Ending Employee Services

What does “termination of an employee’s services” mean?

Termination of an employee’s services means the end of the relationship between the employer and the employee as a result of a decision by one of the parties to terminate the employment contract, whether at the employee’s request or by decision of the employer. 

The process of terminating an employee’s employment involves settling the employee’s entitlements and returning any company property, and may include conducting an exit interview or a gradual transfer of knowledge from the departing employee to a new employee.

What are the reasons for terminating an employee’s employment?

Terminating the employment relationship between an employee and an employer requires clarification of the underlying reasons and motives. Termination can be classified into three main types:

• Voluntary Termination: The employee decides of their own free will to leave their position at the company and submit their resignation. Voluntary termination by an employee often indicates the presence of issues within the company that need to be resolved to improve the work environment and the employee experience. The most prominent of these reasons include:
  • Professional reasons, such as securing a new job that offers better opportunities, changing career paths, or retiring due to age.
  • Personal reasons, such as moving to another location or pursuing further education.
  • Reasons related to the work environment, such as a poor relationship with colleagues or management, a lack of career development opportunities, or harassment.
• Involuntary termination: In this case, the decision to terminate comes from management or the employer. Termination is usually the result of disciplinary action taken against the employee, organizational changes, or budget cuts. The most common reasons include:
  • Poor employee performance despite warnings and performance improvement plans.
  • Violation of company policies, such as safety standards, misuse of company property, or jeopardizing the company’s reputation.
  • Prolonged absence from work without notice or explanation.
  • Restructuring or downsizing of the company, making termination necessary even if the employee’s performance is satisfactory.
• Mutually Agreed Termination: The employee and employer mutually agree to terminate their contractual relationship. This type of termination is less complicated because it is based on a mutual agreement between the parties. The most common reasons include:
  • The professional relationship is no longer suitable for both parties.
  • Termination of the contract in exchange for financial compensation to the employee.
  • An agreement with the employee to remain in the position until a replacement is found or another employee is trained.

How do you terminate an employee’s employment?

Terminating an employee’s employment requires handling the process with care and respect, making the decision based on clear professional grounds, following precise legal steps and procedures, and providing support to the employee during the transition period. The most important of these steps include:

1. Identifying the problem: Whether the issue relates to the employee’s performance, behavior, or violation of workplace policies, accurately identifying the problem ensures that the termination decision is based on objective and fair grounds. It also helps minimize legal disputes, improve the quality of life at work, and preserve the company’s reputation.
2. Gathering Documentation: Any organization or employer wishing to terminate an employee must gather documentation and evidence supporting this decision, including:
   • Performance records and comprehensive evaluations: All documents related to the employee’s performance and past conduct records, as well as any observations illustrating the employee’s performance level compared to established standards, including annual performance reports and personal feedback from supervisors or colleagues.
   • Attendance records: Records of clock-in and clock-out times that demonstrate the employee’s adherence to work hours, as well as sick leave, unexcused absences, and paid and unpaid leave.
   • Notices, Correspondence, and Conversations: Collect all notices and correspondence exchanged with the employee regarding any violations of company policies or warnings issued to them, as well as meetings held with them regarding their performance or conduct.
   • Financial and Administrative Records: Financial documents such as payslips and bonus statements, and administrative documents such as agreements entered into with the employee and company policies.Medical reports: These should detail the medical history the employee provided to justify their leave, poor performance, or the impact of their health condition on their ability to work.
3. Conducting a discussion with the employee: This process typically involves several steps aimed at ensuring transparency by giving the employee an opportunity to understand the issue, fairness to ensure the employee is aware of the reasons for the decision, and an effort to help the employee improve if there is room for it. The steps involved in the discussion with the employee prior to termination include:
   • The supervisor or manager conducting the discussion should prepare all relevant documents, such as performance reports and any previous complaints.
   • Creating a safe and neutral environment that allows the employee to express themselves freely and without fear of retaliation.
   • Clarifying the objectives of the discussion, focusing on the specific issues being discussed and the expected outcomes.
   • Listen actively to the employee without interrupting and without making premature judgments.
   • Provide clarification and guidance on the steps that will be taken based on the outcome of the discussion and the disciplinary measures to be implemented.
4. Preparing documents and files: An official notice of termination is provided to the employee, including a clear explanation of the reasons and next steps, as well as guidance on the procedures regarding their salary or any additional actions; then, all documents related to the termination of employment are prepared, including contract termination forms.

What practices should be followed when terminating an employee’s employment?

