The Kingdom of Saudi Arabia has enacted a major revision of its labour law effective February 2025, aiming to modernise employment contracts, strengthen worker protections, and support its national Vision 2030 economic transformation.

The updates, approved by royal decree and cabinet resolution in August 2024, mark the most comprehensive overhaul of labour regulations in the country in two decades.

Under the new regime, all employment contracts for non-Saudi nationals must be in writing and fixed-term.

If a contract omits a term, it will default to one year from the employee’s start date, automatically renewing under the same conditions if employment continues beyond that period.

This change is intended to bring greater clarity and stability for both employers and expatriate workers.

Work arrangements now include clearly defined categories—such as fixed-term, part-time, seasonal, or remote work—with separate legal rules governing renewal, termination, compensation and benefits.

Workplace flexibility has thereby increased, reflecting evolving labour dynamics and the growth of digital, remote, and part-time employment.

Probationary periods for new hires have been extended from 90 to 180 days, giving employers more time to assess fit and performance, while workers benefit from more transparency about evaluation criteria before long-term employment is secured.

Employers are now also required to provide lawful housing or a housing allowance and transportation support or allowance.

This applies across the board, enhancing standards of employment conditions.

The reforms further update notice and termination rules.

Resignation under fixed-term contracts now requires written notice and will be deemed accepted if the employer fails to respond within thirty days.

For indefinite contracts, a thirty-day notice by the employee or sixty-day notice by the employer is now standard.

Termination without just cause may lead to increased indemnities based on tenure and legal category.

Employee rights have also been strengthened.

New leave entitlements include extended maternity leave (twelve weeks instead of ten), paid bereavement leave for the death of a sibling, and clearer rules on overtime compensation—allowing either paid overtime or compensatory time off.

The amendments enshrine protection against discrimination, mandating equal treatment regardless of race, gender, disability, marital status or other status.

For employers, especially foreign-owned or multinational firms operating in Saudi Arabia, the reforms introduce new compliance obligations.

Contracts must be in Arabic, HR records must be localized in the Kingdom, and foreign companies may need to contribute to the national unemployment-insurance scheme for eligible expatriates under certain contract conditions.

Staffing agencies and labour-supply firms face stricter licensing requirements, with penalties for non-compliance.

Taken together, the reforms reflect a strategic pivot under Vision 2030 — balancing efforts to protect workers and raise standards with greater labour-market flexibility and contractual clarity.

As the new legal structure is implemented, businesses must update HR policies and employers need to ensure full compliance.

For many workers — Saudi and expatriate alike — the changes promise clearer, fairer and more secure employment terms in a rapidly transforming economy.

Whether these reforms will live up to their promise will depend on consistent enforcement, transparent corporate practices and the ongoing ability of the labour market to absorb the structural shifts written into law.

The new era in Saudi employment regulation has begun in earnest.