Terminating Employment Contracts Under Article 77 of the Labor Law

Article 77 of the Saudi Labor Law remains one of the most discussed topics among employers and employees, particularly regarding the calculation of compensation when a contractual relationship ends.

When a contract is terminated under Article 77, HR professionals often face the challenge of calculating fair and accurate compensation. This is especially complex given the different requirements for Fixed-Term Contracts versus Indefinite Contracts. To address this, we are excited to announce a new feature in our system designed to automate these calculations with total precision.

Key Features of the New Update:

1. Determining the Initiating Party The system now allows you to specify who initiated the termination: the Employer or the Employee. This distinction is fundamental, as financial obligations vary significantly based on which party ended the contract.

2. Calculation Options: Automatic vs. Manual We understand that some companies reach private settlements or specific agreements with employees upon termination. Therefore, the system offers two flexible options:

• Automatic Calculation: The system automatically calculates the compensation based on the remaining duration of the contract or the standard Labor Law requirements.

• Manual Entry: If there is a prior agreement on a specific compensation amount, you can enter it directly, and the system will seamlessly integrate it into the Final Settlement.

3. Smart Differentiation Between Contract Types The system is intelligent enough to distinguish between:

• Fixed-Term Contract: Where compensation is typically calculated based on the wages for the remainder of the contract period.

• Indefinite Contract: Where it follows general compensation rules (e.g., 15 days' wage for each year of service).

Transparent Final Settlements

Once termination under Article 77 is triggered, the system generates a dedicated Compensation Tab within the Final Settlement statement. This card is displayed clearly and separately, detailing:

• The total compensation amount due.

• Any associated deductions (if applicable).

• An Audit History (recording who performed the action and when).