End of Service Benefit KSA: How It's Calculated

If you're wrapping up a job in Saudi Arabia — resigning, being terminated, or finishing a fixed-term contract — the end of service benefit KSA law guarantees you is often the biggest single payment you'll ever get from an employer. Most people miscalculate it. Here's what the Labor Law actually says.

Quick answer

Under Article 84 of the Saudi Labor Law (Royal Decree M/51), the end of service benefit KSA employees are owed equals half a month's wage for each of the first five years of service, plus one full month's wage for each year beyond that. The calculation uses your last-drawn wage, including basic salary plus commissions and allowances paid regularly. Partial years count pro-rata. Whether you get the full amount, two-thirds, one-third, or nothing depends on who ended the contract and why — resignation is treated very differently from termination.

What counts as "wage" in the calculation

This is where people slip up. The gratuity isn't based on basic salary alone.

Article 2 of the Labor Law defines "wage" as the basic pay plus any regular allowances — housing, transport, commissions tied to sales, and anything else paid as a fixed, recurring part of your compensation. Discretionary bonuses, one-off incentives, and reimbursements don't count.

So if your contract says SAR 10,000 basic + SAR 3,000 housing + SAR 1,000 transport, your gratuity base is SAR 14,000 per month — not SAR 10,000. Employers love to quote the basic. Don't let that frame the conversation.

Watch out: If your allowances are paid irregularly or labeled as "bonuses" in payslips, employers will argue they're excluded. Check how they appear in your contract and GOSI (General Organization for Social Insurance) filings.

The formula, worked through

Take someone leaving after 8 years with a final monthly wage of SAR 14,000.

• First 5 years: 5 × (½ × 14,000) = SAR 35,000
• Next 3 years: 3 × (1 × 14,000) = SAR 42,000
• Total gratuity if fully entitled: SAR 77,000

Partial years are prorated by days. Eleven months and fifteen days of service in year 8? You get 11.5/12 of that year's share.

Resignation vs termination — the big swing

Article 85 cuts the gratuity for employees who resign voluntarily on open-ended contracts:

• Less than 2 years of service: nothing
• 2 to 5 years: one-third of the gratuity
• 5 to 10 years: two-thirds
• 10+ years: full gratuity

If the employer terminates you (and it's not for a disciplinary reason under Article 80), you get the full amount regardless of tenure. Fixed-term contracts that run to their natural end also pay the full gratuity under Article 85.

There are exceptions where a resigning employee still gets 100%: force majeure, the employer's breach of contract (Article 81 — unpaid wages, assault, unsafe conditions), and — for female employees — resignation within 6 months of marriage or 3 months of childbirth (Article 87). Honestly, Article 81 is underused; if the employer stopped paying you or changed your role unilaterally, your "resignation" may legally count as constructive dismissal, and you keep the full gratuity plus potentially compensation.

When you get nothing

Article 80 lists the grounds for dismissal without end-of-service benefit: assault on the employer, serious breach of duties, repeated absence, disclosure of trade secrets, forged documents to get the job, and a few others. The employer has to follow due process and the burden sits on them. A vague "poor performance" letter is not Article 80 territory.

Payment timing and disputes

Article 88 says final dues — gratuity, unused leave, unpaid wages — must be paid within one week of contract end if the employer terminated, or within two weeks if the employee resigned. Blow past that and you can file at the Labor Court through the Ministry of Human Resources and Social Development (HRSD) portal. First stop is amicable settlement through the labor office; if that fails within 21 working days, the file moves to the Labor Court.

Keep your contract, payslips for the last 12 months, GOSI certificate, and the termination letter. Those four documents decide most cases.

Tip: Before you sign a final settlement ("mukhalasa"), calculate the gratuity yourself. Signing a release with a lowball figure makes recovering the difference much harder — not impossible, but harder.