End-of-service award in Saudi Arabia: how to calculate it

How much is the end-of-service award?

Under Article 84 of the Saudi Labour Law, the award is half a month's wage for each of the first five years of service and a full month's wage for each year after the fifth. It is worked out on the last wage the employee received, and a part of a year counts in proportion to the time worked.

Which wage is used?

The award uses the last wage. In the Labour Law the wage is the basic wage plus the recurring allowances, such as housing and transport. Commissions and other variable pay count as well unless the contract leaves them out, so read the contract before you settle on the figure.

Unused annual leave is paid separately, at the last wage, on top of the award.

What does an employee who resigns receive?

When the employee resigns, Article 85 reduces the award by length of service. Before two years nothing is due. From two to under five years a third is due, from five to under ten years two thirds, and from ten years the full award. The award itself is still worked out with Article 84.

When is the full award due?

The full award is due when the contract ends for any reason other than the employee's resignation or a dismissal for a serious cause. That covers the end of a fixed-term contract, a termination by the employer and retirement, and a few cases of leaving that the law treats like them:

• The employee leaves because of the employer's faults listed in Article 81.
• The employee leaves because of force majeure (Article 87).
• A female employee ends the contract within six months of marriage or three months of giving birth (Article 87).
• No award is due when the employee is dismissed for one of the serious causes in Article 80.

How do you calculate it, step by step?

Count the service in years, including any part of a year, and take the last monthly wage. Multiply half the wage by the years up to five, then the full wage by the years after the fifth, and add the two. If the employee resigned, apply the Article 85 share to the total.

1. Count the years of service from the first day to the last, including the part of the final year.
2. Take the last monthly wage: the basic wage plus recurring allowances such as housing and transport.
3. Multiply half the wage by the years of service up to five.
4. Multiply the full wage by the years after the fifth, and add the two amounts.
5. If the employee resigned, apply the Article 85 share: nothing, a third, two thirds or all of it.
6. Add any unused annual leave, paid at the last wage.

Example: eight years of service on a last wage of SAR 10,000. The first five years give 5 × 5,000 = SAR 25,000 and the next three give 3 × 10,000 = SAR 30,000, so the award is SAR 55,000. Had the employee resigned, two thirds would be due, about SAR 36,667.

How DynamoOS handles it

The Saudi Arabia pack estimates the end-of-service award of each employee from the joining date, the last wage and the reason for leaving, under Articles 84, 85, 87, 81 and 80. Use the figure to plan and to check a final settlement: contracts and court practice can differ, so it is an estimate, not legal advice.