Employee Legal Options and Protections in Saudi Arabia Amidst Company Financial Distress

Safeguarding Employee Rights in Saudi Arabia

End of Service Benefits (ESB) in Saudi Arabia represent a mandatory lump-sum payment crucial for employee financial security upon the termination of employment, calculated based on service length and basic salary. However, a challenging scenario arises when employees face the risk of losing these entitlements and unpaid salaries due to companies undergoing liquidation or exhibiting signs of financial distress, even without a formal bankruptcy declaration. The Saudi Labor Law provides robust legal options and protections for employees in such situations, ensuring their rights are safeguarded and offering avenues for pursuing these critical dues despite the employer’s financial instability.

The Kingdom of Saudi Arabia operates under a comprehensive legal framework, the Saudi Labor Law, meticulously designed to regulate employment relationships. Its fundamental purpose is to protect the rights of both employers and employees, thereby playing a pivotal role in fostering the nation’s economic growth and development. This legal regime is widely regarded as relatively employee-friendly, particularly in critical areas such as employment termination, regulation of working hours, and the employment of women, distinguishing it from standard practices in some other jurisdictions.

The foundational pillars of this framework are the “Labour Law” (Royal Decree M/51 of 2005, as amended) and its “Implementing Regulations”. Recent amendments introduced in Q1 2025 signify a continuous effort to strengthen employee rights, enhance employer accountability, and streamline compliance procedures. These legislative updates are anticipated to come into effect 180 days following their publication in the Legal Gazette, expected later in 2024.

This report specifically addresses the critical predicament faced by employees when their salaries remain unpaid and their End-of-Service Benefits (ESB) are withheld by companies exhibiting clear signs of financial distress or impending liquidation, even in the absence of a formal bankruptcy declaration. This challenging scenario necessitates a clear understanding of the legal avenues available to employees to protect their rights and recover their rightful dues.

The Saudi labor law’s inherent employee-friendly nature is a significant aspect of its design. This is directly observable in the various provisions that prioritize worker welfare and ensure fair treatment. The continuous evolution of Saudi labor law, as evidenced by the 2025 amendments, signals a strategic national commitment under Vision 2030 to create a more stable, transparent, and attractive labor market for both local and international talent. The legislative changes are not merely isolated adjustments to individual rights; they are integral components of a larger national economic and social development strategy.

For Vision 2030 to succeed in diversifying the economy and attracting foreign investment, a stable, fair, and efficient labor market is a fundamental prerequisite. By robustly protecting employee rights, especially during periods of corporate financial distress, the government aims to build trust among the workforce and enhance the Kingdom’s appeal as a destination for international businesses and skilled professionals. This sustained governmental focus on maintaining labor market stability and fairness should instill greater confidence in employees pursuing their claims.

II. Understanding End of Service Benefits (ESB) and Unpaid Salaries

A. ESB Calculation and Eligibility

End of Service Benefits (ESB), known in Arabic as مكافأة نهاية الخدمة, are mandatory lump-sum payments that employees receive upon the termination of their employment. These payments, stipulated by Saudi labor law, are intended to acknowledge an employee’s service and provide financial security as they transition out of their job. The calculation of ESB is primarily based on the employee’s length of service and their final basic salary.

The general calculation formula, as outlined in Article 84 of the Labor Law, is structured as follows: For the initial five years of continuous service, the employee is entitled to compensation equivalent to half a month’s wages for each year. For each subsequent year beyond the first five years, the employee is entitled to a full month’s wages. Importantly, employees are also entitled to a pro-rata benefit for any partial year of service. It is crucial to note that ESB is calculated solely on the basic salary and explicitly excludes allowances such as housing, transportation, or bonuses.

Eligibility for ESB depends significantly on the length of service and the reason for termination. In cases where the employer terminates the employment contract for reasons other than disciplinary misconduct, the employee is entitled to full End of service benefit, irrespective of their length of service. However, if an employee resigns, the ESB entitlement is tiered:

• Less than 2 years of service: No ESB entitlement.
• Between 2 and 5 years of service: Entitlement to one-third (1/3) of the total calculated ESB.
• Between 5 and 10 years of service: Entitlement to two-thirds (2/3) of the total calculated ESB.
• More than 10 years of service: Entitlement to the full ESB amount.

