Termination of Employment Relationship is a crucial topic for both employers and employees, as it marks the end of a professional journey and the start of a new chapter. The knowledge of the termination of an employment relationship, its causes and methods assists in safeguarding the rights of both involved parties and also makes sure the termination process is done in a fair and legal manner. Be it because of performance problems, the restructuring of the business or because of mutual understanding, being aware of the correct steps and ramifications can save the time of confrontations in the future and save the image of a business.
What does termination mean?
Termination of Employment Relationship means officially ending the relationship between an employer and an employee. It may occur due to a number of reasons including termination of a fixed term contract, termination, cancellation or agreement between two parties. In the majority of the cases, the employer or the employee may terminate the employment in case there is legal reason.
In case of indefinite contracts, an employee can resign by giving a notice without explaining the cause whereas the employer has to have a reason which is valid and substantial enough to break the contract. Fixed-term contract on the other hand normally terminates automatically upon completion of the agreed period or work.
The employment relationship may be terminated on the spot without any prior warning, however, only in very severe circumstances, e.g. a significant violation of the contract. The two parties must practice equitable processes and the employer must notify and seek the advice of the employee before making final decisions.
What are the legal grounds for terminating an employee’s contract?
The act of termination of an employees contract is a grave legal process that should be proved on reasons that are well established and documented. To ensure the safety of both the employer and the employee, the employers must ensure that each and every termination is carried out in fair procedures and in line with the laws of employment.
- Performance Issues
- Misconduct
- Redundancy or Restructuring
- Violation of Employment Contract
- Inability to Perform Job Duties
- Legal or Regulatory Violations
How should employers properly handle the termination process?
Employers must manage Termination of Employment Relationship fairly, transparently, and in line with labor laws. It must begin with a legal cause that has been well documented and a meeting in which the employee is able to act. Written notification has to be very specific of the reason and date of termination.
The salary, notice payments, and any other unused leaves should also be paid on time. The use of legal and internal processes can avoid conflicts and make the process of terminating compliantly without any complications.
What are employee rights after termination?
Even after the expiry of a contract involving an employee, he or she has certain legal rights that safeguard his or her income and guarantee reasonable treatment. Such rights are based on the local labor laws but typically comprise the following:
- Final Salary Payment
- Notice Period
- End-of-Service Benefits
- Unemployment or Compensation Rights
- Health Insurance and Benefits
- Protection Against Unlawful Dismissal
How can HR ensure a smooth termination process?
The process of termination must be smooth to ensure there is trust, compliance, and professionalism in the issuance of the employee. HR contributes significantly to a decent and effective transition. The key steps that the HR should take to make the process seamless are the following:
- Create a clear and transparent termination policy
- Notify all relevant departments and stakeholders
- Conduct a structured exit interview
- Plan for knowledge transfer and task handover
- Retrieve all company property
- Secure access to data and company systems
- Settle all financial obligations promptly
- Communicate the departure professionally to the team
- Gather feedback through exit surveys
- Use HR software like NotchHR to automate and monitor the offboarding process
By following these steps, HR can reduce legal risks, maintain positive relationships with departing employees, and use their feedback to improve retention and workplace culture.
What is the difference between voluntary and involuntary termination?
The key difference between voluntary and involuntary Termination of Employment Relationship lies in who initiates the end of the employment relationship.
- Voluntary Termination- It takes place when an employee voluntarily quits the company. This can occur owing to individual factors, improved employment, transfer or retirement.
- Involuntary Termination– This occurs when the employer terminates the employment. It can be the case of poor work performance, policy infraction, misconduct, or the restructuring and layoffs of the company.
Concisely, voluntary termination is whereby the employee decides to retire and involuntary termination is where the employer decides who to retire.
How is end-of-service gratuity calculated after termination?
In Saudi Arabia, end-of-service gratuity is a mandatory payment employers must provide when an employee’s service ends, whether due to resignation or termination. It’s calculated based on the employee’s last basic salary and total years of service according to Articles 85 and 87 of the Saudi Labor Law.
Here’s how it works after termination:
- Less than 1 year of service: No gratuity is paid.
- Between 1 and 5 years of service: Half a month’s salary for each year worked.
- More than 5 years of service: One month’s salary for each additional year.
If the termination occurs due to reasons beyond the employee’s control (as outlined in Article 87), they are entitled to full gratuity, regardless of their service duration.
This calculation ensures fair compensation for employees based on their length of service and final wage at the time of termination.
Termination of employment relationship through OST
Managing the end of an employment relationship can be complex, especially when compliance and documentation are involved. With OST, you can simplify the entire termination process through a secure, government-approved platform designed to protect both employers and employees.
From submitting termination requests to finalizing settlements in line with Saudi labor regulations, OST ensures every step is handled transparently and efficiently.
Take control of your HR processes today — streamline employment termination through OST.sa and ensure full compliance with Saudi labor law.
Ensuring a smooth and compliant termination process
Ending an employment relationship requires careful handling to maintain fairness, protect company interests, and comply with labor laws. A structured process helps prevent disputes and ensures a positive offboarding experience for both parties.
Employers should clearly document every step, provide notice in accordance with legal requirements, and process final settlements accurately. Maintaining transparency and professionalism throughout reflects the organization’s integrity and supports future employer branding.
