuring and economic conditions are not among them. The Labour Law amendments issued by Royal Decree No. M/44 dated 8/2/1446 AH, in force since February 2025, did not change the text of this article or its absence limits: it was last amended by Royal Decree No. M/46 dated 5/6/1436 AH.

Read more: Unexcused employee absence

The main cases of employee dismissal in the private sector and where they sit in the law

These are the most common reasons for dismissal in companies, and each follows a different route under the Labour Law:

Professional misconduct

Such as repeated lateness, not following work instructions or misusing company resources. These are violations handled by the work regulations. Article 66 lists the disciplinary penalties an employer may impose: a warning, a fine, withholding or deferring a pay increment, postponing a promotion (each for no more than a year), suspension from work without pay, and dismissal in the cases the law provides for. The article does not rank these penalties or require them to be applied one after another: the violations and penalties schedule in your company's approved work regulations sets the penalty for each violation and how it escalates on repetition, and no penalty may be imposed that is not in the law or in those regulations (Article 67). The Implementing Regulations distinguish "dismissal from work with the end-of-service benefit", for a legitimate reason arising from the violation, from "dismissal from work without the end-of-service benefit", in the Article 80 cases only.

Gross misconduct

Most of it falls under the Article 80 cases: an "assault on the employer, the manager in charge or one of his superiors or subordinates during work or because of it" (paragraph 1), deliberate material harm to the employer, reported to the competent authorities within 24 hours (paragraph 4), breaking posted safety instructions despite a written warning (paragraph 2), and bad behaviour or an act that violates honour or integrity (paragraph 3).

Poor performance despite support

Poor performance in itself is not one of the Article 80 cases. If your company decides to end the contract because of it, the route under an indefinite contract is termination for a legitimate reason with notice (Article 75) and the end-of-service benefit. A fixed-term contract is not ended by notice: it ends when its term expires (Article 74). The law does not list what counts as a legitimate reason in Article 75, so if the employee disputes the reason and it is found not to be legitimate, they are entitled to the compensation in Article 77: fifteen days' wage for each year of service under an indefinite contract, or the wage for the remaining period under a fixed-term contract. That is why this decision needs a clear record: defined objectives, documented performance appraisals, written warnings and a real chance to improve.

Restructuring or abolishing roles

This is not one of the Article 80 cases. If your company ends the activity in which the employee works, the contract ends under Article 74 unless agreed otherwise. In any other case, an indefinite contract is ended for a legitimate reason with notice, while a fixed-term contract runs to its end date, and ending either without a legitimate reason brings the compensation in Article 77. Either way the end-of-service benefit is still due, because Article 84 requires it "if the employment relationship ends".

Economic conditions that prevent keeping the employee

Financial crises and falling revenue do not allow dismissal without the end-of-service benefit. If the establishment closes permanently, the contract ends under Article 74, and the benefit and all other rights are still due.

Legal restrictions that prevent the employee continuing

Examples include proof that the employee used forgery to get the job (Article 80, paragraph 5), the employee being unable to do their work as confirmed by an approved medical certificate, which ends the contract (Article 79), or any other case provided for by another law (Article 74). On the other hand, an employee may not be dismissed because of illness before using up the sick leave periods set out in the law (Article 82).

Read more: Absence during the probation period

The difference between lawful and unfair dismissal

Read more: How to calculate the end-of-service benefit

The main steps to dismiss an employee in the private sector

1. Investigate before any penalty: no disciplinary penalty may be imposed until the employee has been told in writing what they are accused of and questioned, and their defence has been heard, with all of this recorded in a report kept in their file (Article 71).
2. Respect the time limits: an employee may not be charged with a violation discovered more than thirty days earlier, and a penalty may not be imposed more than thirty days after the investigation has ended and the violation has been proved (Article 69).
3. Give the written warning where the law requires it: in absence cases (after 20 days of intermittent absence or 10 days of continuous absence), and for disobeying orders and safety instructions (Article 80, paragraph 2).
4. Hear the employee's objection: give them the opportunity to state their reasons for objecting to the termination in the Article 80 cases, and document it.
5. Give notice under an indefinite contract: outside the Article 80 cases, written notice at least 60 days in advance if the wage is monthly, or 30 days if it is not, or pay the wage for the notice period (Articles 75 and 76). A fixed-term contract is not ended by notice: it ends when its term expires (Article 74), and ending it early without a legitimate reason means paying the wage for the remaining period, no less than two months' wage (Article 77). During the notice period the employee may take one full day a week, or eight hours during the week, off work to look for another job on full pay, and the employer may release them from work, with their service counting until the end of the notice period and their wage paid for it (Article 78).
6. Give the decision in writing: the employee is notified of the penalty decision in writing, and may file a written grievance with the employer within thirty days of being notified, excluding official holidays, and then object before the labour courts if the grievance is rejected or not decided (Article 72).
7. Settle entitlements on time: if the employer ended the relationship, the employee's wage must be paid and their entitlements settled within one week at most of the date it ended (Article 88): the wage, the end-of-service benefit, pay for unused leave, a certificate of service on request, and the return of any certificates or documents they deposited (Article 64).

See also: How to calculate annual leave pay

Contact the Dawmt team

How Dawmt helps document violations and avoid unfair dismissal

Most dismissal disputes come down to proof: whether the violation happened, when, and whether the company followed the procedure. Dawmt's HR system keeps that record in one place:

• Attendance record: employees clock in from the Dawmt app inside the work site's geofence, with selfie verification, or on biometric terminals, so every late arrival or absence has a time and a date.
• Requests and excuses: leave requests with their attachments, reasons for attendance exceptions, and the manager's decision on each are kept in the system.
• Disciplinary penalties: penalties are recorded in the employee's file, the employee can see them in the Dawmt app, and deductions are applied in the payroll register when payroll is calculated.
• Performance appraisal: Dawmt documents the regular appraisals that any decision about poor performance needs.
• End-of-service benefit: Dawmt includes end-of-service benefit settings, so the employee's entitlement is calculated when their service ends.

Applying the law remains your company's responsibility: Dawmt keeps the record and cuts the manual work, while the decision and its procedure rest with management.

Conclusion

Knowing the cases of employee dismissal in the private sector protects both sides: dismissal without the end-of-service benefit is limited to the nine Article 80 cases, ending an indefinite contract outside them needs a legitimate reason, notice and the benefit, a fixed-term contract ends when its term expires, and ending either for an illegitimate reason requires compensation. A documented record of attendance, violations and appraisals is what makes the decision defensible.

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Sources

• Labour Law issued by Royal Decree No. M/51, with amendments up to Royal Decree No. M/44 dated 8/2/1446 AH, Ministry of Human Resources and Social Development (in Arabic), Articles 64, 66, 67, 69 to 72, 74 to 80, 82, 84, 88, 97 and 111.
• Labour Law, Part 5: Labour relations, Ministry of Human Resources and Social Development (in Arabic), text of Articles 50 to 88.
• Labour Law, Part 6: Conditions and circumstances of work, Ministry of Human Resources and Social Development (in Arabic), Articles 97 and 111.
• Implementing Regulations of the Labour Law and their annexes, Ministry of Human Resources and Social Development (in Arabic), Article 58 (types of penalty) and the violations and penalties schedule.

This information was reviewed in October 2026. Regulations can change, so check the official source before relying on it.