Indefinite Contract Template for Saudi Arabia

An indefinite contract is the most common form of employment agreement in Saudi Arabia, establishing a permanent working relationship between you and your employee without a fixed termination date. Under Saudi Labor Law (Royal Decree No. M/51), this type of contract provides both parties with flexibility while ensuring comprehensive legal protection and compliance with local employment regulations.

When do you need this document?

You need an indefinite contract when hiring employees for permanent positions in your Saudi Arabian business operations. This document is essential for establishing full-time employment relationships, whether you're a multinational corporation expanding into the Kingdom or a local business hiring your first employees. The contract is particularly important for senior management positions, skilled professionals, and any role where you expect long-term employment. It's also required when converting temporary or fixed-term contracts to permanent positions, and when ensuring compliance with Nitaqat (Saudization) requirements for hiring Saudi nationals.

Key legal considerations

Your indefinite contract must include several critical provisions to ensure legal compliance and protect both parties' interests. The probationary period cannot exceed 90 days and must be clearly specified, during which either party can terminate the contract with minimal notice. Working hours, overtime compensation, and rest periods must align with Saudi Labor Law requirements, typically not exceeding 8 hours per day or 48 hours per week. The contract must detail annual leave entitlements, sick leave provisions, and public holiday arrangements. End of service benefits calculations must be clearly outlined, including gratuity payments based on the employee's length of service and final salary. Confidentiality clauses, non-compete agreements, and intellectual property rights should be carefully drafted to ensure enforceability under Saudi law.

Legal requirements in Saudi Arabia

Saudi Labor Law mandates that your indefinite contract includes specific information about both parties, including full legal names, addresses, and identification numbers. The contract must specify the job title, workplace location, and detailed duties and responsibilities. Salary and benefits must be clearly stated, including any allowances, bonuses, or commission structures. You must ensure compliance with the Wage Protection System (WPS) by specifying electronic salary payment methods and timing. Social Insurance Law compliance requires clear provisions about mandatory contributions and coverage. The contract must address disciplinary procedures, grievance mechanisms, and termination procedures, including notice periods and circumstances for immediate dismissal. Additionally, contracts for foreign employees must consider visa sponsorship obligations and residency requirements under Saudi immigration law.