Saudi End of Service Award: Rules Explained

The Article 84 formula

Article 84 of the Saudi Labour Law states the formula in one paragraph. The employer pays half a month's wage for each year of the first five years of service, and one full month's wage for each year after that. The last wage received is the basis, and any fraction of a year is paid in proportion to the time actually worked.

To calculate by hand, work in order. First, find your last wage, meaning basic salary plus every fixed allowance in your contract. Second, measure your service from the first working day to the last, including fractions. Third, apply the two rates. Fourth, if you resigned, apply the Article 85 share below. The amount depends on only three things: your last wage, how long you served, and how the job ended. The two mistakes that cost people money are entering the basic salary instead of the full wage, and measuring the service period wrong.

Which wage counts

Article 84 calculates the award on the last wage, and the Labour Law defines wage broadly: the basic wage plus all amounts due to the worker, including fixed allowances and benefits in kind. In practice that means basic salary plus housing, transport and food allowances and regular cost-of-living increases.

A contract that pays 4,500 riyals basic plus 1,500 riyals housing gives a wage of 6,000 riyals for the award, not 4,500 riyals, and employers who calculate on the basic figure alone underpay by a quarter. There are two honest exceptions. Article 86 allows the contract to exclude commissions, sales percentages and similar payments that rise and fall, if the agreement says so clearly. One-off discretionary bonuses are also normally outside the wage. If a large part of your pay is variable, the last wage is usually taken as an average of recent months, so ask HR in writing which months and components they used. The award always uses the last wage, never an average of past salaries, so a late raise increases the whole award and a late cut reduces it. Part-year service counts proportionally, so six extra months count as half a year, not as a rounded-down zero.

Worked examples

Ahmed worked in Riyadh for seven years. His last monthly wage was 6,000 riyals, counting basic salary plus his housing allowance. His contract ended normally, so he receives the full award. The first five years give 15,000 riyals. The next two years give 12,000 riyals. The total is 27,000 riyals. If Ahmed had resigned after the same seven years, Article 85 would cut the award to two thirds: 18,000 riyals.

Resignation shares and exceptions

When the employer ends the contract, or a fixed-term contract simply runs out, the full award is paid at any length of service. Resignation is different. Article 85 pays only a share, and the share grows with service: less than two years gives nothing, zero; two years to less than five years gives one third; five years to less than ten years gives two thirds; and ten years or more gives the full award.

Article 87 then restores the full award to a resigning employee in two situations: when the worker leaves because of force majeure, a circumstance beyond their control, and when a female worker ends her contract within six months of her marriage or within three months of giving birth, under the conditions the article sets. Article 81 covers a third route: an employee who leaves without notice because the employer broke the contract, for example by not paying wages, keeps all their rights. The reduction in Article 85 bites only when the worker chooses to leave early. The exception is dismissal for the serious misconduct grounds listed in Article 80, such as assault, major financial damage or long unexplained absence, where the award itself can be lost. A standard guide does not model Article 80 cases: if your termination letter cites Article 80, get advice before relying on any figure. No award is payable for service that ends during probation, and since the 2025 amendments probation can run to 180 days. A worker dismissed in month five of a six-month probation therefore receives nothing under Article 84.

2025 amendments, leave and deadlines

The Labour Law amendments approved in 2024 and in force since 19 February 2025, under Royal Decree M/44, changed the rules around the award without touching its formula. Resignation now has a formal procedure and counts as accepted if the employer does not respond within 30 days. The maximum probation period rose from 90 to 180 days. Notice on a monthly-paid indefinite contract is now 60 days from the employer and 30 days from the employee, and maternity leave rose to 12 weeks on full pay. Articles 84 to 88, the provisions that fix the award itself, were not changed.

Cross-check your figure with the Saudi end of service tool. See all guides for the country on the Saudi Arabia page, and browse more guides on the Calcotia blog.