End-of-Service Benefits in Saudi Arabia: Calculation Guide

Saudi End-of-Service Benefits: Calculation Guide

Understanding Saudi end-of-service benefits is important before you resign, reach the end of a contract or receive a termination notice. The amount is not simply a fixed percentage of salary. Instead, the calculation can depend on your last applicable wage, length of service, reason for leaving and any statutory exception that applies.

This guide explains end-of-service benefits in Saudi Arabia in practical terms. Saudi Labor Law also distinguishes the end-of-service award from other amounts in a final settlement. Therefore, unpaid salary, unused annual leave, notice compensation and other contractual dues should normally be checked separately. This guide explains the statutory formula, salary basis, resignation rules, termination situations, partial years and practical examples. Because employment law can change, always compare the calculation with current Ministry of Human Resources and Social Development guidance, Qiwa records and your employment documents.

What Are Saudi End-of-Service Benefits?

End-of-service benefit, often shortened to EOSB, is a statutory employment benefit that may become payable when an eligible employment relationship ends. Under the general Saudi Labor Law framework, the award is linked to the employee's service period and last applicable wage.

However, EOSB is only one part of a possible final settlement. It should not automatically be combined with monthly salary, unpaid wages, unused annual leave, overtime, expenses or other contractual payments.

Who Qualifies for Saudi End-of-Service Benefits?

Saudi and expatriate employees working under employment relationships covered by the Saudi Labor Law may qualify. Relevant situations include employer termination, natural expiry of a fixed-term contract, resignation and other legally recognized reasons for ending employment.

Entitlement is not identical in every case. The applicable legislation, contract, service history and reason for separation must be checked. Certain worker categories can also be governed by separate regulations rather than the general private-sector rules.

How Are Saudi End-of-Service Benefits Calculated?

Article 84 of the Saudi Labor Law provides the core formula. When the employment relationship ends, the full statutory award is calculated using half a month's wage for each year of the first five years and one month's wage for each year after the first five. The employee's last wage is used as the calculation basis. Fractions of a year are calculated proportionately.

For example, an employee completing eight years of qualifying service would first calculate five years at the half-month rate. The remaining three years would then be calculated at one month's wage per year.

Salary Basis for Saudi End-of-Service Benefits

For Saudi end-of-service benefits, a common mistake is to assume that Saudi EOSB must always be based only on basic salary. Article 84 refers to the employee's last wage. Under the Labor Law definitions, the term "wage" means the actual wage, which is broader than the basic wage.

The actual wage can include the basic wage and other due increments connected to the employment relationship. Depending on how they are documented, this can include contractual allowances, commissions, qualifying bonuses and certain other benefits.

However, Article 86 allows the employer and employee to agree that all or some commissions, sales percentages and similar variable wage elements that naturally increase or decrease will not be included in the wage used for EOSB.

Saudi EOSB Salary Component Example

Saudi End-of-Service Benefits: 2-Year Example

This is the full Article 84 calculation before any resignation adjustment. If the employee resigned after completing two continuous years, the Article 85 resignation rule would need to be applied.

Saudi End-of-Service Benefits: 5-Year Example

Therefore, the theoretical full EOSB is SAR 25,000. Again, resignation may reduce the payable amount unless a statutory full-award exception applies.

Saudi End-of-Service Benefits: 8-Year Example

Saudi End-of-Service Benefits: 12-Year Example

Saudi End-of-Service Benefits When an Employee Resigns

Article 85 changes the amount payable when the employment relationship ends because of the employee's resignation. First calculate the full Article 84 benefit. Next, apply the resignation proportion.

Saudi End-of-Service Benefits After Resignation: Example

Saudi End-of-Service Benefits When the Employer Terminates the Contract

Employer termination is not treated as an employee resignation. Therefore, Article 85's resignation reduction should not simply be applied to every employer-initiated termination.

Nevertheless, the reason for dismissal matters. Article 80 identifies specific serious circumstances in which an employer may terminate the contract without award, notice or compensation, provided the legal requirements are satisfied and the employee is given an opportunity to state objections.

Article 80 and Serious Misconduct

Article 80 includes specified cases such as certain assaults, serious failure to perform essential contractual obligations after the required warning, proven dishonesty, deliberate material loss, job-related forgery, specified unauthorized absence and disclosure of protected business secrets.

Because Article 80 is fact-sensitive, neither an employee nor an employer should assume that an allegation automatically removes EOSB entitlement.

Fixed-Term Contracts and Saudi End-of-Service Benefits

Natural expiry of a fixed-term contract is different from resignation. Article 74 recognizes expiry of the agreed term as a way an employment contract may end, unless the contract has been renewed in accordance with the law.

If the contract naturally ends, the employee's EOSB should be reviewed under the applicable end-of-service rules. Other final-settlement amounts, including unpaid salary and unused leave, should then be checked separately.

Importantly, HRSD guidance also indicates that choosing not to renew a contract is not automatically the same as resignation. Contract notice provisions should still be reviewed.

