What are end-of-service benefits in Saudi Arabia?
End-of-service benefits (ESB, also called EOSB or gratuity) are a mandatory lump sum every private-sector employer in Saudi Arabia must pay when an employment relationship ends. The entitlement is set by Article 84 of the Saudi Labor Law and accrues from your first day of work — there is no minimum service period when the employer ends the contract. Unlike the UAE, the award is calculated on your last full wage, not basic salary alone, and there is no upper cap on the total payout.
How do you calculate end of service in Saudi Arabia?
The Article 84 formula has two tiers: half a month's wage for each of the first five years, then one full month's wage for every year after that. Partial years are paid pro rata. For example, on a last wage of SAR 10,000 with 8 years of service: first 5 years = 10,000 × 0.5 × 5 = SAR 25,000; next 3 years = 10,000 × 3 = SAR 30,000; total award = SAR 55,000. Working elsewhere in the Gulf? The UAE gratuity calculator uses a different 21/30-day formula.
Which salary is used for the Saudi end-of-service award?
The law uses your last actual wage, defined as basic pay plus the fixed, recurring allowances paid to you — typically housing, transport, and any regular communication allowance. Variable items such as one-off bonuses, overtime, and performance incentives are normally excluded. This is the single biggest reason online estimates differ from an employer's final settlement: entering basic salary alone will significantly understate your award, so use the full monthly package your contract treats as wage.
What happens to your gratuity if you resign in Saudi Arabia?
Article 85 reduces the award when you resign voluntarily, on a sliding scale by length of service:
- Less than 2 years: no award at all
- 2 to 5 years: one-third of the calculated award
- More than 5 but under 10 years: two-thirds of the award
- 10 years or more: the full award, with no reduction
If your employer terminates the contract or it simply expires, no reduction applies and you receive the full Article 84 amount.
How much is end of service after 10 years in Saudi Arabia?
Ten years is the threshold where resignation stops costing you anything. On a last wage of SAR 15,000 with exactly 10 years: first 5 years = 15,000 × 0.5 × 5 = SAR 37,500; next 5 years = 15,000 × 5 = SAR 75,000; total = SAR 112,500 — paid in full whether you resign or are terminated. Resigning one year earlier at 9 years would pay only two-thirds of SAR 97,500, or SAR 65,000. Before you commit a payout of this size, a compound growth calculator shows what it becomes if invested rather than spent.
Are there exceptions to the Saudi resignation reduction?
Yes. Under Article 87, several situations pay the full award regardless of the Article 85 scale: a female employee who resigns within six months of marriage or within three months of giving birth, an employee who leaves because of force majeure beyond their control, and cases of death or permanent disability. Conversely, Article 80 allows an employer to dismiss an employee without any end-of-service award for specific grave breaches, such as assault, fraud, or serious violation of duties.
Is end-of-service pay taxable in Saudi Arabia?
No. Saudi Arabia levies no personal income tax, so your end-of-service award is received in full without deduction at source. Employers may lawfully offset outstanding loans or salary advances if there is a written agreement. Expats from countries taxing worldwide income — the United States, for instance — may still have to declare the payment at home. The award should be settled within one week of the contract ending, or up to two weeks if you are the one resigning. If you are weighing a Gulf move against staying, the UAE salary calculator helps compare packages across the region.