Employment contract and Types of contracts

- Types of contracts in the system:

• Permanent contract: in its two types (specified duration or unspecified duration), by the agreement of the two parties.

• Temporary work: work that by its nature falls within the activities carried out by the employer, requiring a specific duration for its completion, or focused on a specific task that ends upon completion, and does not exceed 90 days in both cases.

• Seasonal work: work carried out during recognized periodic seasons.

• Casual work: work that does not fall within the usual activities of the employer, and does not take more than 90 days to complete.

• Part-time work: work performed by an employee who is not fully dedicated to the employer and works for fewer hours than half of the establishment's regular daily working hours, whether the employee works daily hours or only on certain days of the week.

• Flexible work: a system that enables Saudi job seekers and employers to contract flexibly, where the payment is based on an hourly basis (the minimum unit for wages) without committing to any other benefits such as paid leave, end-of-service bonus, or overtime pay.

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- Relevant system texts and executive regulations:

 

• Article 37 of the Labor Law stipulates the following:

A non-Saudi employment contract must be written and for a specified duration. If the contract does not specify its duration, the work permit duration is considered the contract duration.

• Article 12 of the Executive Regulations of the Labor Law states the following:

In implementing the provisions of Article 37 of the Law, a non-Saudi fixed-term employment contract remains so regardless of its duration or renewal, and it does not convert to an indefinite contract even if both parties agree.

• Article 50 of the Labor Law:

An employment contract is a contract between an employer and an employee, where the employee undertakes to work under the employer's management or supervision in return for a wage.

• Article 51 of the Labor Law:

An employment contract must be written in two copies, with each party retaining one copy. The contract is valid even if unwritten, in which case the employee alone can prove the contract and the rights arising from it by all means of proof. Each party can request the contract to be in writing at any time. However, for government and public sector employees, the appointment decree or order issued by the competent authority stands as the contract.

• Article 52 of the Labor Law states the following:

1 - In accordance with the provisions of Article 37 of this Law, the Ministry shall establish a unified model for employment contracts, which shall include essential information such as the employer's name and location, the employee's name and nationality, proof of identity, residence address, agreed wage including benefits and allowances, type and location of work, date of joining, and duration if specified.

2 - The employment contract must be according to the model mentioned in paragraph (1) of this article, and the parties may add additional clauses that do not contradict the provisions of this Law, its regulations, or the implementing decisions.

• Article 55 of the Labor Law regarding the termination or renewal of an employment contract states the following:

1- A fixed-term contract ends at the specified duration, and if the parties continue to execute it, it is considered renewed for an unspecified period (taking into account Article 37 regarding non-Saudis).

2- If the fixed-term contract includes a condition for renewal for a similar period or a specific duration, it will be renewed for the agreed period. If renewed three consecutive times or the original contract period along with the renewal period reaches 4 years, whichever is less, and the parties continue to execute it, the contract becomes an indefinite contract.

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Types of Permanent Contracts:

 

1- Specified Duration Contract:

This type of contract is characterized by having a specific start and end date known at the beginning of the contractual relationship between the two parties (the duration is agreed upon by both parties before signing the contract), for example, one year, two years, etc.

2- Indefinite Duration Contract (Open Contract):

This type of contract applies only to Saudi employees (according to Article 37 of the Labor Law and Article 12 of the Executive Regulations of the Labor Law), and therefore the indefinite duration contract for a Saudi employee can be in one of two ways:

• Signing an indefinite duration contract between the parties at the beginning of the contractual relationship or when the employee starts work without a written contract.

• Renewing a specified duration contract three times consecutively or if the original contract period along with the renewal period reaches 4 years (whichever is less), and both parties continue to execute it.

• Transformation of a Specified Duration Contract to an Indefinite Duration Contract for Saudi Employees:

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The contract transforms from a specified duration to an indefinite duration (for Saudi employees only) if the specified duration contract is renewed three times consecutively or if the original contract period along with the renewal period reaches 4 years (whichever is less), and both parties continue to execute it.