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
- Measure service exactly from the start date to the last working day, in years, months and days.
- Fix the last wage for the calculation: basic plus due allowances, excluding commissions if the contract says so.
- Compute the full award: half a month per year for the first five, a month per year after, plus partial years pro rata.
- Identify why employment ended: employer termination or end of term, resignation, or an Article 87 case.
- Apply the resignation fraction, if any: none, one third, two thirds or full, by length of service.
- 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.