Article 77 of Saudi Labor Law: Arbitrary Dismissal & Maximum Compensation 2026

Article 77 of the Saudi Labor Law is one of the most controversial and searched articles by employees. Some employers mistakenly believe that this article grants them the absolute right to dismiss a worker at any time, while in reality, it was established to regulate the mechanism of financial compensation in the event the contract is terminated for an illegitimate reason (arbitrary dismissal). If you find yourself suddenly and unjustifiably laid off, the law guarantees you strict financial rights. In this article, the labor law experts at Mahmoud Al-Shangiti Law Firm in Jeddah explain when your dismissal is considered arbitrary and how you can ensure you receive maximum compensation.

What is Article 77 of the Saudi Labor Law?

Article 77 stipulates that unless the contract includes specific compensation for its termination by one of the parties for an illegitimate reason, the party harmed by the contract termination is entitled to financial compensation that varies depending on the type of employment contract (fixed-term or indefinite-term).

Mechanism for Calculating Financial Compensation Under Article 77

To protect the employee from random dismissal, the Saudi system has set a minimum limit for compensation, illustrated in the following table:

When is Contract Termination Under Article 77 Considered "Arbitrary Dismissal"?

Many fall into the trap of believing that mentioning "Article 77" in a termination letter makes the dismissal legal. The truth is that any termination of the contract by the employer without a "legitimate cause" (such as the reasons mentioned in Article 80 of the Labor Law, like frequent absence or disclosing secrets) is considered arbitrary and unlawful dismissal. Consequently, the worker deserves the compensation stipulated in Article 77, in addition to their right to a notice period (two months for indefinite contracts).

The Difference Between Article 77 Compensation and End-of-Service Benefits

It is your fundamental right as a worker to separate the compensation from the benefit. Article 77 compensation is a penalty for the damage of unlawful dismissal, and it does not in any way forfeit your right to receive your full End-of-Service Benefits (EOSB), in addition to your unused vacation balance. For detailed information on how to claim these dues step-by-step, we advise you to read our comprehensive guide on the Saudi Labor Court: Procedures for Filing a Labor Lawsuit and Calculating End-of-Service Benefits.

Steps to Ensure Maximum Financial Compensation After Arbitrary Dismissal

If you receive an arbitrary termination letter, you must act smartly and calmly to secure your rights:

1. Do Not Sign a Final Clearance: Do not sign any document that clears the company's liability unless you have received all your dues (salaries, EOSB, vacation allowance, Article 77 compensation, and notice period).
2. Document the Dismissal Incident: Keep a copy of the termination letter, emails, and anything that proves you were prevented from working (if any).
3. Amicable Settlement: File an amicable settlement request via the "Waddi" platform of the Ministry of Human Resources as a first and mandatory step before resorting to the judiciary.

Why Do You Need an Expert Labor Lawyer?

Companies often have legal consultants who try to reduce the amounts owed to you through legal loopholes. We at Mahmoud Al-Shangiti Law Firm in Jeddah have cumulative experience in representing employees before labor courts. We calculate your dues down to the halala according to the latest amendments to the Labor Law, ensuring that none of your rights are lost due to arbitrary dismissal.