End-of-Service Benefits Under Saudi Labor Law

End-of-service gratuity: how it's actually calculated

Articles 84 and 85 of the Saudi Labor Law govern end-of-service gratuity, a vested right that can't be waived or reduced by agreement unless the alternative is more favorable to the employee. Here's how the calculation actually works.

The general rule under Article 84

When employment ends for any reason (except the employee's own resignation, which has separate rules), the gratuity is calculated as:

• Half a month's actual wage for each of the first five years of service.
• A full month's actual wage for each year beyond the first five.
• Partial years (months or days) are counted proportionally.

"Actual wage" isn't just basic salary: it includes all fixed recurring additions such as allowances, commissions, and periodic bonuses, per the wage definition in Article 2 of the Labor Law.

A worked example

An employee on an actual wage of SAR 5,000, with 7 years of service: first 5 years (half-month × 5) = SAR 12,500. The following 2 years (full month × 2) = SAR 10,000. Total = SAR 22,500.

Resignation: an entirely different rule (Article 85)

If employment ends because the employee resigns, the gratuity follows a completely different scale from the general rule:

• Under 2 years of service: nothing is owed.
• 2 to under 5 years: one-third of the gratuity calculated under the general rule.
• 5 to under 10 years: two-thirds of the gratuity.
• 10 years or more: the full gratuity, exactly as if the employer had ended the contract.

When does an employee lose the gratuity entirely?

The cases listed in Article 80 (such as assaulting the employer, forgery to obtain the job, or deliberately harming the employer's financial interests) forfeit the gratuity: but only under strict conditions, including giving the employee a chance to respond before dismissal.

Other rights tied to end of employment

Beyond the gratuity, an employee is typically also owed: payment for unused annual leave, any outstanding financial dues (commissions, allowances), and an experience certificate from the employer. These rights are entirely independent of the gratuity and can't be substituted for it.

Where to calculate your gratuity officially

The Ministry of Human Resources and Social Development provides an official labor calculator to help estimate your entitlement accurately, accounting for whether Article 84 or 85 applies to your case.

These calculations are general, and the details of your specific contract may affect the outcome. For an accurate assessment of your entitlement in Jeddah, reach out to us on WhatsApp.

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