Learn how end-of-service benefits are calculated under the Saudi Labor Law: the wage used, resignation vs. termination, with worked examples.
Short answer: End-of-service benefits are based on your last actual wage: half a month's wage for each of the first five years of service, and a full month's wage for each year after that, with partial years counted pro rata. If you resign, you receive one third, two thirds or the full amount depending on your continuous service.
If you work in Saudi Arabia's private sector and your contract is ending, you are thinking about resigning, or you have been told your employment is being terminated, the first question is usually: how much am I owed? This guide walks through the Labor Law rules step by step, explains when the award is paid in full, reduced or forfeited, and gives illustrative examples. If your situation needs a closer look, see our labor lawyer service.
What is the end-of-service award and who is entitled to it?
The end-of-service award is a payment the employer must make when the employment relationship ends, in return for the worker's length of service. It is governed by Articles 84 to 88 of the Labor Law and applies to workers covered by that law, which in practice mostly means private-sector employees. Government employees under civil-service or pension rules follow different regulations not covered here.
As a rule, the award is due whenever employment ends: when a fixed term expires, when the employer terminates, by mutual agreement or on retirement. There are two important exceptions: resignation, where the award is reduced according to length of service, and lawful dismissal under Article 80, where it may be lost entirely.
Article 84 sets out the calculation:
First five years: half a month's wage for each year.
Each year after the fifth: one full month's wage per year.
Wage used: the last wage received.
Partial years: counted in proportion to the time actually worked.
So you do not need to complete a full year for extra months to count; four years and six months is treated as four and a half years.
Which wage is used?
Article 2 of the Labor Law defines "wage" as the actual wage: the basic wage plus other entitlements granted for effort, risk, or under the employment contract or work regulations, including commissions, allowances and cost-of-living increases.
Calculating on basic salary alone is therefore a common mistake. Note, however, Article 86: the parties may agree that commissions, sales percentages and similar variable elements are excluded from the wage used for the award. If part of your income is commission, check whether your contract contains such a clause.
How much do you receive if you resign?
Under Article 85, a resigning employee receives a share of the award calculated under Article 84:
Continuous serviceEntitlement on resignationLess than two yearsArticle 85 provides no awardTwo to five yearsOne thirdMore than five and less than ten yearsTwo thirdsTen years or moreFull award
The recent amendments added Article 79 bis, which confirms that an employee whose contract ends by resignation receives all statutory rights, and also regulates the resignation process itself: for example, a resignation is deemed accepted if the employer does not respond within thirty days.
When is the full award due even though you ended the contract?
Force majeure: Article 87 grants the full award if the worker leaves because of force majeure beyond their control.
Female employees: a female employee receives the full award if she ends the contract within six months of her marriage contract or three months of giving birth.
Leaving under Article 81: if the employer breaches essential obligations, treats you with cruelty or insult, or pushes you into appearing to have ended the contract, Article 81 allows you to leave without notice while keeping all statutory rights. See our article on Articles 80 and 81 of the Labor Law.
When can the award be lost?
Article 80 lets the employer terminate without award, notice or compensation only in listed cases, such as assault on the employer or a superior at work, proven dishonesty, forgery to obtain the job, or unexcused absence of more than thirty days in a contract year or fifteen consecutive days after a written warning. The employer must give the worker a chance to state their objections before terminating.
If you were dismissed without a valid reason, you may also be entitled to separate compensation, explained in our article on Article 77 of the Labor Law.
How does the calculation look in numbers?
These figures are illustrative only and are not an assessment of any particular case.
Example 1 – contract ends after eight years. Last actual wage SAR 10,000. First five years: 5 × 5,000 = 25,000. Next three years: 3 × 10,000 = 30,000. Total: SAR 55,000.
Example 2 – resignation after eight years. Same figures, but the employee resigned. Service is over five and under ten years, so two thirds apply: 55,000 × 2/3 ≈ SAR 36,666.67.
Example 3 – partial year. Last wage SAR 6,000, service three years and six months, terminated by the employer: 3.5 × 3,000 = SAR 10,500. Had the employee resigned, one third applies: SAR 3,500.
Example 4 – resignation after twelve years. Last wage SAR 12,000: 5 × 6,000 + 7 × 12,000 = SAR 114,000, paid in full because service reached ten years.
To run your own numbers, use our end-of-service calculator and compare the result with your employer's offer.
When must the award be paid?
Article 88 sets clear deadlines. If the employer ended the relationship, wages and entitlements must be settled within one week at most. If the employee ended the contract, settlement must be made within two weeks at most. The employer may deduct any work-related debt owed by the employee, so ask for a written breakdown before you sign anything.
What if payment is late or short?
Recalculate using your last actual wage, service length and the type of termination.
Gather your contract, payslips or bank statements, and the resignation or termination letter.
Do not sign a final release until you understand what you are waiving.
Raise the issue with your employer in writing.
File an amicable settlement request through the Ministry of Human Resources and Social Development e-services, the first stage for labor disputes. The Ministry's service requirements state that claims should be filed within twelve months, so act promptly.
What are the common mistakes?
Using basic salary only and ignoring allowances that form part of the actual wage.
Ignoring partial years.
Applying resignation percentages when the employer terminated or the fixed term expired.
Confusing the end-of-service award with compensation for unlawful termination.
Waiting too long to claim.
Frequently asked questions
Is the award based on basic or total salary?
On the last actual wage, meaning basic pay plus allowances and entitlements under the contract or work regulations. Commissions may be excluded by agreement under Article 86.
Do I get anything if I resign before two years?
Article 85 starts the resignation entitlement at two continuous years. If the employer terminates or a fixed term expires, you are owed the award for your actual service under Article 84, even if under two years.
How long does the employer have to pay?
One week if the employer ended the relationship; two weeks if you did (Article 88).
Can the employer deduct amounts?
Only work-related debts owed to the employer. Ask for an itemised statement and challenge deductions you do not recognise.
Is it different for female employees?
The formula is the same, but Article 87 gives the full award to a female employee who ends the contract within six months of marriage or three months of childbirth.
Is your settlement short?
If the amount offered is lower than your calculation, or payment is late, a specialist review of your contract and documents can help. Kawkaba Law represents individuals and companies in labor matters across Saudi Arabia, in person and remotely.
Request a case assessment
Official sources: Saudi Labor Law – Bureau of Experts · End-of-service calculator – HRSD
Disclaimer: This article is general information about the Saudi Labor Law and is not legal advice for any specific case. Outcomes depend on the contract, facts and documents, so please consult a qualified lawyer before taking action.
