Responses by Sara Khoja, partner, Employment and Incentives Group, Clyde & Co, Dubai.
Is there a requirement for employers to legally justify redundancies and if so, what reasons do they need to provide?
Like the UAE redundancy is not recognised as a concept under Saudi Arabian labour laws, and there’s no mandatory requirement to consult with employees or notify the Ministry of Labour before terminating employment.
The best method an employee can challenge an employer’s decision to lay them off is to claim for unfair dismissal.
In KSA termination of employment should be for a valid reason (which is not defined) there is no cap on potential compensation and an employee can request reinstatement. However, in practice, substantial awards to employees are not common place.
Also, under Saudi labour law, a non-KSA national employee must be engaged on a fixed term contract. If the contract does not specify a period, then the employee's fixed term will be the duration or validity of the work permit and residency visa. These authorisations are usually granted for 2 years. Only an employee on an indefinite term contract is entitled to be given written reasons for the termination.
What is the statutory minimum notice?
Where written notice is required, 30 days is the minimum.
What is the statutory minimum calculation for redundancy payments (if any)?
There is no statutory redundancy under Saudi labour laws. Instead, an employee is entitled to notice, payment in lieu of accrued untaken holidays and an ‘end of service gratuity’. This is payable on termination, regardless of whether the employee resigns or the employer decides to lay them off and the only way it can be lost is if gross misconduct is cited as the reason for the end of employment.
In KSA, the benefit is calculated as:
- On the total remuneration (basic salary and allowances).
- Bonus and commission can be excluded if the employment contract specifically provides for this.
- The benefit is to 15 days' remuneration for each year of complete service.
- The entitlement goes up to 30 days' remuneration for each complete year of service over 5 years.
According to law what are the minimum steps that an employer should take during a redundancy process?
An employer needs to notify the employee they are risk, meet them face-to-face in order to discuss the potential decision and, if the contract demands it, inform them in writing.
When effecting any termination of employment, a three step process should be followed including notifying the employee of the potential decision, meeting the employee face to face in order to discuss the potential decision and then confirming the decision and issuing notice in writing.
Statutory minimums aside, what is the standard practice for making redundancies and calculating payments at banks in your market?
In practice, most international banks follow the same procedure in Saudi Arabia as they do elsewhere in the world, so it’s not unusual for employees to receive more than the end of service gratuity, subject to signing of waiver and release agreement. Regional banks typically follow the rules above.