Legal Differences Between Notice Period Compensation and Unlawful Termination Compensation
There is widespread confusion in workplace environments regarding whether Notice Period Compensation (Article 75) and Unlawful Termination Compensation (Article 77) can be claimed simultaneously. The established legal principle, however, is clear: the two cannot coexist in relation to the same termination event.
1. Notice Period Compensation (Article 75)
- Notice period provisions apply exclusively to open-ended (indefinite-term) contracts where termination is lawful and justified.
- The party seeking to terminate is obligated to notify the other party in advance — 30 days if the termination is initiated by the employee, or 60 days if initiated by the employer.
- If the grounds for termination are lawful but the notice period was not observed, the party in breach is liable to compensate the other party solely for the notice period duration — since the termination itself is valid, and the violation is limited to the failure to provide adequate notice.
2. Unlawful Termination Compensation (Article 77)
- Compensation under Article (77) arises only when the grounds for termination are unlawful — i.e., without a reason permitted by the Labor Law.
- In this case, compensation addresses the harm caused by the termination itself, not the absence of a notice period.
Why Cannot Both Compensations Be Combined?
Combining both forms of compensation for the same termination event would result in the aggrieved party being compensated twice for a single act of termination — a position that contradicts the fundamental nature of compensation under Saudi Labor Law.
- If termination is lawful but the notice period was not observed → Only notice period compensation is due; a claim under Article (77) is not applicable.
- If termination is unlawful → Compensation is governed exclusively by Article (77); notice period compensation cannot be added on top, as the employment contract ended unlawfully and is therefore no longer subject to notice period provisions.
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