Saudi labor law end of service benefits are a vital component of ensuring an employee’s future security after the end of their contractual relationship with the employer. With an increasing number of employees entering into various contracts, legitimate questions arise regarding whether employees can negotiate these benefits: Is it legally allowed to modify or negotiate these benefits? Can they be improved or changed with the agreement of both parties? What are the legal limits to such negotiations?
In this article, we explore the legal and professional answers to these questions, clarifying when employees can negotiate, when such negotiations would violate labor laws, and offering guidelines that protect the rights of the weaker party in the contractual relationship: the employee.
What is the Stance of Saudi Labor Law on End of Service Benefits?
Saudi labor law end of service benefits are a fixed right for the employee, guaranteeing them a financial sum upon the termination of the employment relationship, whether the contract is fixed-term or indefinite. These rights are clearly outlined in Article (84) of the Labor Law.
Key Legal Points:
- The benefits are calculated based on half a month’s wage for each year of the first five years and a full month’s wage for each subsequent year.
- Resignation affects the value of the benefits, as the percentage decreases in cases of voluntary resignation (depending on the years of service).
- Employees cannot waive their benefits or agree to reduce them in violation of the law; any agreement to do so is considered null, even if a contract is signed to this effect.
Thus, the system guarantees the employee the minimum end of service benefits, preventing any reduction. However, it does not prohibit increasing or improving these benefits by mutual agreement, which we discuss in the next section.
Can End of Service Benefits Be Modified When Signing the Contract?
When signing an employment contract, a clause related to saudi labor law end of service benefits may be introduced, whether increasing them, linking them to performance indicators, or offering them in a different financial form.
In the following, we clarify the conditions under which any agreement to modify the benefits would be valid:
Improvement of Benefits: Employers may offer employees a higher benefit than the statutory minimum provided by the labor law.
Reduction of Benefits: No clause in the contract can reduce the employee’s basic rights, including end of service benefits.
Documentation of Clauses: Any agreement to improve the benefits must be documented in the contract or official appendices. Oral agreements or unrecorded deals are not legally binding in case of a dispute.
Thus, negotiating the benefits is possible and permissible, provided that it does not infringe on the employee’s fundamental rights, and is not aimed at circumventing the law.
Can Negotiation Occur Upon Termination of Service?
In some cases, after the contractual relationship has ended, both parties may enter into negotiations for a comprehensive settlement that includes Saudi labor law end of service benefits, especially in cases of dispute or abrupt termination. In this context, we distinguish between two cases:
1. Termination by Mutual Agreement
- Employees and employers may agree on a settlement that includes end of service benefits, as long as the settlement does not fall below the statutory minimum.
- Some companies may offer employees compensation higher than the statutory benefits in exchange for signing a waiver of future claims.
2. Unilateral Termination or Resignation
- In cases of wrongful dismissal, the employee may request compensation above the statutory benefit, and it may be negotiated during the dispute resolution process.
- For resignation cases, the benefit calculation is still subject to the number of years the employee has worked, and negotiation for increasing it is only possible with the employer’s consent.
Negotiation at this stage is not a legal right but can be a friendly settlement, provided that the employee’s minimum rights, as defined by the law, are maintained.
What Is the Impact of Negotiation on Employee Rights?
It is important to note that an imbalanced negotiation may lead the employee to waive their rights without realizing it. Here, the sensitive aspect of the issue arises.
Impact of Negotiations on the Entitlement to Benefits:
- Signing a final settlement without legal review may cause the employee to lose their right to claim later, even if they did not receive their full entitlement.
- A written agreement that increases the benefit reflects the employer’s goodwill and can be positively utilized.
- Any agreement that reduces the legal benefit is considered void under Saudi labor law.
- In case of dispute, official documents are required to prove the employee’s right or lack thereof, not just claims.
Therefore, it is always advisable for employees to negotiate from a position of legal knowledge, or in the presence of a legal consultant or a representative from human resources.
What Is the Legal Framework for Negotiation?
Any negotiation regarding saudi labor law end of service benefits must occur within the boundaries set by the system, which aims to protect the employee’s rights.
Key Legal Principles Governing This Negotiation:
The Contract Does Not Override the Law: Any clause in the contract that contradicts the law is considered null, even if both parties agree to it.
Acquired Rights Cannot Be Waived: Rights cannot be waived simply by signing a contract, except if the increase is mutually agreed upon.
Negotiation is Permitted to Improve, Not to Reduce: Negotiation is allowed to improve the benefits, not to lower them.
Arbitration in Case of Dispute: If an agreement cannot be reached, the employee can refer to official bodies, such as the labor office or labor court.
In this context, it is important for negotiations to be written, documented, and based on a clear understanding of rights and obligations.
How Does Nawras Support This Process?
In light of the challenges companies face in managing salaries and end of service compensations, the Nawras platform provides an intelligent solution that supports both employers and employees.
What Does Nawras Offer in This Context?
- Integrated systems for accurately calculating end of service benefits according to Saudi labor law.
- Electronic documentation of contracts and bonus clauses to prevent any legal disputes.
- Issuance of final settlements in legally approved formats.
- Synchronization between attendance data and payroll to ensure accurate compensation calculations.
- Instant reports that help make fair decisions regarding benefits and entitlements upon termination of service.
Understanding employee rights and dealing with saudi labor law end of service benefits is essential for successful human resources management. Through the Nawras platform, businesses can overcome legal and administrative complexities with ease, thanks to intelligent systems that ensure accuracy in calculating benefits, documenting settlements, and full compliance with local regulations. Relying on Nawras not only streamlines procedures but also fosters a transparent working environment that maintains rights and builds trust between companies and employees.