Saudi Employment Contracts: Fixed-Term vs Indefinite for New Employers

How fixed-term and indefinite contracts work under the Saudi Labour Law, and which one a new employer should offer for each kind of role.

The Saudi Labour Law recognises fixed-term and indefinite contracts, and the choice affects how the employment ends and what each side owes on termination. Contracts should be in Arabic or bilingual, documented on Qiwa, and consistent with the law's minimum protections. The Labour Law was amended with changes that took effect in 2025, so confirm the current rules on notice, renewal and termination with an adviser before finalising templates.

Fixed-term contract at a glance

A contract that runs for a defined period and ends on its expiry unless renewed. It gives both sides a clear horizon, and the law sets rules on renewal and on what happens if either side ends it early.

Indefinite contract at a glance

A contract with no end date that continues until one side ends it in accordance with the law. It signals permanence and typically suits core roles.

Ending the contract

Fixed-term contract: Ends on expiry. Ending it early without a valid reason can make the ending party liable for compensation defined by the law or the contract.

Indefinite contract: Ended by notice for a valid reason under the law. The notice rules and the definition of a valid reason matter.

Renewals

Fixed-term contract: Renewal rules apply, and repeated renewals can change how the contract is treated. Check the current law.

Indefinite contract: No renewal cycle for the contract itself, although residency and permits still renew.

End-of-service benefit

Fixed-term contract: Due on expiry according to the service period, calculated under the Labour Law.

Indefinite contract: Due on termination or resignation, with amounts that can depend on who ended the contract and why.

Flexibility for the employer

Fixed-term contract: Clear exit at the end date, less flexibility before it.

Indefinite contract: More flexibility over time, but termination must follow the law carefully.

Signal to candidates

Fixed-term contract: Can look temporary, which matters in competitive hiring.

Indefinite contract: Signals commitment and usually helps retention.

Administration

Fixed-term contract: Needs a renewal diary and a decision before each expiry.

Indefinite contract: Simpler to run, with attention focused on performance and any termination process.

When fixed-term contract wins

• The role is linked to a project or contract with a known end.
• You want a defined review point before continuing the relationship.
• The employee is a foreign hire whose residency plans are tied to a period.
• You need to match employment to a client contract term.

When indefinite contract wins

• The role is core to the business and ongoing.
• You are hiring Saudi nationals into long-term careers.
• You want to reduce the administration of repeated renewals.
• Retention and stability matter more than flexibility.
• Your competitors for the same talent offer indefinite contracts.

How to decide

Use fixed-term contracts where the job genuinely has an end, such as a project role, and indefinite contracts for core, ongoing roles. Do not use fixed-term contracts as a routine way to avoid termination rules; that often costs more in retention and disputes than it saves. Whichever you choose, use one clear template per contract type, reviewed against the current law.

List each role with its expected duration and link to client contracts. Roles tied to a project term point to fixed-term; roles that exist as long as the business does point to indefinite.

Domira works with foreign investors on the property side of entering Saudi Arabia: finding land or premises, due diligence, design, construction and asset management. For licensing, tax and legal steps, work with a licensed adviser; we coordinate with yours so the property decision fits the structure you choose.