Mutual Agreement Termination Of Employment Letter Template for Saudi Arabia

When you need to terminate an employment relationship by mutual agreement in Saudi Arabia, you require a formal Mutual Agreement Termination Of Employment Letter. This document serves as legal proof that both you and your employee have consensually agreed to end the working relationship, ensuring compliance with Saudi Labor Law and protecting both parties throughout the separation process.

When do you need this document?

You need this letter when both employer and employee have reached a mutual understanding to terminate the employment contract outside of standard resignation or dismissal procedures. This commonly occurs during organizational restructuring where certain positions become redundant, when an employee wishes to pursue other opportunities but wants to maintain a positive relationship with the company, or when both parties agree that the working arrangement is no longer beneficial. The document is also essential when negotiating early release from fixed-term contracts or when settling workplace disputes through amicable separation agreements.

Key legal considerations

Your letter must clearly establish that the termination is genuinely mutual and not coerced by either party. Include specific details about the effective termination date, final salary calculations, and end-of-service benefits computation according to Saudi Labor Law provisions. Address the return of company property, confidentiality obligations, and any non-compete clauses that may continue post-employment. Ensure the document covers settlement of all outstanding benefits including unused annual leave, overtime payments, and statutory entitlements. Consider including mutual release clauses to prevent future legal disputes and specify the method for processing final payments through the Wage Protection System as required by Saudi regulations.

Legal requirements in Saudi Arabia

Under Article 74 of Saudi Labor Law (Royal Decree No. M/51), mutual agreement terminations must be properly documented and comply with specific procedural requirements. You must calculate end-of-service benefits according to Articles 84-88, ensuring employees receive their full statutory entitlements based on their length of service and final salary. Follow Ministerial Resolution No. 684/1 requirements for proper termination documentation and ensure all final payments are processed through the approved Wage Protection System. Notify the General Organization for Social Insurance (GOSI) of the employment termination and transfer any applicable social insurance benefits. The letter should be signed by authorized company representatives and acknowledged by the employee, with witnesses present if required by your company's internal policies or if the settlement amount is substantial.