Special considerations also apply. Female employees are granted full ESB if they resign within six months of marriage or within three months after childbirth. Employees who complete a fixed-term contract are entitled to full ESB. Crucially, employees who resign under the conditions stipulated in Article 81 of the Labor Law (due to employer violations) retain their full ESB entitlement regardless of their tenure, as the law recognizes the employer’s misconduct as the effective cause of separation.

Conversely, employees dismissed during a probation period are not entitled to ESB, as this period does not count towards the service period for benefits. Similarly, employees dismissed for valid disciplinary reasons or misconduct may forfeit their right to End of service benefits, depending on the severity of the infraction and specific labor regulations. For ease of calculation, the Saudi Ministry of Human Resources and Social Development (MHRSD) provides an official online tool specifically designed for ESB calculation in accordance with Article 84 of the Saudi Labor Law.

The strict rules regarding ESB calculation and timely payment, coupled with penalties for delays, underscore the Saudi government’s proactive stance in safeguarding employee financial security, even in situations where an employer is facing financial distress. The requirement for immediate or rapid payment (within one or two weeks), combined with the threat of legal penalties for delay , signifies a strong legislative intent to prevent employers from withholding funds. This is particularly critical when companies are struggling financially, as it acts as a preemptive measure to secure employee entitlements before the company’s financial health deteriorates further. This legal framework provides a clear and enforceable basis for employees to demand their dues swiftly, enhancing their protection.  

The explicit exclusion of bonuses and allowances from End of service benefit calculations is a noteworthy detail. If an employee’s overall remuneration is significantly boosted by allowances, calculating ESB solely on their basic salary could result in a final payout that is considerably lower than their expectations. This discrepancy can lead to disputes if employees are not fully informed or do not understand this critical distinction from the outset of their employment. This highlights the importance of clear employment contracts that delineate what constitutes “basic salary” for ESB purposes and how other benefits are treated upon termination. This seemingly minor detail can have a substantial financial impact and is a key area for employee awareness and potential contention.

Table 1: End of Service Benefits Calculation Summary

Note: End of service benefit is calculated on basic salary only, excluding allowances and bonuses.

B. Employer Obligations and Timely Payments

Employers are legally required to pay wages to their employees at least once a month and ensure that these payments are made on time. Wages must be disbursed in Saudi Riyals unless a different currency is explicitly agreed upon in the employment contract. End of Service Benefits must be paid immediately upon the termination of the employment contract.

Specifically, if an employee resigns, all their entitlements, including ESB, should be settled within two weeks. If the employer initiates the termination of the contract, all entitlements must be settled within one week. Delayed payments are subject to legal penalties. Employers found to be in violation may face fines for failing to pay salaries on time. In instances of serious or continuous violations, the Ministry of Human Resources and Social Development (MHRSD) holds the authority to suspend or even revoke the employer’s license to operate.

III. Initial Steps and Legal Protections for Employees

A. Internal Resolution and Documentation

Before initiating any formal action, employees are advised to meticulously review their employment contracts. This step is crucial to ensure that their salary, benefits, and other employment terms are clearly stipulated, as the contract will serve as the foundational basis for any subsequent claim, particularly regarding agreed-upon wages and payment terms. Employment contracts must explicitly outline compensation, benefits, termination conditions, employee rights, and working hours. It is also legally mandated that these contracts be in Arabic and signed by both parties.  

Workers should first endeavor to resolve the issue directly with their employer by sending a formal written request for the unpaid wages. While informal communication may occur, a documented written request is highly recommended to establish a clear record of the attempt to resolve the matter amicably. The importance of maintaining detailed records cannot be overstated. Employees should keep copies of their signed employment contracts, all payslips, bank statements that reflect payment (or lack thereof), and any and all communications with the employer, including formal requests, emails, and messages pertaining to delayed payments or termination discussions. This meticulous documentation is crucial for substantiating claims and providing irrefutable proof in any dispute.  

