Document background
The Severance Pay Agreement is a crucial document used in Saudi Arabia when formalizing the termination of employment relationships and establishing clear terms for final settlements. This document becomes necessary when an employment relationship is ending, whether through mutual agreement, retirement, or unilateral termination, and must strictly comply with Saudi Labor Law requirements and Islamic Shariah principles. The agreement typically includes detailed calculations of end-of-service benefits, treatment of unused leave, bonus considerations, and other entitlements as prescribed by Saudi law. It serves to protect both employer and employee interests by clearly documenting all financial obligations, release of claims, and ongoing commitments, while ensuring that the settlement process adheres to local regulatory requirements, including the Wage Protection System (WPS) and Social Insurance Law provisions.