Saudi End-of-Service Benefits for Indefinite Contracts

The same Article 84 EOSB calculation framework can apply when an indefinite employment relationship ends. However, the reason for separation remains important.

Notice requirements and any compensation for failure to comply with notice are separate from EOSB. Employees should therefore avoid combining notice compensation with the statutory end-of-service award.

Partial-Year Saudi End-of-Service Benefits

For Saudi end-of-service benefits, article 84 specifically provides proportional entitlement for fractions of a year. Therefore, an employee does not necessarily need to complete another full year before the additional period has value.

The same proportional principle can be applied when verified service records show periods such as 3 years 6 months or 10 years 8 months. For additional days, use the employee's exact recorded dates and the calculation method applied under current law and company records rather than inventing a separate daily formula.

Does Unpaid Leave Affect Saudi End-of-Service Benefits?

Unpaid leave needs careful treatment. The amended Labor Law definition of continuous service recognizes certain unpaid absences where the total does not exceed twenty intermittent days during a work year.

Separately, Article 116 states that agreed unpaid leave exceeding twenty days causes the employment contract to be considered suspended for the excess period unless the parties agree otherwise. Consequently, employees should review the leave agreement and HR record before deciding whether a period counts toward service.

Unauthorized Absence

Unauthorized absence should not be treated in the same way as approved leave. In serious cases that meet Article 80's statutory thresholds and procedures, absence may even become a lawful termination ground.

Maternity and Other Statutory Leave

Statutory leave should not automatically be treated as unauthorized absence. Current Saudi Labor Law provides specific protected leave rights, including maternity leave. Therefore, employees should distinguish statutory leave from voluntary unpaid absence when checking continuous service.

Final Settlement vs Saudi End-of-Service Benefits

For Saudi end-of-service benefits, eOSB is not the same as the employee's total final payment. A final settlement may contain several separate items.

Article 88 also addresses settlement timing. Generally, when employment ends the employer must settle the worker's entitlements within a maximum of one week. If the employee is the party who ended the contract, the period may extend to a maximum of two weeks.

Unused Annual Leave and Saudi End-of-Service Benefits

Article 111 provides for payment for accrued leave days when an employee leaves work without using them. This amount is separate from the EOSB formula.

Check your leave balance, HR attendance system, employment contract and the current Labor Law. Employees should also make sure that approved leave already taken has not been incorrectly shown as outstanding.

Notice Pay vs Saudi End-of-Service Benefits

No. Notice compensation and EOSB are separate legal concepts. If a party fails to observe a required notice period for an indefinite-term contract, compensation may arise under the applicable notice provisions.

Therefore, a final settlement may show a notice-related amount on one line and EOSB on another.

Bonuses, Commissions and Saudi End-of-Service Benefits

The answer depends on the nature of the payment. Fixed or recurring compensation that forms part of the legally defined actual wage can be treated differently from a purely discretionary payment.

Commissions and percentages can form part of actual wage. However, Article 86 allows an agreement excluding all or some commissions, sales percentages and similar inherently variable components from the EOSB wage basis.

Employees should therefore review their contract, company regulations and payment history rather than relying only on the label used on a payslip.

Service Breaks and Saudi End-of-Service Benefits

EOSB depends heavily on recognized service duration. A genuine break between two separate employment relationships can therefore affect the calculation.

Rejoining the same company does not automatically prove that an earlier period must be combined with later service. On the other hand, the law's definition of continuous service can recognize service with the same employer or its legal successor. Keep documents showing how the relationship was ended and restarted.

Changing Employers and Saudi End-of-Service Benefits

EOSB normally relates to the employment relationship that is ending. A transfer to another employer should therefore be reviewed through the contract termination record, Qiwa status and employer documentation.

Do not assume that prior service automatically transfers to the new employer. If the transaction involves a legal successor, restructuring or another special arrangement, verify how continuity is legally recorded.

Company Sale or Ownership Change

A change in ownership does not automatically mean employees should assume that their service has restarted from zero. Because continuous service can include service with an employer's legal successor, employees should verify the legal structure of the transaction and their updated employment records.

Death, Disability and Other Special Circumstances

Saudi Labor Law recognizes death of the worker or medically established inability to perform the work as circumstances that may end an employment contract. The resulting statutory and contractual entitlements should then be settled under the applicable rules.

Article 87 also provides full EOSB despite the normal resignation reductions when the worker leaves because of force majeure beyond their control.

Special Circumstances for Female Employees

Article 87 provides a specific full-award exception where a female employee terminates the contract within six months from the date of her marriage contract or within three months from the date of giving birth.

Because these conditions are specific, employees should check the current wording and supporting documentation before relying on the exception.

Saudi End-of-Service Benefits Calculator: Information You Need

You do not need to rely blindly on an online calculator. A manual calculation becomes much easier once the correct inputs have been confirmed.

