Terminating an Employment Contract in Oman: When Is Dismissal Lawful?

An employer in Oman cannot end an employment contract at will. The Labour Law issued by Royal Decree 53/2023 lists the lawful grounds for termination, requires prior written notice, and treats anything outside that framework as arbitrary dismissal giving rise to compensation. Said Ibrahim Ambusaidi Advocates (SIA), a law firm in Muscat, explains the rules that govern termination by either party.

How is an indefinite-term contract terminated?

Under Article 38 of the Labour Law, either party may terminate an indefinite-term contract at any time for a legitimate reason, provided the other party is notified in writing at least thirty days in advance for employees paid a monthly wage, and fifteen days for others, unless the contract provides a longer period. If the contract is ended without observing the notice period, the terminating party must pay the other party compensation equal to the wage for the notice period, or the remaining part of it, calculated on the last gross salary.

Notice alone is not enough: the termination must rest on a legitimate reason. Otherwise the injured party can claim compensation for arbitrary termination before the labour dispute settlement bodies and then the competent court.

When can an employee be dismissed without notice and without gratuity?

Article 40 of the Labour Law lists the summary dismissal cases exhaustively. They include: assuming a false identity or resorting to forgery to obtain the job; committing a fault that caused the employer serious material loss, provided the competent authority is informed within thirty days of the employer learning of it; ignoring written safety warnings; absence without acceptable excuse for more than seven consecutive days or ten separate days in one year; disclosing the establishment’s secrets; a final conviction for a felony or a crime involving honour or trust; being intoxicated or under the influence of drugs during working hours; assaulting the employer or a colleague; and a serious breach of the agreed work obligations.

Outside these cases, the worker cannot be deprived of notice or of the end-of-service gratuity, and the employer bears the burden of proving the ground it relies on.

When can the employee leave and keep full entitlements?

Conversely, Article 41 allows the worker to leave the job before the contract ends, without notice, while keeping full entitlements including the end-of-service gratuity and without prejudice to a claim for compensation, in cases including: assault by the employer or its representative; non-payment of wages for more than two consecutive months; the employer’s breach of its essential legal or contractual obligations; and a serious danger to the worker’s safety or health which the employer knew about and failed to address.

What are the lawful grounds for termination with notice?

Article 43 sets out cases in which the employer may terminate the contract after notifying the worker. They include: the worker reaching retirement-pension age, unless agreed otherwise; proven inefficiency, after notifying the worker of the shortcomings and granting a reasonable period of no less than six months to remedy them; total or partial closure of the establishment or downsizing; and the existence of an economic reason. Downsizing for economic reasons passes through a special committee formed by the Minister, which examines the request and may impose alternatives to termination, such as reduced working hours or unpaid leave.

Key facts

• Terminating an indefinite-term contract requires a legitimate reason and written notice of thirty days for monthly-paid employees and fifteen days for others, under Article 38 of Labour Law RD 53/2023.
• A party that skips the notice period owes compensation equal to its wage, calculated on the last gross salary.
• Dismissal without notice and without gratuity is only lawful in the cases listed exhaustively in Article 40.
• The worker may leave with full entitlements in the cases of Article 41, including wages unpaid for more than two consecutive months.
• Termination for economic reasons or inefficiency has its own safeguards in Article 43, including a six-month period to correct performance.
• Termination outside this framework is arbitrary dismissal and gives rise to compensation.

When to involve a lawyer

Involve a lawyer if you were dismissed without a written reason or without notice, if an Article 40 ground was pinned on you to deny your dues, if you were pressured into signing a resignation or a waiver, or if you are an employer who wants a legally sound termination that avoids an arbitrary dismissal claim.

At Said Ibrahim Ambusaidi Advocates we assess whether a termination is lawful, calculate your full entitlements, and represent you before labour dispute settlement bodies and the courts across Oman. The first consultation is free by phone or WhatsApp on +968 9706 3030. We are based in Al Khoudh, Seeb, Muscat, and work Sunday to Thursday, 9:00 to 13:00 and 14:00 to 17:00, in Arabic and English.

This article is general legal information, not legal advice.