End-of-Service Award: How Is It Calculated, and What Changes on Resignation?

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Enter the start and end dates, wage and reason for ending the relationship in the end-of-service award calculator to get an instant estimate under Articles 84, 85 and 87, then use the statutory deadlines calculator to find the last date to file a claim.

The basic rule: Article 84

When the employment relationship ends, the worker is entitled to an award for the period of service, calculated on the basis of half a month's wage for each of the first five years and one month's wage for each subsequent year. The last wage is taken as the basis for the calculation, and the worker is entitled to an award for fractions of a year in proportion to the time spent working in them.

Example: eight and a half years of service

Last wage of SAR 10,000 and service of 8 years and 6 months:

• First five years: 5 × 5,000 = SAR 25,000.
• Next three years: 3 × 10,000 = SAR 30,000.
• Final half year: 0.5 × 10,000 = SAR 5,000.

Total: SAR 60,000, before considering the effect of the reason the relationship ended.

On resignation: Article 85

If the relationship ends with the worker's resignation, entitlement varies with the length of service:

• Less than two consecutive years: no award.
• From two to five years: one-third of the award.
• From more than five years to less than ten: two-thirds of the award.
• Ten years or more: the full award.

In the previous example, if the relationship ended by resignation after 8 and a half years, the worker would be entitled to two-thirds of SAR 60,000, i.e. SAR 40,000.

Full entitlement despite leaving work: Article 87

A worker is entitled to the full award if they leave work as a result of force majeure beyond their control, and a female worker is likewise entitled to the full award if she ends the contract within six months of the date of her marriage contract or within three months of giving birth.

Which wage is the award calculated on?

It is calculated on the last wage as defined by the Law, and the way allowances and commissions are stated in the contract and pay slips affects the calculation; so review the contract and payroll records before relying on any figure.

Before signing the final release

Do not sign a final release before verifying the counted length of service, the last wage and the recorded reason for ending the relationship, and whether the release covers your other entitlements such as unused leave. If there is a dispute, start with a request for amicable settlement within the statutory period.

Calculating the End-of-Service Award When the Employer Terminates the Contract

If the employer terminates the contract outside the cases permitted by Article 80, or the term of a fixed-term contract expires, the end-of-service award is calculated under Article 84 without the resignation reduction.

Example One: A final wage of SAR 7,000, service of 4 years and 3 months, and the employer terminated the contract.

• The four years: 4 × 3,500 = SAR 14,000.
• The three months: 0.25 × 3,500 = SAR 875.

The total is SAR 14,875, due in full because the end of the relationship was not by the employee's resignation.

Second example: a final wage of SAR 15,000 and 12 years of service. The first five years: 5 × 7,500 = SAR 37,500, and the following seven years: 7 × 15,000 = SAR 105,000, for a total of SAR 142,500.

Calculating the End-of-Service Award upon Resignation: Practical Examples

In case of resignation, the award is first calculated in full under Article 84, and the portion set by Article 85 is then applied to it according to the length of service. The article provides that the employee is entitled to one-third if their service was two consecutive years and did not exceed five years, two-thirds if it exceeded five consecutive years without reaching ten, and the full award if it reached ten years or more.

• One year and eight months: no award is due, because the service is less than two consecutive years.
• Three years at a wage of SAR 6,000: The full award is 3 x SAR 3,000 = SAR 9,000, and the amount due upon resignation is one-third of it: SAR 3,000.
• Seven years at a wage of SAR 12,000: The full award (5 × 6,000) + (2 × 12,000) = SAR 54,000, of which two-thirds is due: SAR 36,000.
• 12 years at a wage of SAR 15,000: Service reached ten years, so the full amount calculated in the previous example is due: SAR 142,500.

When Is the Award Not Due? And When Is It Due in Full Despite Leaving Work?

• Termination under Article 80: The Law allows the employer to terminate the contract without an award in specific cases and subject to their conditions, including giving the employee the opportunity to state the reasons for objecting. For detail, read Explanation of Article 80 of the Labor Law.
• Leaving work under Article 81: An employee is entitled to leave work without notice while retaining all their statutory rights in certain cases, including the employer's failure to perform its material contractual or statutory obligations; where this is established, the employee is not treated as having simply resigned.
• Exceptions under Article 87: force majeure beyond the employee's control, and a female employee terminating the contract within six months of her marriage or three months of giving birth.

When Is the End-of-Service Award Paid?

Article 88 of the Labor Law requires the employer to pay the employee's wages and settle his entitlements within no more than one week from the date the contractual relationship ends. If it is the employee who terminated the contract, his entitlements must be settled in full within no more than two weeks. If payment is delayed or a dispute arises over the amount, see the Labor & Employment Disputes service to determine the appropriate path within the limitation period for hearing the claim.

Common Mistakes in Calculating the End-of-Service Award

• Applying the resignation fraction only to the years following the first five, when it should correctly be applied to the entire award.
• Disregarding fractions of a year, even though the Law counts them in proportion to the part the employee served.
• Adopting an earlier wage instead of the final wage.
• Confusing the end-of-service award with compensation for unlawful termination under Article 77 of the Labor Law, as these are two independent entitlements.
• Not verifying the recorded reason for the end of the relationship, since it determines which article the entitlement is calculated under.

Frequently asked questions

How do I calculate the end-of-service award?

Calculate half of the final wage for each of the first five years, a full wage for each year after that, and add the fraction of a year on a pro rata basis. Then look at the reason the relationship ended: if it was a resignation, what Article 85 specifies applies; otherwise, the full award is due unless the termination was under Article 80.

How Much Is the End-of-Service Award upon Resignation after Seven Years?

If the service exceeds five years but does not reach ten, a resigning employee is entitled to two-thirds of the award. With a final wage of SAR 12,000, the full award for seven years of service is SAR 54,000, and the amount due upon resignation is SAR 36,000. The figure varies according to the applicable wage and the actual length of service.

Am I entitled to an end-of-service award if I resign before two years?

Under Article 85, a resigning employee is not entitled to the end-of-service award if their service is less than two consecutive years. Exceptions are set out in Article 87, such as leaving work due to force majeure beyond the employee's control, or a female employee terminating the contract within six months of her marriage or three months of giving birth.

When must the employer pay the end-of-service award?

Article 88 of the Labor Law requires settling the employee’s dues and paying their wage within no more than one week from the end of the contractual relationship. If it was the employee who terminated the contract, their dues in full are settled within a period not exceeding two weeks.