Saudi Labor Law – End of Service Benefits Explained

End‑of‑Service Benefits (ESB)—sometimes called gratuity or severance pay—are a mandatory lump‑sum payment every employer in Saudi Arabia must make to departing employees. Whether you are an expatriate or a Saudi national, understanding how ESB is calculated under Articles 84–87 of the Saudi Labor Law will help you plan your career moves, negotiate better packages, and ensure you leave a job with everything you are legally owed.

📌 Quick Facts About ESB

  • Applies to all private‑sector workers—Saudi and expat alike.
  • Paid in a lump sum on final settlement.
  • Based on basic salary only, not allowances.
  • Mandatory after two years of service (partial payouts may apply sooner).
  • Governed by Articles 84–87 of Saudi Labor Law.

🧑‍⚖️ Who Is Eligible?

Under Article 84, ESB is due to any employee who:

  • Completes at least two years of continuous service, or
  • Leaves under special circumstances (e.g. retirement, female resignation after childbirth—see Article 87).

ESB applies to workers on fixed‑term, indefinite, and even part‑time contracts if the labor contract explicitly grants the benefit.

📐 Standard ESB Formula (Article 84)

For employer‑initiated terminations or contract expiry:

  • ½‑month basic salary for each of the first five years.
  • 1‑month basic salary for each additional year after year 5.

Example – Monthly basic salary = SAR 5,000, service = 7 years:
(5 years × 0.5 × 5,000) + (2 years × 1 × 5,000) = SAR 22,500

🤝 ESB When the Employee Resigns (Article 85)

Length of Service ESB Entitlement on Resignation
< 2 yearsNo ESB
2 – 5 years⅓ of full ESB
5 – 10 years⅔ of full ESB
> 10 yearsFull ESB

👩‍🍼 Special Cases (Article 87)

Full ESB is due regardless of tenure when a female employee:

  • Resigns within 6 months of marriage, or
  • Resigns within 3 months of giving birth.

🚫 Termination With Cause – Article 80

If the employer proves grave misconduct (e.g. theft, assault, repeated absence), ESB can be partially or entirely forfeited. The employer must document and justify the dismissal; otherwise, labor courts often rule in favor of employees.

⚖️ Article 77 – Dismissal Without Just Cause

A company that fires an employee without legitimate reason before the end of a fixed‑term contract must pay:

  • The full ESB, plus
  • Extra compensation equal to the salary for the remainder of the contract or at least two months’ salary, whichever is higher.

📝 How to Claim Your ESB

  1. Submit official resignation or receive termination letter.
  2. Request a final settlement statement.
  3. Return company assets and clear any liabilities.
  4. Receive payment (bank transfer or cheque) and End‑of‑Service certificate.
  5. If unpaid, file a complaint via the MHRSD portal.

🔢 Online ESB Calculator

For a quick estimate, use the official calculator on the Ministry of Labor website. Enter your basic salary and service years to see your approximate entitlement.

❓ Frequently Asked Questions (FAQ)

1. Is ESB taxable?

No. ESB is tax‑free in Saudi Arabia.

2. Do housing or transport allowances count?

No. ESB calculations use basic salary only unless your contract explicitly states otherwise.

3. Can ESB be paid in installments?

The law expects a lump‑sum payment, but installments can be agreed in writing. Always keep a signed receipt schedule.

4. Does unpaid leave affect ESB?

Yes. Only the actual paid service period counts toward ESB accrual. Long unpaid leave breaks the accrual clock.

✉️ Sample ESB Request Letter


HR Department
[Company Name]

Subject: Request for End‑of‑Service Benefit Settlement

Dear Sir/Madam,

I have completed my notice period following my resignation dated
[dd/mm/yyyy]. In line with Articles 84–87 of the Saudi Labor Law, I kindly
request the calculation and release of my End‑of‑Service Benefits along
with my final settlement.

Thank you for your cooperation.

Sincerely,
[Your Name]
Iqama No: [XXXXXXXXXXXX]

🔚 Conclusion

End‑of‑Service Benefits protect employees who faithfully serve in Saudi Arabia. Whether you resign, retire, or are terminated, knowing the exact formula and legal articles empowers you to claim every riyal you deserve. Always keep documentation, use the official calculator, and escalate disputes to the Ministry of Human Resources if needed.

Read next: How to Use Absher App for All Government Services in Saudi Arabia  |  Resigning Within a Contract – Your Legal Guide

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