Article 37 of the Saudi Labor Law

Article 37 of the Labor Law sets a special rule for the contracts of non-Saudi workers, which differs from the general rules for Saudis' contracts, and rests on three elements:

• Writing: a non-Saudi's employment contract must be in writing, so for them the Law is not satisfied with an oral agreement.
• A fixed term: the contract must be for a fixed term, that is, it must state a period at which it ends, so a non-Saudi's contract cannot be one of indefinite term.
• The rule when the term is omitted: if the contract does not state its term, the Law presumes that its term is one year counted from the date the worker actually commences the work, not from the date of signing the contract or the worker's entry into the Kingdom.

The article added a rule for after this year ends: if the two parties continue performing the work after its expiry without signing a new contract, the contract is considered renewed for a similar term, that is, for another year, and so on as long as the work continues.

What does this mean in practice?

1. The employer must draw up a written contract with every non-Saudi worker and state a clear term in it.
2. If the term is omitted, the contract is neither void nor of indefinite term; the Law applies the one-year presumption automatically.
3. The contract remains fixed-term even after it is renewed, because renewal is for a similar term and not an open-ended one.

This article is linked to those around it: Article 36 authorizes the Minister to specify the professions that non-Saudis are prohibited from working in, and Article 38 prevents employing the worker in a profession other than the one recorded in their work permit before the procedures for changing the profession are completed. This completes the framework for employing non-Saudis: a permitted profession, consistent with the permit, and a written contract for a fixed term.

This is the text in force after the article was amended by Royal Decree No. M/44 dated 8/2/1446 AH, effective from 20/8/1446 AH. To learn the effect of the contract term on particular rights such as compensation on termination, it is advisable to consult a lawyer specialized in labor cases.