The end-of-service benefit is an entitlement under the Labor Law issued by Royal Decree M/51, as amended by Royal Decree M/44 of 1446H, effective 19 February 2025, and it is calculated on the last actual wage — not the basic salary alone. This page explains the rule, which pay components enter the base, how resignation changes the fraction, and worked examples you can verify yourself. For a detailed figure for your own case, use the free end-of-service calculator.

The base rule — Article 84

At the end of the employment relationship the worker is entitled to:

  • Half a month's wage for each of the first five years.
  • A full month's wage for each year after the fifth.
  • A proportional share of the award for any fraction of a year served.

As a practical formula:

Full award = (actual wage × 0.5 × service years up to 5) + (actual wage × service years beyond the fifth year)

For an approximate daily calculation when tenure includes months and days: for the first five years, actual wage × service days within the first five years ÷ 720; after the fifth year, actual wage × service days beyond it ÷ 360.

What counts as the actual wage?

The Labor Law defines the actual wage as the basic salary plus increments, allowances, benefits, and commissions and other components owed to the worker under the contract, the work organization regulation, or custom, with detailed rules and limits for in-kind benefits and variable components. In practice:

  • Housing and transport allowances usually enter the base when they are due and regular allowances.
  • Temporary expenses reimbursed against invoices are normally not part of the actual wage.
  • The most common mistake is calculating the award on basic salary only — which visibly understates the figure.

Note: do not confuse the social insurance (GOSI) contribution wage with the EOSB wage base; each has its own definition and rules.

How resignation changes the fraction — Article 85

When the relationship ends because the contract expires or the employer ends it, the full Article 84 rule applies unless a specific statutory ground changes the effect. On resignation, these fractions apply:

| Tenure at resignation | Entitlement | | --- | --- | | Under 2 years | No award | | 2 to 5 years | One third | | Over 5, under 10 years | Two thirds | | 10 years or more | Full award |

Some cases restore the full award even though the worker ended the contract: a female employee who ends the contract within six months of marriage or within three months of childbirth, and any worker whose relationship ends due to force majeure.

Worked examples you can verify

Example 1 — resignation after 4 years, actual wage SAR 9,000:

  • Full award: 9,000 × 0.5 × 4 = SAR 18,000.
  • Resignation fraction (two to five years): one third.
  • Entitlement: SAR 6,000.

Example 2 — resignation after 8 years, actual wage SAR 12,000:

  • First 5 years: 12,000 × 0.5 × 5 = SAR 30,000.
  • Next 3 years: 12,000 × 3 = SAR 36,000.
  • Full award: SAR 66,000.
  • Resignation fraction (over five, under ten): two thirds.
  • Entitlement: SAR 44,000.

These figures come before any other statutory entitlements or deductions. To run your exact inputs — contract type, reason the relationship ended, wage, and tenure in years, months, and days — use the end-of-service calculator, and compare the result with the official calculators listed in the sources below. More labor material is available in the labor section.

When do you need a licensed lawyer?

The rules above cover the general case, but the calculation becomes case-specific in situations such as: disputes over classifying pay components (is a commission or allowance part of the actual wage?), disagreement over why the relationship ended and its effect on entitlement, special written arrangements in the contract or regulation, or interrupted service and unpaid leave affecting the count. In those situations, review by a licensed lawyer or labor advisor working from the actual case documents — the contract, payslips, and termination notices — is the reliable way to determine the exact entitlement, and the Labor Court hears any dispute that amicable settlement does not resolve.