Compensation for unjustified termination
In one sentenceAn amount the party that ended the employment contract without a legitimate reason pays the other party. It is separate from the end-of-service benefit and is calculated under the contract and the Saudi Labor Law.
Simply put
If the business ends the contract without a legitimate reason, or the employee leaves work in the same way, compensation may be due to the harmed party. How it is calculated is in the contract and the Saudi Labor Law and its regulations, so check them for the details.
In the accounts: compensation the business pays is an expense separate from the end-of-service benefit, so do not mix it with the benefit provision. If the matter is disputed and not settled, consider contingent liabilities and disclosure.
Example
A store ended an employee's contract before its term ended without a legitimate reason. The accountant recorded the benefit from its provision, and recorded the agreed compensation in a separate expense account.
Don't confuse it with
End-of-service benefitThe benefit is a right earned for years of service, while compensation is a penalty for ending the contract without a legitimate reason.