The end-of-service award is an amount a worker is entitled to when the employment relationship ends. It is calculated on the last wage and the length of service. The rule in the Saudi Labour Law is short, but how it applies depends on why the relationship ended.
The basic rule (Article 84)
When the employment relationship ends, the worker is entitled to:
- Half a month’s wage for each of the first five years.
- A full month’s wage for each year after that.
- A proportional amount for part of a year.
On resignation (Article 85)
If the relationship ends because the worker resigns, the worker is entitled to a share of the award according to length of service:
| Length of service | What the worker is entitled to |
|---|---|
| Less than two years | No award |
| Two years up to five years | One third of the award |
| More than five and less than ten years | Two thirds of the award |
| Ten years or more | The full award |
Cases where the full award is due
Article 87 gives the full award to a worker who leaves because of force majeure beyond their control, and to a female worker who ends the contract within six months of her marriage or three months of giving birth.
In the other direction, Article 80 allows the employer to terminate the contract without an award in specific cases, such as absence without a legitimate reason for the periods the law sets.
Worked examples
Assume the last monthly wage is SAR 6,000.
Example 1: terminated by the employer after 8 years
- First five years: 5 × 3,000 = SAR 15,000
- Following three years: 3 × 6,000 = SAR 18,000
- Award: SAR 33,000
Example 2: resignation after 8 years
- Full award: SAR 33,000
- Due on resignation (two thirds): SAR 22,000
Example 3: resignation after 3 years
- Full award: 3 × 3,000 = SAR 9,000
- Due on resignation (one third): SAR 3,000
Common mistakes
- Calculating on basic salary only. The award is based on the last wage; which allowances count is set by the law and the contract.
- Ignoring part-years. Seven years and six months is not seven years.
- Applying the resignation share to every case. The end of a fixed-term contract or termination by the employer is not subject to the Article 85 shares.
- Relying on an inaccurate joining date. A wrong joining date changes the result directly.
How a system helps
When the joining date, wage and length of service are recorded in one system, the settlement is calculated from that same data with nothing re-entered, and passes its approvers before payment. That is what the end-of-service feature in IdaraSuite does.
For a quick figure, try the end-of-service calculator.
This article is general information, not legal advice. Laws and regulations change; refer to the official text in force or to a legal adviser before making a decision.