B. Filing a Complaint with the Ministry of Human Resources and Social Development (MHRSD)

If direct communication with the employer fails to yield results, employees can proceed to file a formal complaint with the Ministry of Human Resources and Social Development (MHRSD) through its designated Complaint and Settlement Office. This amicable settlement process is a mandatory first stage that must be exhausted before a case can be escalated to the Labor Court. Complaints are primarily received electronically via the MHRSD portal. The Ministry’s virtual branch further facilitates this by allowing online submission of labor complaints, enhancing accessibility and efficiency.  

A critical aspect for employees is adherence to filing deadlines. A complaint for unpaid wages must be filed within three months from the date the salary was due. For the broader “Friendly Settlement for Labor Disputes” service, the complaint must be submitted within 12 months. This dual timeline introduces a nuance that employees must be acutely aware of, as missing these specific deadlines could jeopardize their claims.

The 3-month deadline specifically for unpaid salaries indicates that wage claims are considered highly urgent and require swift action. This shorter timeframe reflects the immediate financial hardship caused by withheld wages. The broader 12-month period for a “friendly settlement” likely applies to other labor disputes that, while important, may not carry the same immediate financial urgency as unpaid salaries. This distinction underscores the critical importance the law places on timely wage payment and recovery, urging employees to act promptly on salary issues to prevent the potential forfeiture of their rights due to delay.

Upon receiving a complaint, the MHRSD will endeavor to mediate between the employer and the employee to facilitate a resolution. If the parties successfully reach a settlement, this agreement is formally documented and becomes legally enforceable. Should mediation fail to achieve an amicable solution, the case will then be referred to the competent Labor Court within 21 working days from the date of the initial lawsuit filing.  

C. Legal Protections Under Saudi Labor Law

Article 81 of the Saudi Labor Law empowers employees to resign immediately, without serving a notice period, if the employer violates specific contractual or legal obligations. Valid grounds for such a resignation include, but are not limited to: consistent non-payment of wages , being hired under false pretenses or through fraudulent practices , experiencing abuse or assault by the employer or their representative , enduring unsafe working conditions where the employer fails to address serious hazards , being reassigned to fundamentally different work without their consent , or situations where the employer’s conduct effectively forces the employee to resign (constructive dismissal).

Crucially, if an employee successfully proves their claim under Article 81, they receive their End-of-Service Benefits in full, as the law recognizes the employer’s misconduct as the legitimate cause of separation. Article 81 acts as a powerful leverage point for employees, transforming what might appear as a voluntary departure into a legally justified termination that preserves full ESB entitlement. In a financially distressed company, an employer might attempt to coerce employees into “voluntary” resignation to circumvent the obligation of paying full ESB and other termination dues. Article 81 directly counters this tactic by legally reclassifying such a “resignation” as a termination caused by the employer’s misconduct.

This means the employee is not forfeiting their rights but rather exercising a legally protected avenue to leave a harmful or exploitative work environment while retaining their full entitlements. This provides a strong incentive for employers to comply with their fundamental obligations, even when struggling, to avoid triggering Article 81 and the associated full ESB payout, thereby empowering employees to exit deteriorating situations with their financial security largely intact.

The Saudi Labor Law does not explicitly permit unilateral termination of employment without cause, and termination for…source restricted. Article 80 outlines specific, limited grounds under which an employer can terminate a contract without notice or compensation (e.g., gross misconduct, prolonged absenteeism). However, it mandates that employers must support such claims with clear documentation and provide the employee with an opportunity to respond to the allegations before termination is finalized. If an employee is terminated without a valid legal justification, they are entitled to seek compensation, which may include salary for the remainder of a fixed-term contract and severance pay.  

