End of service in Saudi Arabia: resignation vs termination

Why does the way a contract ends change the award?

Article 84 of the Labour Law sets one award for everyone whose contract ends, and Article 85 reduces it only when the employee resigns. So the question is never just how long someone worked: it is also who ended the contract and why. The same eight years can be worth the full award or two thirds of it.

That is why the reason for leaving matters as much as the dates. Before you calculate anything, record on the employee's file how the contract ended: a resignation, the end of a fixed term, termination by the employer, retirement, or one of the special cases the law treats differently.

This article explains the general rules. It is not legal advice: contracts, settlements and court decisions can lead to a different amount in a particular case.

When is the full award due?

The full Article 84 award is due whenever the contract ends for a reason other than the employee's resignation or a dismissal under Article 80. That covers the employer ending an open-ended contract, the end of a fixed-term contract, retirement, and the cases where the law treats the employee's departure as if the employer had caused it.

• The employer ends the contract with notice, or without a reason the law accepts.
• A fixed-term contract reaches its end date and is not renewed.
• The employee leaves without notice for one of the employer's faults listed in Article 81, such as not meeting essential contractual duties.
• The employee leaves because of force majeure beyond their control (Article 87).
• A female employee ends the contract within six months of her marriage or three months of giving birth (Article 87).

If the employer ends an open-ended contract without a valid reason, Article 77 adds compensation on top of the award: fifteen days' wage for each year of service, or the rest of the term for a fixed-term contract, and in either case at least two months' wage, unless the contract sets its own amount.

What does an employee who resigns receive?

An employee who resigns receives part of the Article 84 award, depending on continuous service. Below two years there is nothing. From two years to under five the employee receives a third, from five to under ten two thirds, and from ten years on the full award, exactly as if the employer had ended the contract.

Since the 2025 amendments, Article 79 bis also confirms that an employee whose contract ends by resignation keeps every right the law gives them. The fraction applies to the award; it does not touch the wage still due or the pay for unused annual leave.

When is no award due at all?

No award is due when the employer ends the contract for one of the serious causes listed in Article 80, such as assault at work, forgery to obtain the job, or unexcused absence beyond the set limits. The employer must first give the employee the chance to state why they object, and some causes need a written warning first.

Article 80 also lets the employer end the contract without an award during probation. And an employee who resigns before completing two years of continuous service receives no award under Article 85. In every other case some award is due, so treat a zero figure as something to double-check rather than a default.

How do you calculate the award step by step?

Work out the full Article 84 award first, then apply the resignation fraction if the employee resigned. The award is based on the last wage, which means the basic wage plus recurring allowances such as housing and transport. Part of a year counts in proportion to the days worked, so do not round service down to whole years.

1. Find the start date and the last working day, and calculate the service in years, including the fraction of the final year.
2. Take the last monthly wage: basic wage plus recurring allowances, and commissions unless the contract excludes them.
3. Multiply half a month's wage by the years up to five, and a full month's wage by each year after the fifth, then add the two.
4. If the employee resigned, apply the fraction for their service: nothing, a third, two thirds or the whole.
5. Add any unused annual leave, paid at the daily wage (the monthly wage divided by 30), and the wage still due.

The end-of-service calculator linked on this page does the first four steps for you, for either way of leaving.

What do the figures look like in practice?

Take an employee whose last wage is SAR 10,000 a month, basic plus allowances. Half a month is SAR 5,000, so each of the first five years is worth SAR 5,000 and each later year SAR 10,000. The table compares the two ways of leaving at three lengths of service, with no other amounts added.

Seven years works out as five years at SAR 5,000, which is SAR 25,000, plus two years at SAR 10,000, which is SAR 20,000. Twelve years is SAR 25,000 plus seven years at SAR 10,000. An employee who resigns after 18 months receives no award, while the same 18 months ended by the employer give SAR 7,500.

When must the final settlement be paid?

Article 88 sets the deadline. When the employer ends the contract, the wage and all dues must be settled within a week at most from the end of the contract. When the employee ends it, the employer has up to two weeks. The employer may deduct any debt owed to it because of the work.

• The end-of-service award, full or reduced.
• Pay for annual leave earned and not taken, including a part year in proportion (Article 111).
• The wage for days worked in the final month.
• Notice pay if either side did not respect the notice period (Article 76).

How DynamoOS helps

In Dynamo People, the Saudi Arabia pack estimates each employee's end-of-service award from their record, with one rule for a contract that ends and another for a resignation, so the fraction is applied for you. Dynamo Payroll uses the wage on the last salary slip, and unused leave is shown beside it before you settle.