End-of-service benefits are among the most disputed employment questions, usually because each side calculates them differently. This article sets out the general rule under the Saudi Labour Law, the difference between resignation and termination, and the cases where the benefit is lost.
The general rule
The award is based on length of service and the final wage:
- Half a month’s wage for each of the first five years.
- A full month’s wage for each year after that.
- Part of a year counts in proportion to the time served, so extra months are not lost.
It is calculated on the final wage, taking into account which fixed allowances form part of the wage under the contract and the nature of the obligation.
Resignation vs termination
Where the relationship ends by the employer’s decision or at the end of the contract term, the employee is entitled to the full award under the rule above. Where the employee resigns, the entitlement depends on length of service:
- Less than two years: no award.
- Two to under five years: one third of the award.
- Five to under ten years: two thirds of the award.
- Ten years or more: the full award.
There are also cases where the employee keeps the full award despite leaving — for instance leaving for a legitimate reason attributable to the employer, or force majeure beyond the employee’s control. For that reason, the reason for leaving should be documented in writing, not verbally.
When is the award lost?
The law sets specific cases allowing termination without an award and without notice. They are exceptional and tied to both substantive and procedural conditions: proving the incident, investigating with the employee, and allowing a defence within the statutory periods. Skipping those steps turns the termination into an unlawful one, with compensation payable.
Entitlements often forgotten at settlement
- Payment for untaken annual leave.
- Unpaid wages, allowances and overtime.
- A return ticket for an expatriate employee where the contract provides for it.
- A service certificate and clearance without wording that harms the employee’s prospects.
Practical notes for both sides
For employers: make contracts and internal regulations explicit about wage and allowances, document warnings and investigations, and settle entitlements within the statutory deadlines to avoid claims.
For employees: keep a copy of the contract, correspondence and payslips, and check the time limit for filing a labour claim before it lapses.
The firm provides employment advisory for contracts, regulations and amicable settlement, and representation before the competent forums where settlement is not possible.
A dispute over end-of-service pay?
Review your position before signing any settlement or release.
This article is general information, not legal advice. Outcomes vary with the contract wording and the facts of each case; always refer to the statute in force.