Table 2: Key Documents Required for Labor Claims

IV. Pursuing Claims After Sponsorship Transfer

A. Iqama Transfer Without Employer Consent

In Saudi Arabia, the legal residency status of expatriate workers, known as an Iqama, is traditionally tied to their sponsoring employer. Historically, obtaining the current employer’s consent was often a prerequisite for an Iqama transfer. However, significant reforms under the updated Labor Reform Initiative have altered this requirement. As of March 2021, and further reinforced by 2025 updates, employees no longer require their current employer’s consent for an Iqama transfer in specific, legally defined situations. This change aims to make employment laws more favorable to expatriates and attract global talent.  

An employee can initiate an Iqama transfer without their current employer’s approval under several crucial conditions: expiration of the employment contract , delays in salary payments exceeding three months , the employer failing to renew the employee’s Iqama , or the labor contract not being registered on the Qiwa platform. Additionally, the employee must comply with all Saudi laws and have completed at least one year with their current employer , a well-documented work contract is required , and the new employer must formally submit the employment offer through the Qiwa portal.  

The Qiwa platform is central to the modern employer transfer process. The new employer initiates a “Transfer of Services” request on Qiwa using the employee’s Iqama number. Qiwa automatically notifies the current employer, who then has up to 14 days to respond. The employee must also provide mandatory approval for the transfer through their Qiwa account. The finalization of the transfer, including updating the Iqama status and issuing the new digital work permit, is completed in Absher Business or Muqeem. The entire process of changing employers in Saudi Arabia typically takes between one to four weeks, depending on the responsiveness of both employers and the absence of system errors or violations.  

The ability to transfer sponsorship without employer consent due to unpaid wages serves as a critical pressure point on financially distressed companies. This implies that the Saudi government prioritizes employee welfare and mobility over an employer’s desire to retain staff, even if the company is struggling. Historically, employers could effectively trap expatriate employees by withholding consent for transfers, especially if they owed dues.

The new rule removes this leverage. If an employer fails to pay wages for three consecutive months or more, they automatically lose the ability to block a transfer. This forces financially distressed companies to either fulfill their wage obligations or risk losing their workforce, which could further accelerate their operational decline. This mechanism is a significant protection, ensuring employees are not held captive in non-paying jobs.

B. Claiming Past Dues Post-Transfer

Employees are legally entitled to pursue claims for unpaid salaries and End-of-Service Benefits even after successfully transferring their sponsorship to a new employer. The act of transferring sponsorship does not extinguish an employee’s right to previously accrued dues from their former employer. Article 11 of the Labor Law is particularly relevant here, stating that if an employer transfers all or part of their original business to another natural or corporate person, both the predecessor and the successor are jointly and severally liable for workers’ rights accrued prior to the change, including wages or unrealized ESB.

While this specifically addresses business transfers, it reinforces the broader principle that accrued employee rights remain due regardless of the former employer’s operational changes or the employee’s subsequent employment.

The process for claiming past dues post-transfer generally follows the standard labor dispute resolution steps. It is essential to collect all relevant documentation pertaining to the unpaid wages, ESB calculations, and the previous employment. This includes the employment contract, payslips, bank statements (demonstrating non-payment), and any written communication with the former employer regarding the outstanding dues.

The employee should then initiate the amicable settlement process by filing a formal complaint with the Ministry of Human Resources and Social Development (MHRSD) against the former employer. If the MHRSD’s mediation efforts fail to resolve the dispute amicably, the case will then be referred to the Labor Court for litigation. Once a favorable judgment is obtained from the Labor Court, if the former employer still fails to make the required payments, the employee must then proceed to the Execution Court to enforce the judgment.

While employees can transfer sponsorship due to unpaid wages, the process of claiming those past dues remains a separate legal action through the MHRSD and Labor Courts. This highlights a potential gap in immediate recovery, where mobility is granted, but financial redress still requires navigating the dispute resolution system. The mention of “pending dues or settlements” needing to be cleared before transfer finalization could be misinterpreted by employees as implying that their former employer’s unpaid wages must be settled for the transfer to complete. However, the example of Ahmed explicitly states he transferred due to unpaid wages, indicating the transfer is not contingent on immediate payment of those specific arrears.

