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End-of-Service Award in Saudi Arabia: Articles 84-87 Calculation Guide for Employers
Under Saudi Labor Law (Royal Decree M/51), Articles 84-87 govern the end-of-service award (mukafa'at nihayat al-khidma): employers owe half a month's wage for each of the first five years of service and a full month's wage for each year after that, calculated on the worker's last wage and pro-rated for partial years. Article 85 scales the award down on resignation - none under two years, one-third from two to five years, two-thirds from five to ten years, and the full amount at ten or more years - while Article 87 preserves the full award for force-majeure departures and for female employees resigning within six months of marriage or three months of childbirth. Article 80 lets an employer dismiss for a narrow, exhaustively listed set of nine serious-misconduct grounds without paying the award, provided the worker is given a chance to state his objections before termination; the law's official English text does not set a fixed day-count for how quickly the employer must act, despite some secondary sources citing a "15 working days" rule. The Ministry of Human Resources and Social Development (MHRSD/HRSD) publishes and enforces these rules, with unresolved disputes going to Saudi's labor courts.
Steps
- Classify the separation type - Determine whether the employee resigned, was terminated without cause, or was dismissed for cause under Article 80 - each path sets a different multiplier under Articles 84-85.
- Confirm the wage base - Use the employee's "Actual Wage" as defined by the Labor Law: basic wage plus commissions/sales percentages, allowances, and other regular contractual increases (Article 2). Commissions and similar variable pay are included in the Article 84 award calculation by default - Article 86 lets the employer and worker agree (in writing) to exclude all or part of them, but exclusion is the exception, not the automatic default.
- Calculate the full award - Multiply half a month's wage by each of the first 5 years of service, then a full month's wage by each subsequent year, pro-rating any partial final year.
- Apply the resignation scale-down if applicable - Under Article 85, reduce the award to zero (under 2 years), one-third (2-5 years), or two-thirds (5-10 years); pay it in full at 10+ years or if Article 87's force-majeure/marriage/childbirth exceptions apply.
- Check Article 80 grounds before forfeiting the award - If dismissing for cause, confirm the violation falls within Article 80's exhaustive list of nine grounds and that the worker is given a chance to state his objections before termination. Labor courts interpret these grounds narrowly and do weigh how promptly the employer acted, but the law's official English text sets no fixed day-count for that response window - the commonly cited "15 working days" figure could not be confirmed against the primary text.
- Settle and document the final payment - Pay the calculated end-of-service award together with final wages and accrued leave within the Article 88 deadlines (one week of contract end if employer-initiated, two weeks if the worker resigned), and retain signed settlement records in case of an HRSD or labor-court dispute.
Timeline
Article 88 sets this explicitly: the employer must pay the worker's wages and settle his entitlements (including the end-of-service award) within a maximum of one week from the end of the contractual relation; if the worker ends the contract (resignation), the employer has up to two weeks. The employer may deduct any work-related debt owed by the worker from the final settlement. Unexplained delays beyond these windows are grounds for an HRSD complaint. (Verified directly against the official HRSD-hosted Labor Law PDF, whose file path is dated 2023-02; if a later amendment changed this specific article's wording, that would not be reflected here.)
Cost & fees
No government fee applies to calculating or paying the end-of-service award itself - it is a direct employer wage obligation, not a GOSI-administered fund (unlike UAE-style DEWS savings schemes). Employers must keep GOSI/payroll records current to process an employee's exit.
Some figures on this page vary by jurisdiction, zone or nationality, or could not be independently confirmed from a public source at time of writing - confirm the current figure with the regulator before relying on it.
Sources
- Ministry of Human Resources and Social Development (MHRSD) - End-of-Service Award Regulations
- Ministry of Human Resources and Social Development (MHRSD) - Saudi Labor Law (Royal Decree M/51), official English text PDF, Articles 80 and 84-88 (fetched and read directly for this fact-check)
- Cercli - End Of Service Benefits According To Saudi Labour Law
- Etqan Law Firm - Article 84 Saudi Labor Law: Guide To Gratuity Calculations
- Saudi EOSB Calculator - Entitlement: Resignation Tiers (Article 85) & Full Award
- AHYSP - The Legal Framework Governing Termination and Resignation in Saudi Arabia (Articles 80/81)
Frequently asked
If an employee resigns, do they still get an end-of-service award?
Yes, on a sliding scale under Article 85: nothing if service is under 2 years, one-third of the full calculation for 2-5 years, two-thirds for 5-10 years, and the full award at 10 or more years of continuous service.
What wage is the award calculated on?
The employee's "Actual Wage" as defined in Article 2 - basic salary plus commissions/sales percentages, allowances, and other regular increases tied to the work or contract. Under Article 86, commissions and similar variable pay are included by default; the employer and worker may agree in writing to exclude all or part of them, but that exclusion is the exception, not the default (the opposite of what some HR guidance implies).
Can we dismiss an employee without paying the end-of-service award?
Only under Article 80's exhaustive list of nine serious-misconduct grounds (e.g., assault, dishonesty/integrity violations, deliberate material-loss conduct, forgery to obtain the job, unlawful use of position for personal gain, trade-secret disclosure), and only after giving the worker a chance to state his objections before termination; these grounds are interpreted narrowly by labor courts and cannot be extended by analogy. The law's official text sets no fixed day-count for how fast the employer must act (a commonly cited "15 working days" figure could not be confirmed against the primary text), though courts do weigh delay between discovery and dismissal as a factor.
Are there exceptions where a resigning employee still gets the full award?
Yes - Article 87 grants the full end-of-service award regardless of tenure if the worker resigns due to force majeure beyond their control, or if a female employee ends her contract within six months of marriage or three months of giving birth.