Formula
What is Saudi end-of-service gratuity?
End-of-service gratuity (مكافأة نهاية الخدمة) is a statutory lump-sum benefit that a Saudi employer must pay to a worker when the employment relationship ends. It's built into the Saudi Labor Law (Royal Decree M/51) Articles 84 and 85, applies to all private-sector employment, and is non-waivable - employers cannot contract out of it. The amount is based on the length of service and the last wage, with a different tier applying based on whether the worker is terminated or resigns.
Saudi Article 84 - the base formula
Article 84 sets the gratuity as: half a month's wage for each of the first 5 years of service, plus a full month's wage for each subsequent year. The 'wage' here is the LAST wage - basic salary plus regular allowances (housing, transport, etc.). Service of partial years is pro-rated. Example: a worker with 7 years of service on a SAR 10,000 last wage receives: (5 × 5,000) + (2 × 10,000) = SAR 45,000 - if the contract ends through termination, retirement, or end of fixed term.
Saudi Article 85 - resignation tiers
If you resign rather than being terminated, Article 85 reduces your entitlement based on length of service: less than 2 consecutive years - NO gratuity; 2 to under 5 years - one-third of the Article 84 amount; 5 to under 10 years - two-thirds; 10 years or more - full gratuity. Exceptions where you still receive full gratuity despite resignation: force majeure, marriage of a female worker (within 6 months of marriage), and certain employer breaches that make continuing impossible (Articles 81, 87).
What counts as 'wage' in the calculation
Saudi Article 2 defines the wage as 'all actually paid amounts to the worker against his work, including increments, allowances, and other entitlements'. This is broader than basic salary - housing, transport, and other regular allowances ARE included in the gratuity calculation basis. One-off bonuses, performance incentives, and end-of-year payments are typically NOT included unless they're contractually fixed and regular. If your payslip shows clear allowances marked as 'basic' + 'housing' + 'transport,' all three combine to form your gratuity basis.
When and how you get paid
Per Article 88, the employer must pay all dues - including the gratuity - within one week of contract end if employment was ended by the employer, or within two weeks if you resigned. Payment is in addition to your final salary, unused leave compensation, and any other accrued entitlements. The amount must be deposited to your registered bank account; you have the right to a written breakdown showing how the amount was computed.
How to claim if your employer doesn't pay
If your employer fails to pay or pays an incorrect amount, you can file a complaint with the Ministry of Human Resources and Social Development (HRSD) through their online portal, the Musaned platform, or visit a Labor Office (Maktab al-'Amal) in person. HRSD offers a free mediation service first; if mediation fails, the case escalates to the Labor Court (Mahkamah al-'Ummaliyyah). Keep these documents handy: signed employment contract, last 3-6 payslips, termination letter, GOSI registration confirmation, and bank statements showing salary deposits.
Frequently asked questions
Both. Per Article 84, you get HALF a month per year for the first 5 years, then 1 full month per year for each year after. So a 7-year service nets (5 × 0.5) + (2 × 1) = 4.5 months of last wage, not 7. After year 10, the formula is the same - no extra bonus tier.
Only if you've served less than 2 years. Per Article 85: less than 2 years - nothing; 2 to under 5 years - one-third; 5 to under 10 years - two-thirds; 10+ years - full amount. Exceptions where you still get full pay despite resigning: force majeure, marriage (for female workers within 6 months), and specific employer breaches.
Saudi Article 2 defines wage broadly: basic salary plus regular allowances (housing, transport, etc.). Your gratuity basis is the TOTAL of these as paid in your last month - not just basic. One-off bonuses and incentive payments are typically not included unless contractually fixed.
No - there's no statutory cap. Long-tenured workers can receive multiple years of salary as gratuity. The longest service period straightforwardly multiplies by 1 month per year after year 5.
Per Article 88, employer must pay all final dues - including gratuity - within 1 week of contract end if they terminated you, or 2 weeks if you resigned. The amount is in addition to your final salary and unused leave compensation.
Sources
- Saudi Labor Law (Royal Decree M/51) - Articles 84-85 on End-of-Service Gratuity— Ministry of Human Resources and Social Development (HRSD), Saudi Arabia
- Saudi Labor Law - Full Text (HRSD official portal)— HRSD, Saudi Arabia
- Musaned platform - labor disputes and worker services— HRSD, Saudi Arabia
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