End of Service Benefits in Saudi Arabia: The Real Formula
End of service benefits, or gratuity, pay half a month’s wage per year for your first five years. After that, each year pays a full month’s wage. Resignation before ten years reduces the amount on a sliding scale, and the payment is not taxed.
Do This Next:
- Confirm your years of service and reason for leaving
- Check whether your wage base includes allowances or not
- Apply the formula below to estimate your entitlement
The Basic Formula for End of Service Benefits in KSA
Two Saudi Labor Law articles govern this entitlement. Article 84 sets the accrual formula, and Article 85 sets how resignation reduces it. The wider set of rules those articles sit in is covered in the Saudi labor law basics guide.
The core calculation is straightforward on its own.
- First 5 years of service: half a month’s wage for each year
- Every year after that: a full month’s wage for each year
Partial years count proportionally. Working four and a half years pays out for four and a half years, not four or five flat.
A Worked Example
Numbers make this easier to follow than the formula alone.
Take a worker earning SAR 10,000 monthly, with 7 years of service, whose contract simply ends.
The first 5 years pay 5 × (10,000 ÷ 2) = SAR 25,000. The remaining 2 years pay 2 × 10,000 = SAR 20,000. Total entitlement: SAR 45,000.
That figure assumes full entitlement. Resignation changes it, covered next.
How Resignation Reduces the Amount?
This scale applies only when you resign, not when your employer ends the contract.
| Years of Service | Resignation Entitlement |
|---|---|
| Under 2 years | Nothing |
| 2 to 5 years | One third of full gratuity |
| 5 to 10 years | Two thirds of full gratuity |
| 10 years or more | Full gratuity |
Source: Saudi Labor Law, Article 85 | Verified: August 2026
Using the same SAR 45,000 example above, resigning inside the 5 to 10 year bracket pays two thirds. That works out to SAR 45,000 × ⅔, or SAR 30,000.
Termination by your employer does not carry this reduction in the general case. You are entitled to the full calculated amount.
The One Detail Sources Genuinely Disagree On
Most guides state a wage base confidently. We found real disagreement worth being honest about rather than picking a side.
Some sources state gratuity is calculated on basic salary only, explicitly excluding housing, transport, and other allowances. Others state it includes basic salary plus fixed, regular allowances such as housing.
Both claims are stated confidently, and both cite Article 84 as their basis. We could not resolve this to a single settled answer that applies uniformly.
What this means practically. Check your own payslip and contract for how your employer defines your calculation wage, rather than assuming either convention.
If a final settlement figure looks wrong, ask specifically which wage components were included. That single question resolves most disputes on this point.
Pro Tip: Request a written breakdown of your final settlement showing the wage figure used for the calculation. A one-line total is much harder to dispute than an itemised figure if something looks off.
When You Get Nothing
A small number of situations remove entitlement entirely, and it is worth knowing them before assuming a payment is guaranteed.
Resignation under two years of service pays nothing under Article 85. Article 80 also lists specific grounds allowing termination without end of service pay. These generally tie to serious misconduct or a fundamental breach of contract.
Outside those specific situations, the entitlement stands regardless of how the employment relationship ends.
Tax and Timing
Two practical questions come up immediately once the calculation itself is settled.
Is it taxed? No. Saudi Arabia has no personal income tax, so the full calculated amount is yours without deduction.
When must it be paid? Reporting indicates payment is expected promptly once employment ends. Delay can expose an employer to a labour complaint and financial penalties under Saudi Labour Law.
If Your Employer Does Not Pay
The escalation route matches the pattern used throughout this cluster for unresolved employer disputes.
File a complaint through MHRSD‘s labour dispute channels if your final settlement is withheld or clearly miscalculated. Documentation matters here just as it does in a sponsorship dispute, so keep your contract, payslips, and any correspondence.
The renewal without kafeel guide covers this same MHRSD escalation process in more detail, since the documentation approach is identical.
Government Employees Follow a Different System
This guide describes private-sector gratuity specifically, and that distinction matters.
Civil servants with 25 or more years of service typically qualify for a monthly pension through the Public Pension Agency. That replaces the lump-sum gratuity described here. That is a separate system entirely from what this guide covers.
If you work in the public sector, confirm which system applies to you before using any private-sector formula.
Frequently Asked Questions
How is end of service gratuity calculated in Saudi Arabia?
Half a month’s wage per year for your first five years, then a full month’s wage per year after that. Partial years are calculated proportionally.
Do I get anything if I resign before 2 years?
No, resigning with under two years of service entitles you to nothing under Article 85. Entitlement begins at the two year mark.
Is my gratuity calculated on basic salary or total salary?
Sources genuinely disagree, with some citing basic salary only and others including fixed allowances like housing. Check your own payslip and contract terms directly rather than assuming either convention.
Is end of service gratuity taxed in Saudi Arabia?
No. Saudi Arabia has no personal income tax, so the full calculated gratuity amount is paid without any deduction.
Final Thoughts
The formula itself is simple and well established. What varies, and what deserves your actual attention, is the wage figure it gets applied to.
Confirm that one detail with your employer before you leave a job, not after. It saves the most common source of dispute over a final settlement.
Last verified: July 2026
Reviewed by: KSA Content Team
Source: Saudi Labor Law, Articles 84, 85, and 80; MHRSD labour dispute guidance
Note: this guide provides general calculation guidance, not a legal determination for your specific case. Final entitlement depends on your contract terms and circumstances. Consult MHRSD or a licensed Saudi labour advisor for guidance specific to your situation.
