Saudi Labour Law Article 74: 7 Ways a Contract Ends

What costs employers most in Saudi termination disputes is not the size of the award. It is how the ending was classified on day one. Article 74 of the Saudi Labour Law does not give one reason a contract ends — it gives seven legally distinct cases. Each opens a different calculation branch: some require no notice at all, some trigger Article 77 compensation, and some cut the gratuity to a third.

The practical problem is that most HR systems store all seven in a single field called "terminated", with a free-text reason beside it. When the settlement is computed, it is computed from the wrong branch — and the error only surfaces in the labour court.

The text: seven cases, not seven synonyms for dismissal

Article 74 provides that an employment contract ends in any of the following cases:

1. The parties agree to end it, provided the worker's consent is in writing.
2. The term stated in the contract expires, unless the contract has been renewed expressly or implicitly.
3. At the will of either party in indefinite-term contracts, in accordance with Article 75.
4. The worker reaches retirement age, as determined by the Social Insurance Law.
5. Force majeure.
6. Permanent closure of the establishment.
7. Discontinuation of the activity in which the worker is employed, unless otherwise agreed.

Note what is not on the list: disciplinary dismissal. The nine Article 80 cases that forfeit the gratuity are not Article 74 cases — they are an entirely separate route, with an evidence gate and a written investigation procedure. Conflating the two is the error that turns a lawful dismissal into an unlawful one.

The decision table: what each case actually triggers

This is the part Article 74 itself does not tell you. The financial outcome is not read from Article 74 — it is read from where Article 74 intersects Articles 75, 76, 77, 84 and 85:

Row three is the only row carrying compensation and notice. It is also the only row that splits into two financially distant branches depending on who ended it: a worker with four years of service who resigns is entitled to a third of the gratuity; the same worker, terminated by the employer, is entitled to all of it.

A caution on row one: mutual agreement earns the full Article 84 gratuity — unless the release is drafted as a resignation. The wording here is not a formality; it decides which table applies.

Whichever case applies, the Article 88 clock runs: one week to pay the settlement where the employer ended the relationship, two weeks where the worker did. The clock does not wait for the next payroll run.

Case two: expiry, and the Article 55 trap

Case two looks like the simplest of the seven. The term ran out, the contract ended, no notice and no compensation. But the phrase "unless the contract has been renewed expressly or implicitly" is what catches most employers.

Two traps:

First — continued performance. If the term expires and both parties carry on performing the contract, it is deemed renewed for an indefinite term. No new signature is needed. The worker simply showing up on Monday after a contract that expired on Sunday moves them from row two to row three of the table above — and brings notice and compensation with them.

Second — conversion under Article 55. A Saudi worker's fixed-term contract converts to indefinite once it has been renewed three consecutive times, or once its duration reaches four years, whichever comes first. An employer who has renewed a one-year contract for six years and then "does not renew" believes they are in case two. They have been in case three for two years. (This conversion applies to Saudi workers; a non-Saudi's contract term is tied to the work permit under Article 37.)

The financial gap between the two rows is not marginal: row two means zero compensation, row three means Article 77 compensation with a floor of two months' wages that applies no matter how short the service.

Case four: retirement age is no longer one number

This is a real statutory change that most systems have not caught up with.

Article 74 states no figure; it defers to the Social Insurance Law. And since 3 July 2024 (27 Dhul-Hijjah 1445 AH), the statutory retirement age is no longer a fixed number. It is a function of the subscriber's age on that date, rising in four-month steps by bracket:

The complete brackets, in four-month increments, are published on the GOSI awareness portal. Those who joined the workforce after that date fall under the new law in full.

What this means in practice: any HR system carrying a hardcoded constant of 60 will end contracts on the wrong date. And ending a contract before the statutory age is not a case-four retirement — it is an employer-initiated ending that lands in row three, with its notice and its compensation. What separates the two rows here is the employee's date of birth, not company policy.

"Ended" versus "was ended": where systems go wrong

Article 74 describes an ending: the contract reached its natural end. Only row three describes a termination: a party decided. Systems that conflate the two produce three recurring symptoms:

• One field where two are needed. Which of the seven cases applied, and which party ended it, are independent facts. Storing them in one field makes "the term expired", "they resigned" and "we terminated them" indistinguishable months later.
• A free-text reason. "End of service", "non-renewal" and "contract termination" are all typed by hand and mean different things in law. The labour court reads what was recorded, not what was intended — and the reason logged on the Qiwa platform when the contract is ended is the document that governs.
• A classification written once and never revisited. Nothing re-examines a fixed-term contract at its third renewal to apply the Article 55 conversion. So it stays flagged fixed for ten years.

The rule we apply in payroll-system reviews: classify first, then price. The classification is a constrained field with seven Article 74 values, plus a separate field for the ending party, plus a due date derived from Article 88. Any amount computed before those three are fixed is a guess.

How to audit your classification in a week

Four checks catch most of it, and none of them needs a project:

1. Pull every live fixed-term contract and compute, for each, the number of renewals and the total years. Any Saudi worker's contract past three renewals or four years is misclassified — it is indefinite in law.
2. Compare each contract's end date against the last recorded attendance day. Any attendance after the end date means an implied renewal.
3. Inspect the retirement-age constant in your payroll engine. If it is a single number, it has been wrong since July 2024.
4. Review the last ten settlements paid and ask of each: which of the seven cases, which party ended it, and was it paid inside the Article 88 window.

The first check alone usually surfaces an unrecorded liability, because every misclassified contract carries a potential Article 77 award with a two-month floor.

Run the numbers on the same rules

Rather than applying the tables by hand, the free Saudi Labour Rights Calculator returns the figures directly: enter the start and end dates, the reason the contract ended, and the wage, and it handles the Article 77 branch, the Article 84 gratuity, the Article 85 fractions and pay in lieu of notice, itemised by statutory article. If you need the gratuity alone, the end-of-service calculator runs the same rules.

For deeper reading:

• The Saudi labour rights calculator: five figures, each with its statutory article — the full map of end-of-relationship entitlements.
• A termination settlement engine in TypeScript (Article 77) — the implementation of the termination branch: notice, compensation, the Article 80 cases, and the Article 88 clock.
• A probation period engine in TypeScript (Articles 53 and 54) — the other end of the contract lifecycle, where the termination rules start out different.

Is your ending classification correct?

If you run payroll in Saudi Arabia and suspect your fixed-term contracts have passed the Article 55 threshold, or that your retirement-age constant has not been touched since July 2024 — send us a description of how you store termination state (the fields and their permitted values, not the data). We will send back a written read on which of the seven cases is being priced wrongly and where the liability arises, with no obligation on your side.

Get in touch — or message us on WhatsApp if that is faster.