• Employment start date
• Last working date
• Total qualifying service duration
• Contract type
• Reason for leaving
• Last applicable wage
• Relevant contractual allowances
• Commission or bonus treatment
• Unpaid leave or suspension periods
• Any previous EOSB payment or settled service period

Manual EOSB Worksheet

1. Confirm Service Period
   Compare your joining date and last working date with the employment contract, Qiwa and HR records.
2. Confirm Reason for Leaving
   Identify whether the employment ended by resignation, contract expiry, employer termination or another legal reason.
3. Identify the Applicable Wage
   Review basic wage, contractual allowances and qualifying variable elements under the Labor Law definition of wage.
4. Calculate the Full Statutory Benefit
   Apply half a month's wage per year for the first five years and one month's wage per later year.
5. Apply Any Resignation Rule
   If the separation is legally treated as resignation, apply the Article 85 proportion after calculating the full benefit.
6. Add Other Final-Settlement Items Separately
   Review unpaid salary, accrued annual leave, notice compensation and any other valid dues.
7. Compare With Employer Calculation
   Request a written breakdown and compare each line with your own records.

Sample Calculation Table

The sample numbers above are educational examples only. Actual entitlement depends on the employee's verified records and applicable law.

Common Saudi End-of-Service Benefits Calculation Mistakes

• Using basic salary automatically without checking the legal wage definition.
• Ignoring contractual allowances that may form part of actual wage.
• Ignoring partial years of service.
• Applying resignation reductions to employer termination.
• Using an outdated Saudi gratuity formula.
• Confusing contract expiry with resignation.
• Forgetting unused annual leave and other final-settlement amounts.
• Using an incorrect joining or last-working date.
• Subtracting unpaid leave without checking whether the contract was suspended.
• Accepting undocumented deductions.

How to Verify Saudi End-of-Service Benefits

1. Confirm the employment start date.
2. Confirm the last working date.
3. Check the contract type.
4. Confirm the recorded reason for separation.
5. Check the wage used for EOSB.
6. Recalculate the service period.
7. Apply the Article 84 formula.
8. Apply the Article 85 resignation proportion only if relevant.
9. Verify unused annual leave.
10. Check unpaid salary or allowances.
11. Review every deduction.
12. Compare the final total.

Ask HR for a written final-settlement breakdown. A clear statement should make it easier to identify whether the disagreement relates to wage, service length, resignation treatment, leave or another amount.

If Your Saudi End-of-Service Benefits Calculation Looks Wrong

1. Review the employment contract and amendments.
2. Check your employment information in Qiwa.
3. Ask HR for the EOSB formula and written settlement breakdown.
4. Compare the calculation with current Saudi Labor Law.
5. Keep payslips, bank records and leave records.
6. Raise the discrepancy formally with the employer.
7. Use official Saudi labor-dispute channels where appropriate.
8. Seek qualified professional advice where the facts are complex.

A documented review is usually more useful than immediately escalating a disagreement without first identifying the exact calculation difference.

Documents Employees Should Keep

• Employment contract
• Qiwa contract and employment record
• Payslips
• Bank salary records
• Joining or appointment letter
• Resignation letter
• Termination or non-renewal notice
• Leave records
• Allowance records
• Commission and bonus records
• Final settlement statement
• Service certificate

Saudi End-of-Service Benefits for Expats

Expatriate employees covered by Saudi employment law may qualify for EOSB in the same general employment-law framework. Nationality alone does not determine the amount.

Expats should pay particular attention to their Qiwa contract, salary records, final settlement, termination record and relevant exit or transfer documentation. Keep copies before access to an employer system ends.

Saudi Employees

Saudi employees may also qualify for EOSB under the applicable Labor Law. However, EOSB should not be confused with social-insurance benefits administered through GOSI.

Saudi End-of-Service Benefits vs GOSI

No. EOSB is an employment-related end-of-service entitlement calculated under the applicable labor-law framework. GOSI relates to Saudi social-insurance programs and benefits.

Because the two systems have different purposes and calculation rules, employees should not subtract GOSI benefits from their EOSB calculation or treat the two as interchangeable.

Related Saudi Employment Guides

You may also find these Gulf Career Group resources useful: Saudi Arabia employment contract, Saudi work visa requirements, jobs in Saudi Arabia for expats, Saudi Arabia salary guide, and how to find a job in Saudi Arabia.

Saudi End-of-Service Benefits FAQs

Conclusion

Calculating Saudi end-of-service benefits begins with three questions: what wage legally applies, how long the qualifying service lasted and why the employment relationship ended. The standard formula uses half a month's wage for each of the first five years and one month's wage for later years, while resignation can change the amount payable.

In addition, employees should remember that EOSB is only one part of a final settlement. Unused leave, unpaid salary, notice compensation and other contractual dues may need separate calculations. Before accepting the employer's figure, compare the dates, wage components, separation reason and service period with your contract, Qiwa information and current official Saudi guidance.

Explore more Saudi Arabia employment guides and career resources on Gulf Career Group.