Therefore, “pending dues” in this context more likely refers to government-related fees or administrative clearances (e.g., GOSI contributions, government transfer fees). The critical implication is that while the employee gains freedom of movement and employment, the battle for their outstanding financial entitlements from the previous employer is a distinct legal process that must be pursued.

V. Role of the Saudi Labor Courts and Execution Courts

A. Labor Court Process and Jurisdiction

If mediation by the Ministry of Human Resources and Social Development (MHRSD) fails to resolve a labor dispute amicably, the case proceeds to the Labor Court. The Labor Court holds jurisdiction over a wide range of employment-related disputes, including those concerning unpaid salaries, working conditions, contract violations, and other employment issues. Litigation proceedings in the Labor Court typically involve submitting a statement of claim at the clerk’s office, providing evidence and probative documents, attending court hearings, and ultimately, the issuance of a ruling. If either party disagrees with the court’s ruling, they have the right to appeal the decision to a higher court.  

The Saudi Ministry of Justice reports a rapid resolution of labor disputes, with the average duration of labor cases in 2023 being 20 days, and most closed cases requiring only two hearings. This significant reduction in case resolution time reflects a major advancement in judicial efficiency. This efficiency ensures that both employees and employers receive timely justice, reducing prolonged uncertainty and financial strain.

The Ministry of Justice attributes these achievements to key institutional reforms, specifically the establishment of central departments like the Case Preparation Center and the Case Audit Center. These centers have been crucial in expediting legal procedures, ensuring thorough case preparation, and enhancing the overall efficiency of labor courts. By standardizing processes and centralizing judicial functions, the ministry has successfully improved the speed and quality of labor dispute resolution, fostering a more stable and attractive business environment.

B. Saudi Execution Court: Enforcement of Judgments

After a conclusive judgment has been issued by the Labor Court, if the employer still fails to make the required payments, the employee must then proceed to the Execution Court to enforce the ruling. Enforcement applications are submitted through Najiz, the Ministry of Justice’s online portal. Required documents include a certified copy of the judgment or award, proof of its finality and due process, and Arabic translations by an accredited translator.  

Once the Execution Court verifies that the requirements of Article 11 of the Enforcement Law are satisfied, the debtor is notified of the enforcement application and is given five days to voluntarily comply with the judgment or award. If the debtor fails to comply within this five-day period, the Execution Court will take robust steps to enforce the judgment. These measures include the withdrawal of funds directly from the debtor’s account, the seizure of property and assets, public auctions for asset liquidation, and direct payment orders. The court may also impose sanctions on the debtor, such as travel bans and even issue arrest orders for uncooperative debtors who refuse to repay dues.  

Recent trends indicate a significant acceleration in the speed of enforcement proceedings in Saudi Arabia. The introduction of digital case management systems and procedural reforms has substantially reduced processing times. In urgent cases, courts have demonstrated the ability to resolve disputes within days. For example, in a recent case, a fraudulent promissory note’s wrongful enforcement was prevented, with the Execution Court assessing the dispute, holding hearings, and rejecting the claim, returning withdrawn funds within ten days.

This increased efficiency is attributed to enhanced judicial training and specialization, strengthened coordination between the Ministry of Justice and enforcement authorities, and increased use of real-time electronic communication. These developments are positioning Saudi Arabia as a more predictable and significantly faster jurisdiction for enforcement proceedings, enhancing its attractiveness for international businesses and investors.

The Execution Court’s robust powers, including the ability to freeze bank accounts, seize assets, impose travel bans, and issue arrest orders , serve as a powerful deterrent against non-compliance. This comprehensive array of enforcement tools means that a court judgment is not merely a symbolic victory but carries significant weight and practical enforceability. The swift application of these measures can compel even uncooperative employers to settle their obligations, as the consequences of non-compliance can severely impact their business operations and personal freedom. This demonstrates the legal system’s commitment to ensuring that judgments are not just rendered but effectively executed, providing a credible pathway for employees to recover their dues.  

