How to Calculate End-of-Service Benefits in Saudi Arabia

What Are End-of-Service Benefits?

End-of-service benefits are a monetary amount paid to an employee upon the termination of their employment relationship with an employer. They are a legal right stipulated in Saudi labor law. The benefit is calculated based on the employee's length of service and their last basic salary, and aims to compensate the employee for their years of work and recognize their efforts during their tenure with the organization.

How to Calculate End-of-Service Benefits

The calculation method differs depending on the reason for termination and the employee's length of service, according to Articles 84 and 85 of Saudi labor law:

1. Termination by Employer (Article 84)

In this case, the employee is entitled to full end-of-service benefits calculated as follows:

• First five years: Half a month's salary for each year of service
• After five years: One full month's salary for each year of service

2. Employee Resignation (Article 85)

The benefit is calculated based on length of service as follows:

• 2 to less than 5 years: One-third of entitled benefits
• 5 to less than 10 years: Two-thirds of entitled benefits
• 10 years or more: Full benefits

3. Exceptional Cases Entitled to Full Benefits

There are special cases where an employee is entitled to full benefits even if they resign before completing 10 years:

• An employee who left work due to force majeure beyond their control
• A female employee who terminated her contract within 6 months of her marriage
• A female employee who terminated her contract within 3 months of childbirth

You can also use the end-of-service benefits calculator from the official Ministry of Human Resources and Social Development website to easily calculate your benefits.

Illustrative Examples of End-of-Service Benefit Calculations

Example 1: Termination by Employer

An employee worked for 8 years with a last basic salary of 10,000 SAR.

Calculation:

• First five years: 5 years × (10,000 ÷ 2) = 25,000 SAR
• Remaining three years: 3 years × 10,000 = 30,000 SAR
• Total benefit: 55,000 SAR

Example 2: Resignation After 7 Years

An employee resigned after 7 years of work with a last basic salary of 12,000 SAR.

Calculation:

• Full benefit for first five years: 5 × (12,000 ÷ 2) = 30,000 SAR
• Full benefit for remaining two years: 2 × 12,000 = 24,000 SAR
• Total full benefit: 54,000 SAR
• Entitled amount (two-thirds of benefit): 54,000 × (2 ÷ 3) = 36,000 SAR
• Total benefit: 36,000 SAR

Frequently Asked Questions

1. What salary components are included in end-of-service benefit calculations?

Benefits are calculated based on the last basic salary only and do not include other allowances such as housing allowance, transportation allowance, or any variable allowances. The basic salary is the amount specified in the employment contract as a fixed monthly wage.

2. What if I worked for less than two years?

If your service period is less than two years and you resign, you are not entitled to any end-of-service benefits. However, if the employer terminates your contract, you are entitled to full benefits even if your service period is less than two years.

3. Are unused annual leave days included in the benefit?

No, unused annual leave balance is calculated separately from end-of-service benefits. Employees are entitled to monetary compensation for remaining leave days in addition to end-of-service benefits.

4. When must the employer pay the benefit?

The employer must pay end-of-service benefits within a maximum of one week from the date of employment termination. Delay in payment is considered a violation of labor law.

5. Can any amounts be deducted from end-of-service benefits?

Yes, the employer can deduct any amounts owed by the employee, such as unpaid loans or advances, or compensation for damages caused by the employee, provided they are documented and legally established.

6. Is the probation period counted in the length of service?

Yes, the probation period is counted in the total length of service when calculating end-of-service benefits, as long as the employee was confirmed after the probation period ended.

7. What is meant by force majeure in labor law?

Force majeure refers to exceptional circumstances beyond the employee's control that compel them to leave work, such as severe illness that prevents them from continuing work, the need to care for a family member in critical health condition, or mandatory relocation to another city for unavoidable family reasons. In these cases, the employee is entitled to full benefits even if they resign before completing 10 years, provided these circumstances are proven with official documents.

Conclusion

End-of-service benefits are a legal right guaranteed to every employee in the Kingdom of Saudi Arabia and are an essential part of workers' rights protected by Saudi labor law. It is important for employees to be fully aware of how to calculate their benefits according to the circumstances of employment termination and their length of service, whether termination is by the employer or through resignation. We advise all employees to keep copies of employment contracts, salary statements, and official documents proving length of service to ensure they receive their full entitlements upon end of service. In case of any dispute or inquiry regarding benefits, you can contact the Ministry of Human Resources and Social Development or the relevant labor offices to resolve issues and ensure proper application of regulations.

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