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A Severance Agreement spells out the final terms when an employer and employee part ways in Saudi Arabia. It's a binding contract that details the compensation package, benefits, and conditions that come with ending the employment relationship - typically including final salary payments, end-of-service benefits, and any additional perks.

Under Saudi labor law, these agreements often cover important elements like confidentiality obligations, non-compete clauses, and the return of company property. They protect both parties by clearly stating their rights and responsibilities, preventing future disputes, and ensuring compliance with the Kingdom's strict employment regulations. Most Saudi companies use these agreements for management-level positions or during major restructuring.

Use a Severance Agreement any time you're ending an employment relationship in Saudi Arabia, especially for senior positions or during major organizational changes. It's particularly important when dealing with sensitive company information, high-value compensation packages, or complex benefit arrangements that need clear documentation.

The agreement becomes essential when handling delicate situations like performance-based terminations, restructuring, or voluntary resignations of key employees. Saudi labor laws require careful handling of end-of-service benefits and final settlements - having this formal agreement helps avoid misunderstandings, protects confidential information, and creates a clear record of the separation terms that complies with local regulations.

• Severance Pay Agreement: Focuses specifically on financial compensation terms, including base severance pay, end-of-service benefits, and bonus calculations according to Saudi labor law. Commonly used for standard employee departures.
• Layoff Agreement: More comprehensive document used during workforce reductions or restructuring, covering group termination benefits, extended healthcare coverage, and outplacement services. Often includes special provisions for rehire eligibility and mass communication guidelines.

• Employers (Companies): Saudi organizations ranging from large corporations to SMEs use these agreements to formalize employee departures and protect business interests
• HR Directors: Lead the drafting process and ensure compliance with Saudi labor laws while managing the separation process
• Legal Counsel: Review and customize Severance Agreements to meet specific organizational needs and regulatory requirements
• Departing Employees: Must understand and agree to terms, including final compensation, confidentiality obligations, and post-employment restrictions
• Ministry of Human Resources: Oversees compliance with Saudi labor regulations and may review agreements during disputes

• Employee Details: Gather complete employment history, position, salary, and benefits information from HR records
• Final Payment Calculation: Calculate end-of-service benefits, unused leave, and any additional compensation per Saudi labor law
• Company Assets: List all company property to be returned, including devices, access cards, and confidential materials
• Post-Employment Terms: Define non-compete restrictions, confidentiality requirements, and future reference arrangements
• Document Generation: Use our platform to create a legally-compliant Severance Agreement that includes all mandatory elements under Saudi law
• Review Process: Check alignment with company policies and ensure clear Arabic/English versions if bilingual agreement needed

• Identification Section: Full names, contact details, and employment history of both employer and employee
• Separation Terms: Clear statement of employment end date and reason for separation under Saudi labor law
• Financial Compensation: Detailed breakdown of final salary, end-of-service benefits, and any additional payments
• Confidentiality Clause: Specific provisions protecting company secrets and intellectual property
• Non-Compete Terms: Geographic and time restrictions that comply with Saudi competition regulations
• Release of Claims: Mutual release from future legal claims, written in compliance with local laws
• Governing Law: Express statement that Saudi labor law governs the agreement
• Authentication: Signature blocks for all parties, with space for official company stamp

A Severance Agreement differs significantly from a Business Acquisition Agreement in Saudi Arabia, though both involve significant financial transactions and organizational changes. While they may sometimes overlap during company restructuring, their core purposes and requirements are distinct.

• Primary Purpose: Severance Agreements focus on ending individual employment relationships and settling final benefits, while Business Acquisition Agreements deal with the complete transfer of business ownership or assets
• Scope of Coverage: Severance Agreements typically cover compensation, benefits, and post-employment obligations for specific employees. Business Acquisition Agreements encompass entire business operations, including assets, liabilities, and employee transfers
• Regulatory Framework: Severance Agreements must comply with Saudi labor laws and employee protection regulations. Business Acquisition Agreements fall under commercial law and require additional regulatory approvals
• Timeline and Duration: Severance Agreements usually have immediate effect with specific post-employment terms, while Business Acquisition Agreements often involve longer transition periods and ongoing obligations