C. Penalties for Employer Non-Compliance

Saudi labor courts have begun to impose statutory fines on employers who fail to pay their employees in a timely manner. Under Article 94 of the Labor Law, if the court finds that the employer has unjustifiably delayed payment of the employee’s wages beyond the due date, it shall order the employer to pay a fine not exceeding double the delayed wages. This measure is intended to reduce delays in the payment of employees’ dues and minimize the influx of lawsuits related to wages.  

Beyond wage-specific penalties, broader fines for labor law violations exist and are subject to proposed changes in 2025. These fines vary based on the organization’s size. Examples of proposed fines include SR10,000 for each non-Saudi worker hired without a work permit, and up to SR3,000 for non-serious violations like failing to grant approved rest periods or increasing work hours without paying overtime.

In more severe cases, the Ministry of Human Resources and Social Development (MHRSD) may suspend or revoke an employer’s license to operate. The Labor Law also provides for fines not exceeding SAR 100,000, closure of the firm for up to 30 days, or permanent closure for serious infringements. These penalties aim to reinforce compliance with fair practices and act as a deterrent.

VI. Priority of Employee Claims During Company Restructuring or Liquidation

A. Saudi Bankruptcy Framework Overview

The introduction of the Saudi Bankruptcy Law in 2018 (Royal Decree No. M/50) marked a significant shift in the Kingdom’s approach to managing financial distress. This law provides a structured and commercially credible framework for businesses to manage insolvency, aiming to preserve economic value and market integrity. Its alignment with global norms, particularly the UNCITRAL Model Law on Cross-Border Insolvency, signals Saudi Arabia’s intention to be a globally integrated and investor-friendly jurisdiction. The Saudi regime has a dual focus: it offers tools for early intervention when business recovery is possible (e.g., Preventive Settlement, Financial Restructuring), and it provides mechanisms for an orderly exit when continuation is no longer viable (Liquidation).  

The framework includes three main procedures:

• Protective Settlement: This procedure is initiated by the debtor to avoid instability before reaching full insolvency, allowing them to propose a plan to creditors.
• Financial Restructuring: This can be applied for by debtors, creditors, or competent government authorities, involving court supervision and the appointment of an officeholder to ratify a restructuring plan.
• Liquidation: This procedure leads to the formal termination of a company, applied for by debtors, creditors, or government authorities, with an officeholder appointed to manage asset distribution and debt settlement. Bankruptcy is now also a valid reason for termination under the 2025 labor law updates.

B. Priority of Employee Claims

A defined path exists for creditors to recover value through structured repayment hierarchies in Saudi Arabia. Secured creditors, employees, and government authorities are generally granted priority in these proceedings. The specific order of priority for asset sale proceeds among creditors is outlined in Article 196 of the Law:  

1. Secured debts.
2. Secured funding.
3. Wages of the debtor workers; equivalent of (30) days salary.
4. Family expenses approved by a legal provision or court order.
5. Expenses necessary for the continuation of the debtor’s activity during the procedure.
6. Previous wages of the debtor workers (beyond the initial 30 days’ equivalent).
7. Unsecured debts.
8. Unsecured fees, subscriptions, taxes, and receivables owed to the government.

The priority given to employee claims, specifically the equivalent of 30 days’ salary, is a critical safety net for workers. This provision ensures that, even in the event of a company’s bankruptcy or liquidation, employees are protected with at least a portion of their recent earnings before many other types of creditors. This legal prioritization mitigates the immediate financial impact of an employer’s insolvency on employees, providing a crucial buffer during a period of uncertainty. It reflects a deliberate policy choice to safeguard the most vulnerable stakeholders in a distressed business, emphasizing social welfare alongside economic stability.

Employees whose claims (debts) are not included in a Protective Settlement proposal may file with the court to request their inclusion within 14 days of the procedure commencement. In Financial Restructuring and Liquidation procedures, employees must file their claims to the appointed officeholder within the specified period, attaching supporting documentation. For Administrative Liquidation procedures, claims are filed with the Bankruptcy Commission.  

