The end-of-service award is one of the most common sources of dispute between employees and employers. Here are the core rules for calculating it under the Labour Law.
The general rule
Under Article 84 of the Labour Law, when the employment relationship ends the employer must pay the employee an award for the period of service: half a month’s wage for each of the first five years, and one month’s wage for each following year. The last wage is the basis of calculation, and partial years are paid pro rata.
If the employee resigns
Under Article 85, an employee who resigns is entitled to one third of the award after at least two and no more than five consecutive years of service, two thirds after more than five and less than ten years, and the full award after ten years or more.
When the full award is due
Under Article 87, the employee is entitled to the full award if they leave work due to force majeure beyond their control. A female employee is also entitled to the full award if she ends the contract within six months of her marriage or three months of giving birth.
A worked example
An employee with a last wage of SAR 10,000 who served 8 years and whose contract ended without resignation:
- First five years: 5 × 5,000 = SAR 25,000
- Next three years: 3 × 10,000 = SAR 30,000
- Total award: SAR 55,000
Had the employee resigned, they would be entitled to two thirds of this amount, since service exceeded five years but was under ten.
A note of caution
What counts as the “last wage” follows the Law’s definitions, and the result may depend on how the contract ended and on any prior settlements. We recommend seeking legal advice before signing any final clearance.
This article is for general awareness and does not constitute legal advice. Contact us for an opinion on your specific case.