Coronavirus in Saudi Arabia: When can a company cut employee salary or end contract?

Saudi Arabia requires private companies to fulfill a set of requirements before it can reduce an employee’s salary or terminate their contract amid the coronavirus crisis.

The Ministry of Labor and Social Development announced on April 30 that it will allow private companies in the Kingdom to reduce the salary of their employees in order to mitigate the economic and financial impact of the coronavirus pandemic.

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However, the company must not reduce an employee’s salary by more than 40 percent, and the reduction in salary must correspond to a reduction in working hours.

The company can reduce salaries for a period no longer than six months, after which it is obligated to return to paying its employees’ salaries in full.

The employee has no right to object to the salary reduction so long as it doesn’t exceed 40 percent.

The company has the right to determine when an employee can have his/her annual leave based on the working conditions.

The company can give all of its employees their annual leave during the same time period or allow them to take annual leave alternately.

Salaries during annual leave must be paid at the original rate before any reduction.

Employees can take unpaid leave if the company approves it.

The company is not allowed to terminate employment contracts unless it meets the necessary conditions to declare force majeure.

The conditions are: Waiting for a period of six months after implementing aforementioned actions and the situation still remains the same, exhausting all the allowed measures of reducing salaries and giving people annual leave, and proving the company has suffered losses due to the situation.

Companies which choose to reduce its employees’ salaries can still benefit from government subsidies related to coronavirus.

The ministry later on Thursday added a provision to the law stating that companies that don’t abide by the regulations will be fined 10,000 riyals ($2,660) which can increase depending on the number of cases and employees.

The provision was added after some companies terminated employment contracts in an “unlawful manner.”