Payroll and HR

End of Service Calculation in Saudi Arabia

The Saudi end-of-service award is calculated under Article 84 of the Labor Law: half a month's wage for each of the first five years, and a full month's wage for each year after that, based on the last wage, with partial years counted pro rata. If the employee resigns, Article 85 applies: nothing before two years, one third of the award from two to five years, two thirds above five and below ten years, and the full award at ten years or more.

  • Updated:
  • 7 min read
  • Saudi Arabia

The rule: Article 84

Service Award per year
First five years Half a month's wage
Each year after year five One month's wage
Part of a year Pro rata to the time worked

The full award applies when the employment ends other than by resignation — for example when the employer ends the contract or a fixed term expires.

Resignation: Article 85

Continuous service at resignation Share of the award
Under two years None
Two to five years One third (⅓)
More than five, less than ten years Two thirds (⅔)
Ten years or more Full award

Note that exactly five years falls in the one-third band: two thirds is for service over five years.

Full award even when the worker leaves (Article 87)

The full award is due regardless of length of service if the worker leaves because of force majeure. A female worker also receives the full award if she ends the contract within six months of her marriage or three months of giving birth.

Which wage is used?

  • The last wage the employee received.
  • Wage under the Labor Law means the basic wage plus all other due increases set for the worker for effort, job risks, or under the contract or work rules — fixed housing and transport allowances, for example.
  • The parties may agree that commissions, percentages of sales and similar items are fully or partly excluded from the calculation base.

Worked examples

Assume a last wage of SAR 10,000 a month (basic 7,000 + housing 2,500 + transport 500).

Service Full award Employer ends contract / term expires Resignation
3 years 3 × ½ month = 1.5 months = 15,000 SAR 15,000 ⅓ = SAR 5,000
7 years (5 × ½) + (2 × 1) = 4.5 months = 45,000 SAR 45,000 ⅔ = SAR 30,000
12 years (5 × ½) + (7 × 1) = 9.5 months = 95,000 SAR 95,000 Full = SAR 95,000

Partial year: 7 years and 6 months = (5 × 0.5) + (2.5 × 1) = 5 months = SAR 50,000 in full, or two thirds = SAR 33,333.33 on resignation.

Steps

  1. Measure service exactly from the start date to the last working day, in years, months and days.
  2. Fix the last wage for the calculation: basic plus due allowances, excluding commissions if the contract says so.
  3. Compute the full award: half a month per year for the first five, a month per year after, plus partial years pro rata.
  4. Identify why employment ended: employer termination or end of term, resignation, or an Article 87 case.
  5. Apply the resignation fraction, if any: none, one third, two thirds or full, by length of service.
  6. Add other dues separately, such as wages for the final days and unused leave — they are not part of the award.

For a quick figure, use the end-of-service calculator.

Common mistakes

  • Using basic salary only when the wage includes due allowances.
  • Applying resignation fractions to an employee the employer terminated.
  • Putting exactly five years in the two-thirds band.
  • Ignoring partial years.
  • Confusing the award with compensation. Compensation for ending a contract without a valid reason is separate from the end-of-service award.

Special cases

  • Continuous service: the resignation bands rely on consecutive service — one third, for example, needs at least two consecutive years.
  • Fixed-term contract expiry: if the term ends without renewal, employment has ended other than by resignation, so the full Article 84 award is due.
  • Dismissal without award: the law lets the employer end the contract without an award in specific cases listed in Article 80, such as assaulting the employer, forgery or disclosing secrets. These are exceptional cases with conditions; apply them only after checking them carefully.
  • Partial years on resignation: calculate the full award including the partial year first, then apply the resignation fraction to the result.

Accruing the liability in your books

The award builds up every month, so businesses usually book a monthly provision rather than absorbing the whole amount when someone leaves. On a SAR 10,000 wage:

Service stage Annual accrual Approximate monthly provision
Within the first five years Half a month = SAR 5,000 SAR 416.67
After year five A full month = SAR 10,000 SAR 833.33

Because the award uses the last wage, a pay rise increases the liability for all earlier years too — re-measure the balance after each raise. The provision shows the real obligation in your financial statements and avoids a surprise when a long-serving employee leaves.

Summary

Full award = half a month's wage for each of the first five years + one month's wage for each later year, on the last wage including due allowances. If the employer ends the contract, the full award is due; on resignation the fractions apply — nothing before two years, one third up to five, two thirds below ten, full from ten. For the other monthly payroll obligation, read the GOSI contributions guide.

This article is general information, not tax or legal advice. Rules and rates change, so confirm with the authority or your accountant. Last updated: 19 October 2026.

Frequently asked questions

Is end of service calculated on basic salary only?

No. It is calculated on the last wage, and 'wage' under the Labor Law means the basic wage plus all other due increases such as fixed allowances. The parties may agree to leave commissions, sales percentages and similar items out of the calculation base.

What does an employee get if they resign before two years?

Nothing, unless one of the full-award cases applies, such as leaving because of force majeure.

When does a resigning employee get the full award?

After ten or more years of service. The full award is also due whatever the length of service if the worker leaves due to force majeure, or if a female worker ends the contract within six months of marriage or three months of giving birth.

Are partial years counted?

Yes. The award covers portions of a year in proportion to the time worked.

Does an employee terminated by the employer get the award?

Yes, the full award under Article 84 — the resignation fractions do not apply — unless the dismissal falls under a case in which the law removes the right to the award.

Sources

  1. Ministry of Human Resources and Social Development — Worker's rights at the end of the contractwww.hrsd.gov.sa
  2. Ministry of Human Resources and Social Development — End-of-Service Award Regulationshrsd.gov.sa

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