Saudi end-of-service gratuity calculator — Labor Law formula

How much end-of-service gratuity does a Saudi private-sector employee receive? Under the Saudi Labor Law: half-month wage per year for the first 5 years, plus full-month wage per year after year 5. Based on LAST total wage (basic + housing + regular allowances). Resignation reduces the gratuity on a sliding scale: 2-5 years tenure = 33%, 5-10 years = 66%, 10+ years or contract-completion = 100%. Worked examples below.

Saudi EoS rules — 6 key things HR must know

Built around how MENA teams actually manage this day-to-day.

Half-month / full-month formula

Half-month wage per year for first 5 years. Full-month wage per year for every year after the 5th. Partial years prorated — e.g., 3 years 6 months = 3.5 × half-month = 1.75 months total.

Broader wage base (vs UAE)

Saudi EoS uses LAST total wage — basic + housing allowance + any REGULAR allowances paid monthly. (Transportation, utilities, phone if regular.) Irregular bonuses, overtime, and commissions typically excluded. This is wider than UAE (basic only) and produces higher gratuity for similar basic salary.

Resignation 33/66/100% brackets

If employee resigns (not completing fixed-term contract): tenure 2-5 years = 33% of full EoS, tenure 5-10 years = 66%, tenure 10+ years = 100%. Under 2 years resignation = typically 0. Full-term contract completion = always 100% regardless of tenure.

Mutual-consent termination = full EoS

If termination is by employer (not misconduct) or mutual consent, employee gets 100% of the formula amount. Only resignation under 10 years triggers the bracket reductions.

Separate from GOSI pension

EoS is distinct from General Organization for Social Insurance (GOSI) pension contributions. Saudi employees are enrolled in GOSI (retirement + disability + SANED unemployment); non-Saudi expats have GOSI occupational-hazards only. EoS is paid in addition to GOSI, not instead.

Article 80 misconduct = no EoS

If employer terminates under Article 80 (gross misconduct: assault, drunkenness, theft, revealing secrets, falsifying documents, etc.), no EoS is payable — must be properly documented with warnings + investigation.

5 worked examples — Saudi EoS calculation

1

3-year employee, SAR 10,000 wage, terminated by employer

Formula: 3 × 0.5 month = 1.5 months. Gratuity = 1.5 × 10,000 = SAR 15,000. Employer-terminated = 100% payable. Final: SAR 15,000.

2

7-year employee, SAR 14,000 wage, mutual consent exit

Formula: (5 × 0.5) + (2 × 1) = 2.5 + 2 = 4.5 months. Gratuity = 4.5 × 14,000 = SAR 63,000. Mutual consent = 100% payable. Final: SAR 63,000.

3

6-year employee, SAR 12,000 wage, RESIGNATION

Formula: (5 × 0.5) + (1 × 1) = 2.5 + 1 = 3.5 months = SAR 42,000 full amount. BUT resignation 5-10 years bracket = 66%. Final payable: 42,000 × 0.66 = SAR 27,720.

4

3-year employee, SAR 15,000 wage, RESIGNATION

Formula: 3 × 0.5 = 1.5 months = SAR 22,500 full. Resignation 2-5 years bracket = 33%. Final: 22,500 × 0.33 = SAR 7,425. (If terminated instead, would get SAR 22,500.)

5

12-year employee, SAR 20,000 wage, RESIGNATION

Formula: (5 × 0.5) + (7 × 1) = 2.5 + 7 = 9.5 months = SAR 190,000 full. Resignation 10+ years bracket = 100%. Final: SAR 190,000 (no reduction).

Common Saudi EoS edge cases

  • What counts as a "regular allowance": Housing + transport + food allowances paid every month count. Bonus paid once a year, sales commission, or overtime do NOT count. Dispute if unclear — Saudi labour court interprets broadly in favour of employee.
  • Salary changes mid-tenure: Saudi uses LAST wage (same as UAE). Employee goes from SAR 8K to SAR 15K → EoS calculated on 15K. Encourages long-tenure retention since EoS inflates with promotions.
  • Transfer between group companies: If employee moves within same owner's companies without break, service continues. If re-hired after formal exit + gap, service resets.
  • Payment timing: EoS must be paid within 1 week of termination per Labor Law. Delays trigger labour-complaint liability + potential daily penalties.
  • Saudi vs expat GOSI impact: GOSI contributions are separate from EoS. Saudis get retirement pension via GOSI; expats rely entirely on EoS as their severance mechanism (no equivalent of US 401k, no portable pension).
  • Nitaqat tier effects: Excessive EoS payouts don't affect Nitaqat tier (that's a separate quota + headcount metric). But frequent terminations may trigger labour-office reviews.

Related AttendUX pages

Frequently Asked Questions

How is Saudi end-of-service calculated exactly?

Per Saudi Labor Law: half-month wage per year for first 5 years + full-month wage per year after year 5. Based on LAST total wage (basic + housing + regular monthly allowances). Partial years prorated. Resignation reduces: tenure 2-5 years = 33% of formula, 5-10 years = 66%, 10+ years or contract-completion = 100%.

Does Saudi EoS include housing allowance?

Yes. Saudi uses a broader wage base than UAE — basic salary + housing allowance + regular monthly allowances (transport, utilities, food if regular) are all included. This typically makes Saudi EoS 30-50% higher than UAE for similar basic pay. Irregular bonuses, commissions, and overtime are excluded.

What are the Saudi resignation reductions?

If employee resigns (not completing their fixed-term contract): 2-5 years tenure = 33% of calculated EoS, 5-10 years = 66%, 10+ years = 100%. Less than 2 years resignation typically = 0 EoS. Full-term contract completion always = 100%. Employer-termination always = 100% regardless of tenure.

Is Saudi EoS paid in addition to GOSI pension?

Yes. EoS and GOSI are completely separate. Saudi nationals are enrolled in GOSI (retirement + disability + SANED unemployment); non-Saudis have GOSI occupational-hazards only. EoS is paid at termination REGARDLESS of GOSI contributions. For Saudi nationals, EoS + GOSI combine to form retirement benefit. For expats, EoS is their only severance.

Does AttendUX automate Saudi end-of-service calculation?

Yes. Saudi Labor Law EoS formula is pre-configured in AttendUX payroll engine. Tenure calculated from hire date, wage base assembled from basic + housing + regular allowances (irregular items excluded), resignation brackets applied automatically based on exit type. At termination, EoS auto-computes + appears in exit settlement + flows to final payslip. Labor-inspection audit trail immutable.

Related Saudi Arabia resources

Legal Information Notice

This page summarizes key provisions of Saudi Labor Law M/51, Articles 84-88 (end-of-service award) for general informational purposes only. This is not legal advice. Labor laws are amended periodically; AttendUX makes no warranty about completeness or current validity. For your specific situation — including employment terminations, disputes, cross-border cases, or policy design — consult a labor-law attorney licensed in the relevant jurisdiction and verify with the Saudi HRSD.

Primary source: Saudi Labor Law M/51, Articles 84-88 (end-of-service award) — Saudi HRSD
Reviewed by: AttendUX Compliance Team · Last reviewed:

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