Transfer Of Service Agreement Template for Saudi Arabia

A Transfer of Service Agreement is a crucial legal document that formalizes the transfer of an employee's services from one employer to another in Saudi Arabia. This agreement ensures that your employee's rights, benefits, and service continuity are properly protected during the transition while maintaining full compliance with Saudi Arabian employment laws.

When do you need this document?

You need this agreement during corporate mergers and acquisitions where employees must transfer to the acquiring company. It's essential when restructuring business operations and moving staff between related entities or subsidiaries. The document is also required when outsourcing services to third-party providers who will employ your current staff, or when transferring employees as part of joint venture arrangements. Additionally, you'll need this agreement when complying with Nitaqat requirements that may necessitate workforce transfers to maintain Saudization quotas.

Key legal considerations

The agreement must clearly define all parties involved, including the transferor, transferee, and affected employees, along with their respective rights and obligations. Critical clauses should address the preservation of the employee's accumulated service period for end-of-service benefit calculations, continuation of existing employment terms and conditions, and handling of accrued benefits like annual leave and sick leave. You must also consider liability allocation between the old and new employers for any outstanding obligations or potential employment disputes. The agreement should specify how confidentiality obligations and non-compete clauses will be handled post-transfer, and establish clear procedures for employee consent and notification requirements.

Legal requirements in Saudi Arabia

Under Saudi Labor Law (Royal Decree No. M/51), employee transfers must comply with strict notification procedures and obtain proper employee consent where required. The agreement must ensure compliance with Social Insurance Law (Royal Decree No. M/33) by maintaining GOSI coverage continuity and properly transferring social insurance obligations to the new employer. You must adhere to Ministry of Human Resources and Social Development regulations regarding documentation and approval processes for employee transfers. The agreement must also consider Nitaqat compliance, ensuring that the transfer doesn't negatively impact either employer's Saudization ratio. Additionally, you need to account for work permit and iqama transfer requirements for expatriate employees, including coordination with relevant government authorities for visa and residency documentation updates.