Article 77 is one of the most important compensation rules in Saudi labor law. It becomes relevant when an employment contract is terminated without a lawful compensation amount already written into the contract.
For workers, it helps explain what compensation may apply. For employers, it helps show why termination decisions should be documented carefully and budgeted properly. For recruiters, it is part of the wider compliance picture when placing talent in Saudi Arabia.
The official labor law summary from HRSD keeps the principle straightforward, even if real-life cases still need document review.
What Article 77 Says In Practical Terms
The ministry’s published guidance explains that compensation under Article 77 is generally based on the type of contract:
- For an indefinite-term contract: compensation is usually fifteen days’ wage for each year of service
- For a fixed-term contract: compensation is usually the wage for the remaining term of the contract
- In both cases, compensation should not be less than two months’ wages
This is why contract type matters so much. Two workers with the same salary may face very different outcomes if one is on an indefinite contract and the other is on a fixed-term arrangement.
Why Expats Need To Read The Contract Carefully
Many expats in Saudi Arabia work on fixed-term contracts. That means early termination can raise serious questions about remaining salary, compensation, notice, and final dues. A worker who assumes every exit works the same way can easily misunderstand their position.
Before signing, it is wise to check:
- Whether the contract is fixed-term or indefinite
- Whether the contract contains a valid compensation clause
- Whether the notice period is clearly written
- Whether housing, transport, and allowances are described properly
Why Employers Should Care About Article 77
From the employer side, Article 77 is a cost-control and risk-management issue. A termination decision that looks simple at first can become expensive if the company has not reviewed the contract type, service length, and possible compensation exposure.
This is especially relevant for firms hiring in waves through bulk hiring services in Saudi Arabia or expanding through manpower supply solutions. The larger the workforce, the more important it becomes to handle contract exits consistently.
A Simple Example
If an employee on a fixed-term contract still has six months remaining and the contract is terminated early without a specific lawful compensation arrangement, the remaining wages can become part of the compensation discussion. If another employee is on an indefinite-term contract, the analysis may shift toward service length and the fifteen-days-per-year formula.
That is why “same salary†does not always mean “same compensation.â€
Article 77 Does Not Replace Every Other Rule
One common confusion is thinking Article 77 answers every contract exit question. It does not. Notice period obligations, end of service benefits, unpaid salary, leave balance, and immigration status may all still matter. Article 77 deals specifically with compensation in the contract termination context.
That is also why employers should connect labor compliance with recruitment planning. Clean offers and clear contracts reduce dispute risk later.
Frequently Asked Questions
Does Article 77 apply to both fixed-term and indefinite contracts?
Yes, but the calculation approach is different for each type.
Is there a minimum compensation level under Article 77?
Yes. HRSD guidance states that the compensation should not be less than two months’ wages.
Should recruiters and HR teams understand Article 77?
Absolutely. It affects hiring documents, budgeting, and dispute prevention.
Final Takeaway
Article 77 is best understood as a compensation rule tied to contract termination. The exact outcome depends on the contract type, service history, and written terms already in place. For both employers and expats, clarity before hiring is far cheaper than conflict after termination.
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