The Human Resources Department works to manage termination processes in an effective and respectful manner, and to achieve this, it takes the following considerations into account:

• Advance Planning: It is essential for the company to be prepared for the termination process by developing a clear and organized plan that includes reassessing team needs and identifying the skills and experience required for a new candidate.
• Effective Communication: The decision to terminate employment must be communicated in a professional and direct manner to the employee concerned, and a professional termination letter must be provided.
• Settling Financial Entitlements: All financial entitlements owed to the employee must be settled accurately and in a timely manner, including any remaining salary, severance pay, and bonuses, if applicable.
• Providing Support to the Employee: Support can be provided to the terminated employee by offering resources such as advice on finding a new job or guidance on maintaining health insurance coverage after leaving the company.
• Ensuring Compliance with Legal Requirements and Obligations: Ensuring compliance with all local and international laws and regulations related to termination of employment, including specified notice periods, and treating employees fairly and without discrimination.
• Maintain confidentiality: Keep all information related to the termination process confidential, including the reasons for termination and the financial arrangements made.
• Periodically evaluate the process: It is important for the company to evaluate the termination process to identify any areas needing improvement and ensure ongoing compliance with policies and procedures.
• Conducting a Thorough Exit Interview: Listen carefully to the employee’s feedback and evaluate their experience at the company, including strengths and weaknesses, as well as suggestions for improving processes. This enhances the company’s ability to benefit from constructive ideas and improves its reputation as an employer that values its employees’ opinions.

Termination of an Employment Contract in Accordance with Saudi Labor Law

Article 74 of the Saudi Labor Law specifies the circumstances under which an employment contract may be terminated, namely:

• Mutual agreement, provided that the employee’s consent is in writing, which safeguards their rights and prevents any form of coercion.
• Expiration of the contract term without renewal.
• The desire of either party to terminate an indefinite-term contract, provided that the other party is given advance notice within the timeframe specified in the contract.
• Reaching the retirement age, which is sixty years for male workers and fifty-five years for female workers, unless both parties agree to continue employment beyond that age.
• The occurrence of force majeure circumstances that make it impossible to continue working.
• Permanent closure of the establishment.
• The termination of the business activity in which the employee is engaged, without an agreement to transfer the employee to another activity within the company.

Can an employee in the private sector be dismissed without compensation?

Article 80 of the Saudi Labor Law allows an employer in the private sector to terminate an employee without providing severance pay, notice, or compensation, provided that the employee is given the opportunity to present a defense and state the reasons for opposing the termination, in the following cases:

• Assaulting the employer, a supervisor, or a superior during work, which requires reporting the incident to the competent authorities.
• Failure to perform job duties as required after receiving a written warning.
• Committing a reprehensible act that violates professional integrity and honor.
• Intentionally causing harm to the company, provided that the employer reports the incident to the competent authorities within twenty-four hours of becoming aware of it.
• Falsifying identification documents or any other documents used in the course of employment.
• Illegally exploiting their position for personal gain.
• Disclosing industrial or commercial secrets related to the job.
• Unexcused absences totaling more than thirty days during the year, or more than fifteen consecutive days, provided that the employer issues a warning to the employee after twenty days of absence in the first case, and after ten days of absence in the second case.
• If the contract includes a probationary period clause, the contract may be terminated during that period without any financial compensation. 

When are the services of a Saudi government employee terminated?

The Civil Service Regulations in the government sector set forth the procedures for terminating the employment of employees in the following cases:

• Resignation. 
• Reaching the statutory retirement age, unless the employee’s service is extended by a decision of the competent authority.
• Request for early retirement before reaching the statutory retirement age in accordance with the retirement system.
• Absence from work for fifteen consecutive days, or thirty non-consecutive days during the year.
• Failure by the employee to comply with a transfer order without a valid excuse within fifteen days of being notified of the order.
• The employee’s absence for a period determined by the Council of Ministers.
• Receiving an unsatisfactory performance evaluation for three consecutive years.
• Dismissal for disciplinary reasons, or conviction in cases involving honor or integrity.
• Medical incapacity.
• Abolition of the position.
• Revocation or loss of citizenship.
• Death.

What is a letter of termination of employment?

A letter of termination of employment is an official document issued by the employer or company notifying the employee of the decision to terminate their employment and employment contract. Article 75 of the Saudi Labor Law stipulates that written notice of termination of the employment contract must be sent to the other party at least 60 days prior to the termination date if the employee is paid monthly, and 30 days for others.

The format of an employee termination notice varies depending on the nature of the original contract and the reasons for termination. Its main elements can be summarized as follows:

• Information about the parties, such as the name of the terminated employee, the company name, and the employer’s name.
• Details of the original contract, such as its type, purpose, and effective date.
• Termination date, to clarify the period during which the employee must prepare for the end of their employment.
• The reason for termination or the reasons leading to the decision to terminate employment.
• The employee’s financial entitlements, such as remaining salary, vacation pay, bonuses, and any compensation due.
• Any remaining obligations and duties that either party must fulfill before the termination date.
• Details of the actions the employee must take, such as returning any company-owned equipment, or instructions on how to receive their financial entitlements.
• A release from any future claims or liabilities against the company after the termination date.
• A confidentiality clause prohibiting the disclosure of any sensitive work-related information.
• A dispute resolution mechanism in the event of a disagreement during the termination process.
• The applicable law that will govern the termination agreement.
• The signature of a company official or the employer, along with the date the letter was issued.