This guide explains End-of-Service Benefits Under Saudi Labor Law in plain language, with the practical steps anyone facing this situation in Saudi Arabia needs to know.
This guide explains how end-of-service gratuity is calculated under the Saudi Labor Law, clarifying the differences between resignation, dismissal, and natural contract expiry cases.
End-of-service gratuity is an acquired right for every worker subject to the Saudi Labor Law, but its calculation method and actual percentage differ materially depending on the reason the employment relationship ended: did the contract end for natural reasons, was the worker dismissed, or did they resign voluntarily?
The law calculates gratuity based on half a month's wage of the last salary for each of the first five years of service, and a full month's wage for each subsequent year after that. Example: a worker who spent 8 years is entitled to (5 × half a month) + (3 × a full month) = 2.5 + 3 = 5.5 months of the last wage as full gratuity.
The basic wage used in the calculation includes the base salary and regular fixed allowances like housing and transport allowances if they're a regular part of the monthly wage, while variable commissions or irregular or unguaranteed bonuses aren't usually included in this base.
If the worker resigns of their own will, different ratios apply than dismissal: they're entitled to nothing if their service is less than two years, one-third of the full gratuity if their service is between two and five years, two-thirds of the gratuity if between five and ten years, and the full gratuity if their service exceeds ten years.
In the exceptional cases limited by Article 80 of the Labor Law (such as assault on the employer or documented serious breach), the worker loses their right to end-of-service gratuity entirely. These cases are statutorily narrow in scope, and the employer cannot expand them to avoid paying due gratuity.
When a fixed-term contract ends with its natural expiry without renewal, the worker is entitled to full end-of-service gratuity under the basic formula, without reducing the ratios applied to resignation cases, because the contract's end wasn't by the worker's unilateral will.
Alongside end-of-service gratuity, upon the employment relationship's end the worker is entitled to: unused annual leave balance calculated in cash, any unpaid delayed wages, and notice period compensation if not observed by the party terminating the contract.
Disputes over calculating gratuity are very common, especially over what's included in the basic wage or classifying the termination reason. Legal representation ensures precise calculation of your full dues and a correct claim before the labor court if the employer refuses payment.
Precise calculation of dues benefits from having the employment contract, payroll records for at least the last 12 months, and the precise service start and end dates. No additional documents are needed at the initial consultation stage.
Yes, the probation period is included in the total service duration when calculating end-of-service gratuity, as long as the employment relationship continued without interruption afterward.
Calculating end-of-service gratuity has precise rules easily miscalculated, whether intentionally or unintentionally. Carefully review your employer's calculation, and don't hesitate to seek legal consultation if you feel the offered amount doesn't reflect your actual dues.
Imagine a worker who worked 3 years at a branch in one city, then was transferred to another branch of the same company for 5 additional years before their service ended. End-of-service gratuity is calculated on the total full service duration (8 years) with the same employer regardless of multiple branches or cities, as long as the company is one legal entity.
In merger or acquisition cases where company ownership transfers to a new legal entity, prior service duration with the old entity is counted within total service duration if the worker continued in the same position without actual interruption in the working relationship, even if the trade name or legal ownership officially changed.
End-of-service gratuity due to the worker isn't subject to income tax on the worker themselves under Saudi law, but it's considered a financial obligation on the company that must be accounted for within provisions, and may be subject to certain accounting treatment when calculating zakat due on the company itself.
We help you precisely calculate your full dues, and claim them before the labor court if the employer refuses voluntary payment.
We believe every worker deserves to receive their full dues without shortfall, and we work seriously to ensure this in every file we handle.
Alongside end-of-service gratuity, it's necessary to confirm calculation of the unused annual leave balance in cash based on the last daily wage, and any commissions or bonuses due for prior actual work periods not yet paid. Many workers overlook these additional dues in their initial calculations.
For part-time workers, end-of-service gratuity is calculated proportionally to actual working hours and the wage due for them, under the same basic rules applied to full-time work, with ratios adjusted to reflect the part-time nature of the work.
Precise calculation from the start prevents disputes later and ensures both parties know exactly what is owed.
For part-time workers, end-of-service gratuity is calculated proportionally to actual working hours and the wage due for them, under the same basic rules applied to full-time work, with ratios adjusted to reflect the part-time work's nature.
No, this content is for general awareness only and doesn't replace direct legal consultation for your specific situation.
Duration varies with case complexity and parties' cooperation, and we give you a realistic estimate after reviewing your file details in a free initial consultation.
Yes, the initial consultation is always free over WhatsApp, and we give you a clear assessment of your legal position within hours.
Yes, the contract or company policy can grant a gratuity higher than the statutory minimum, but cannot go below this minimum under any circumstance.
The default is full payment upon service end, but installment payment can be agreed in special cases with the worker's consent, with guarantees preserving their right to full collection.
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