End of Service in Saudi Arabia: Calculation and Resignation

You worked for a company for eight years. Your last salary was SAR 10,000, and you decided to leave. On the day of the final settlement, HR offers you only SAR 25,000 and says the award is calculated on the basic salary. Is that correct?

The short answer: under the Saudi Labor Law, the end of service award is half a month's wage for each of the first five years and one full month's wage for each year after that, calculated on your last wage (Article 84). If you resign from a fixed-term contract, you receive part of it depending on your length of service: nothing before two years, one third from two to five years, two thirds up to ten years, and the full award after ten years (Article 85). If you end an indefinite (open-ended) contract with proper written notice, that is not a resignation in the legal sense, and you receive the full award (Article 84).

How is the end of service award calculated in Saudi Arabia?

Article 84 of the Labor Law sets the basic rule: for each of the first five years you receive half a month's wage, and for each year after that you receive a full month's wage. The wage used is the last wage you received. If you served part of a year, that part is counted in proportion.

You served 8 years and your last wage was SAR 10,000.

First 5 years: 5 × 5,000 = 25,000

Last 3 years: 3 × 10,000 = 30,000

Total: SAR 55,000

The point most often disputed is allowances. Article 84 makes the “last wage” the basis of the calculation, and Article 2 defines the actual wage as the basic wage plus all other increases due to the worker. So if your employer calculates on the basic salary alone while your pay includes fixed allowances (for example housing or transport), do not sign the settlement before you check. Article 86 allows one exception: the parties may agree that commissions, sales percentages and similar variable parts of the wage are not included in the wage used to calculate the award.

How much end of service do I get if I resign or give notice?

It depends on your type of contract. Since Article 2 was amended, a resignation (istiqala) means the worker's written wish to end a fixed-term contract. So a resignation exists only in a fixed-term contract, where you are bound by the agreed term. For that resignation, the reduction in Article 85 applies, based on your continuous length of service:

So the employee in the example above, if he resigns from a fixed-term contract, receives two thirds: about SAR 36,667 instead of SAR 55,000. If his contract were indefinite and he ended it with proper notice, he would receive the full SAR 55,000.

An indefinite contract has no binding term. You may end it with written notice at least 30 days before the end date (Article 75). This is a lawful termination by notice that takes the place of a resignation. It is not a resignation as the law now defines it, so you are entitled to the full award under Article 84, not the Article 85 scale. This is the reading of the amended text that we apply. Court practice on the amendment is still recent, so keep your written notice and proof that you served the notice period.

Note for expats: a non-Saudi worker's contract is always fixed-term (Article 37). If you end it before its term, that is a resignation, and the Article 85 scale applies.

When do you get the full award even though you resigned?

Article 87 gives two exceptions: a worker who leaves because of force majeure beyond their control, and a female worker who ends her contract within six months of her marriage contract or within three months of giving birth. A third case is a worker who leaves under Article 81, for example because the employer breached its essential obligations or assaulted the worker; that article keeps all the worker's legal rights. Also, the end of a fixed-term contract when its term expires is not a resignation, so the full award is due under Article 84.

A female worker on a fixed-term contract served three years on a salary of SAR 8,000. She married and ended her contract four months after the marriage contract.

If she were treated as an ordinary resigning employee, she would get one third: 3 × 4,000 = 12,000, and one third of that is SAR 4,000.

But she ended the contract within six months of marriage, so she receives the full award: SAR 12,000.

Can you lose your end of service award?

Yes, in the cases listed in Article 80. The list is closed, and includes assaulting the employer or a manager during work, using forgery to get the job, or committing an act against honour or trust. The employer may terminate without the award only in the cases that article lists, and it must first give the worker a chance to state the reasons for objecting. If none of these cases applies to what happened to you, the award remains due.

When must the award be paid, and what if it is late?

The employer must settle your dues within one week if the employer ended the contract, and within two weeks if you ended it (Article 88). If that period passes without payment:

1. Keep a copy of your contract, your latest payslips, and any message that proves the date your work ended.
2. File an amicable settlement request on the Ministry of Human Resources and Social Development (MHRSD) platform. If it does not end in a settlement, the case is referred to the Labor Court, and the law requires labor cases to be heard urgently (Article 234).

Do not wait: under Article 234, a labor claim is not heard after twelve months from the end of the employment relationship, unless the claimant has an excuse the court accepts or the employer admits the right.

This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.

Practical solutions for both sides

If you are the employee:

• Calculate your award yourself on your last wage and compare it with the employer's settlement before you sign.
• If the employer calculates on the basic salary only and you have fixed allowances, object in writing.
• If payment is later than the legal period, file an amicable settlement request, and do not let 12 months pass.
• If you are on a fixed-term contract and plan to resign when you are close to five or ten years of service, calculate the difference first. A few months can move you from one third to two thirds, or from two thirds to the full award.
• If your contract is indefinite, end it with written notice at least 30 days ahead, keep proof that you delivered it, and object in writing if your award is calculated on the resignation scale.

If you are the employer:

• Calculate the award on the last wage, including everything the law counts as wage.
• Do not apply the Article 85 scale to an employee who ended an indefinite contract with proper notice. The scale is for resignation from a fixed-term contract.
• Pay the dues within one week if you ended the contract, and within two weeks if the employee ended it.
• Get a clear final settlement (clearance) that lists each item and amount.
• If you rely on Article 80, document the incident and hear the worker's objection in writing before termination.

A small difference in the calculation can mean a large sum. Send us your last payslip, your length of service and the reason your contract ended on WhatsApp, and we will review the calculation with you.