VII. Recourse Against Employers Delaying Formal Liquidation

A. Recognizing Signs of Gradual Dismantling

A challenging scenario for employees arises when an employer, facing severe financial distress, gradually dismantles operations or ceases payments without formally declaring bankruptcy or initiating liquidation proceedings. This deliberate delay can be a tactic to avoid legal obligations, including the payment of unpaid salaries and End-of-Service Benefits. Signs of such gradual dismantling may include prolonged and consistent delays in salary payments, reduction in workforce without formal termination processes, cessation of business operations without official announcements, dismantling of physical assets, or a general lack of transparent communication regarding the company’s future.

B. Legal Recourse and Proactive Measures

Even if a company avoids formal liquidation, the legal system provides recourse for employees to pursue their claims. The liability for unpaid wages and ESB remains with the employer, regardless of their operational status or formal declaration of bankruptcy. Employees should proactively initiate the amicable settlement process through the Ministry of Human Resources and Social Development (MHRSD) as soon as non-payment or signs of distress become apparent. This is particularly important given the 3-month deadline for filing wage claims.  

The legal system is designed to address non-compliance even in the absence of formal bankruptcy proceedings. The MHRSD plays a primary role as an enforcement body, capable of intervening and imposing penalties on employers who violate labor regulations, including fines for delayed payments and even the suspension or revocation of business licenses.

This means that employers cannot indefinitely evade their obligations by simply delaying formal liquidation. The MHRSD’s role as a primary enforcement body is significant in preventing prolonged evasion of employee dues. Its ability to impose fines and suspend or revoke licenses provides a direct and immediate consequence for non-compliant employers, regardless of their official bankruptcy status. This mechanism is crucial for employees, as it offers a pathway for redress even when a company is attempting to subtly wind down its operations without formal legal proceedings.

Furthermore, the 2025 labor law updates now explicitly recognize bankruptcy as a valid reason for termination. This legislative clarity implies that an employer’s financial distress, even if not formally declared as bankruptcy, can be a legitimate ground for employees to pursue their rights, and delaying a formal declaration will not shield the employer from their obligations. The legal framework is structured to hold employers accountable for their financial obligations to employees, irrespective of their strategic maneuvers to avoid formal insolvency procedures.  

VIII. Conclusion and Recommendations

The Saudi Labor Law provides a robust framework for employees to claim unpaid salaries and End-of-Service Benefits, even when their employer faces financial distress or is showing signs of liquidation. The system is designed to be employee-friendly, with clear calculation methodologies for ESB, strict timelines for payments, and significant penalties for non-compliance. The recent amendments to the Labor Law and the enhanced efficiency of the Labor and Execution Courts further strengthen these protections, aligning with Saudi Arabia’s Vision 2030 goals of fostering a stable and attractive labor market.

A critical aspect of employee protection is the ability to transfer sponsorship without employer consent in cases of prolonged unpaid wages, which acts as a powerful mechanism to prevent employees from being held captive in non-paying jobs. Furthermore, the Saudi Bankruptcy Law prioritizes employee claims, particularly 30 days’ worth of wages, ensuring a vital safety net during insolvency proceedings. Even if an employer attempts to delay or avoid formal liquidation, the MHRSD and the courts retain the authority to enforce employee rights and impose penalties.

For employees navigating such challenging circumstances, the following recommendations are paramount:

• Meticulous Documentation: Maintain comprehensive records of employment contracts, payslips, bank statements, and all communications related to wages and benefits. This is the foundation of any successful claim.
• Prompt Action: Initiate the amicable settlement process with the Ministry of Human Resources and Social Development (MHRSD) as soon as salary delays or non-payment occur, adhering strictly to the 3-month deadline for wage claims.
• Understand Your Rights: Familiarize oneself with Article 81 of the Labor Law, which provides a pathway to resign with full ESB entitlement in cases of employer violations.
• Leverage Digital Platforms: Utilize the Qiwa platform for employer transfer requests if conditions are met, and the Najiz portal for submitting enforcement applications once a court judgment is obtained.
• Seek Legal Counsel: Given the complexities of labor and insolvency laws, consulting with a legal expert specializing in Saudi labor law is highly advisable to ensure all procedural requirements are met and to maximize the chances of a successful recovery of dues.