Breach of Contract in Saudi Arabia: How Much Can Be Deducted and How to Protect Your End of Service Benefits (Complete Guide for OFWs)
Learn how much can be deducted in a breach of contract in Saudi Arabia, how Article 77 applies, and where to file a complaint for incorrect EOSB.
Breach of Contract in Saudi Arabia
Introduction
Kung iniisip mo mag-resign bago matapos ang kontrata sa Saudi, mahalagang maintindihan kung magkano ang posibleng kaltas sa breach of contract at paano mo mapoprotektahan ang iyong EOSB.
OFW Question of the Day???
A reader from our community asked:
Helo sir kmusta po?usually po ba sir magkanu po ang nakakaltas pg breach of contract sir Gaya sa situation ko n gagawn kung sakali..may nadinig kc ako na 2 months equivalent salary daw makakaltas kung ganun situation. Tnx po sir..kung sakali po na masyado dehado ang aking situation..sa pagbbgay ng company ko ng esb san po b ako pede lumapit para makahingi ng panibago computation na fair. Salamat sir.
10yrs amd 5months n po ako sa company ko sa housekeeping dept. And baka po pag dmting visa ko bg cross country ay mag resign po ako. 2027 p po ng Oct ang validity ng qiwa ko at Dec 2026 nmn po ang aking iqama.
What is Breach of Contract in Saudi Arabia
“Breach of contract” happens when an employee or employer terminates a valid contract without a legally justified reason. For workers, this usually occurs when resigning before the end of a fixed-term contract or without proper legal grounds.
In Saudi Arabia, compensation for this situation is governed by Saudi Labor Law Article 77.
Is the “2 Months Salary Deduction” True?
Many OFWs hear that “2 months salary” is automatically deducted. This is not a standard legal rule.
When 2 Months Deduction Applies
- Only if your employment contract explicitly includes a penalty clause
- Example: “Employee must pay 2 months salary for early termination”
When It Does NOT Apply
- If there is no penalty clause in your contract
- If employer cannot prove actual damages
- If termination is legally justified
Key Insight:
There is no fixed penalty under Saudi law. The amount depends on contract terms or actual damages.
Article 77 Explained
The legal basis for breach compensation is Saudi Labor Law Article 77.
Fixed-Term Contract
If your contract has a defined end date:
- Compensation = salary for the remaining contract period
- OR the amount stated in the contract (if a clause exists)
Example:
- 6 months remaining → possible liability = 6 months salary
- If contract says 2 months → only 2 months applies
Indefinite (Open) Contract
If your contract has no end date:
- Compensation = 15 days salary × years of service
Example:
- 10 years → 150 days salary (5 months)
Important Exception
If termination is based on a valid legal reason, compensation may be zero.
EOSB (End of Service Benefits): What You Should Receive
Your EOSB is governed by Saudi Labor Law Article 84.
Your Case (10 Years and 5 Months)
You are entitled to full EOSB, even if you resign.
Standard Calculation
- First 5 years: ½ month salary per year
- After 5 years: 1 month salary per year
Estimated Total:
More than 7.5 months salary equivalent
Can EOSB Be Reduced?
Yes, but only under valid conditions:
- Contract penalties (if applicable)
- Proven damages under Article 77
- Outstanding financial obligations
Where to File a Complaint for Unfair EOSB Calculation
If your EOSB is incorrect or unfair, you can file a complaint with:
👉 Ministry of Human Resources and Social Development
Complaint Process
- Submit complaint (online, hotline, or office)
- Enter amicable settlement stage
- If unresolved → escalate to labor court
Step-by-Step: How to File an MHRSD Complaint
Online Filing (Recommended)
- Login via Nafath / Absher
- Select “Labor Complaint”
- Fill employee and employer details
- Attach evidence (contract, payslip, proof)
- Submit and track case
Hotline
- Call: 19911
- Request complaint assistance
Personal Visit
Strategy: Should You Proceed with Breach of Contract?
Before deciding, evaluate your situation carefully.
If You Proceed
- Possible compensation liability
- Risk of deductions
- Potential transfer complications
If You Wait
- Full legal protection
- No compensation risk
- Smooth EOSB release
Recommended Approach for Your Situation
Based on your details:
- 10 years 5 months service
- Contract valid until 2027
- Iqama valid until Dec 2026
Best Strategy
- Review your contract for penalty clauses
- Consider negotiating mutual termination
- Avoid immediate resignation without calculation
Common Mistakes to Avoid
- Assuming “2 months penalty” is automatic
- Ignoring contract terms
- Not checking contract type in Qiwa
- Resigning without financial calculation
Internal Resources You Can Check
For deeper guidance, explore:
These resources provide practical, OFW-focused insights.
FAQ (Frequently Asked Questions)
Is breach of contract illegal?
No, but it can result in compensation depending on contract terms.
Can employer deduct EOSB automatically?
Only if there is a valid legal basis or agreement.
Can I avoid paying compensation?
Yes, if termination is legally justified.
How long does MHRSD complaint take?
Initial response within days; settlement may take up to 21 days.
Can I transfer after breach of contract?
Possible, but may be delayed depending on case status.
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Conclusion
Sa huli, ang breach of contract ay may malaking epekto sa pera at future mo sa Saudi kaya siguraduhin mong naiintindihan mo ang risks bago ka magdesisyon.
Disclaimer
This content is for informational purposes only and does not constitute legal advice. Outcomes depend on contract terms and official Saudi authority decisions. Always verify through official platforms such as Qiwa, MHRSD, and Absher.
