Understanding employment contracts is key to successfully participating in or adding value to Saudi Arabia’s rapidly expanding labour market. Both employees and employers thrive in an employment situation when there is familiarity with the essential terms and features, distinctions, and legal considerations regarding fixed-term and non-fixed (or indefinite-term) contracts in Saudi Arabia’s rapidly evolving and dynamic employment market.

We have now moved to 2025, and Saudi Arabia is seeing major expansion in many sectors, such as technology, healthcare, construction, and finance, as it executes its Vision 2030 initiative to diversify the economy and bring professionals in from around the world to participate in, or add value to, its economy. The national unemployment rate fell to a record low of 2.8% in Q1 2025.

Large-scale mega-projects such as NEOM and the Red Sea Project create a growing demand for professional personnel, whether contracted or non-contracted. The diversification of business models and the evolving definition of employee rights. Both employers and professional talent need to familiarise themselves with the types of contracts that exist in the employer/employee relationship.

What is an Employment Contract?

An employment contract is a legal document that outlines an employee’s salary, role, duration of employment, hours of work, leave, and notice provisions. In 2025, Saudi Arabia introduced a Unified Employment Contract to all employers nationwide, standardising the terms of the contract, improving the digital registration of employment contracts, and reinforcing protective legal rights to all employees.

Types of Employment Contracts in Saudi Arabia

In the Kingdom, employment contracts can take one of two structures:

• Fixed-term contracts
• Non-fixed (indefinite) contracts

Both of these contracts will contribute to job security, entitlements to be claimed, and levels of flexibility for the employer.

Fixed-Term Contracts

A fixed-term contract contains a clear start date and end date. These contracts are used mostly for project-based temporary or seasonal employment. According to Saudi Labour Law, a fixed-term contract will automatically become a non-fixed contract upon being renewed three times or having elapsed the maximum duration of four years.

Key traits:

• Automatically terminates unless renewed
• A maximum duration for renewal is three times or the four-year timeframe, whichever occurs first.
• Most appropriate for defined-term work or projects

Recent Workforce Data:

In the second quarter of 2025, Saudi Arabia’s workforce, or employed population, totalled 18.2 million, with 14.1 million expatriates constituting 77% of the employed population. Many expatriates work under fixed-term contracts, especially in construction, hospitality, and seasonal contracts.

Non-Fixed (Indefinite) Contracts

An indefinite or non-fixed contract states a starting date but has no end date; it simply continues until either the employer or employee terminates it, usually with advance notice, normally 30 to 60 days.

Key Features:

• The employment relationship is ongoing, subject to the terms of the contract and notice of termination periods in the labour law.
• Typically, indefinite contracts will also refer to permanent contract positions, which provide more job security and employee benefits.
• If the employer wishes to dismiss the employee, valid and documented reasons must be provided.

Statistics to Note:

In the second quarter of 2025, the average salary of Saudi employees approached SAR 11,034, and that of foreign employees was estimated to be around SAR 3,933. Most Saudis who work for large organisations have indefinite contracts.

Saudi Labour Law Updates and Digital Compliance

The Saudi Ministry of Human Resources and Social Development has made it compulsory that all employment-related contracts must be electronically processed, that is, via Qiwa. This makes them legally binding and immediately enforceable by labour courts.

• Foreign employees who have employment contracts without terms of duration are automatically considered to have one-year fixed-term contracts.
• Written agreements are now required for non-Saudi employees.

An integral element of this transformation is the adoption of the Unified Employment Contract (UEC), making the recruitment process more streamlined and reducing controversy. The UEC is an electronic employment contract that is linked to Qiwa and Najiz, and thus, employees and employers can securely create, sign, and manage employment contracts over the internet.

With a mandatory wage clause and direct access to enforcement courts, the system provides employees with more clarity and protection and allows employers improved transparency and productivity. These changes also fulfil the goals of the Saudi Vision 2030 initiative for digital transformation and support the national objective of positioning the Kingdom as a modern, welcoming, and worker-friendly economy.

Choosing the Best Contract Type

Fixed: Suitable for temporary positions, seasonal work, or limited-time projects.

Non-fixed: This is better for regular and longer periods of employment with extra benefits and security.

In deciding what kind of contract to form, employers and employees alike should also consider flexibility and potential for individual development. Fixed-term contracts can benefit employers and workers with valuable experience on jobs with defined time frames and deadlines, but they probably also deny the employee longer-term benefits and security, including end-of-service pay.

Non-fixed contracts serve to generate better loyalty in employees who are planning their longer-term careers, but they have a level of complexity regarding termination and notification periods that may affect workforce planning and employee job security. Understanding these various considerations is essential when attempting to align the choice of contract with the strategic interests of each party.

Practical Suggestions:

• Verify the type of contract you are signing, or seek clarification from HR if you have any doubts.
• Please ensure you retain a copy of your contract for reference.
• Understand how the cycles of notice and termination work under the Saudi Labour Law
• Use online resources for signing and keeping contracts digitally.

How 6 Pence Supports Employers and Professionals

6 Pence guarantees total legal compliance and hassle-free hiring for employers and employees in Saudi Arabia.

We offer:

• Expert contract drafting and advice in accordance with current regulations
• Assisting with digital registration and Qiwa compliance
• Strategic manpower supply for fixed-term and permanent positions
• Advising expatriates and locals on contract types, renewals, and labour laws

Through our local expertise within the Saudi Arabian market, 6 Pence assists organisations and professionals in navigating contract options, HR processes, and ongoing changes in regulations so that both sides can enjoy sustainable and successful careers.

Understanding and navigating contract options is fundamental for anyone working or hiring in Saudi Arabia. You should trust your HR partner with success in the changing labour market in the Kingdom of Saudi Arabia.

Also Read: Workplace Etiquette in Saudi Arabia