Saudi Arabia End of Service Gratuity Calculator 2026

How Saudi Arabia End-of-Service Benefits Work

Saudi Arabia's end-of-service benefit (also referred to as gratuity or "mukafa'at nihayat al-khidma") is governed by Articles 84-88 of the Saudi Labour Law (Royal Decree No. M/51, dated 23/08/1426H). The system provides a lump-sum payment to employees upon termination of their employment, serving as a form of retirement benefit -- particularly for the approximately 11 million expatriate workers who are not covered by the GOSI pension system.

The Saudi gratuity system is notably different from the UAE and Qatar in two important respects: first, it uses the "last actual wage" (which can include regular allowances) rather than just basic salary; and second, it applies significant reductions for employees who resign with fewer than 10 years of service.

The Saudi Gratuity Formula

Under Article 84 of the Saudi Labour Law, the end-of-service award is calculated as follows:

• First five years: Half a month's wage for each year of service.
• After five years: One full month's wage for each additional year of service.
• Basis: Calculated on the "last actual wage" received by the employee.
• Pro-rata: Fractions of a year are calculated proportionally.

Resignation Reductions (Article 85)

This is the most critical difference between Saudi gratuity and the systems in the UAE and Qatar. Under Article 85, if the employee resigns (as opposed to being terminated by the employer), the following reductions apply:

• Less than 2 years of service: No gratuity entitlement.
• 2 to 5 years of service: The employee receives one-third of the calculated gratuity.
• 5 to 10 years of service: The employee receives two-thirds of the calculated gratuity.
• 10 or more years of service: The employee receives the full calculated gratuity.

These reductions do not apply when the employee is terminated by the employer (for reasons other than gross misconduct), when the contract expires, or when the employment ends through force majeure.

Example Calculations

Scenario 1: Employee terminated after 8 years, last wage SAR 12,000/month

• First 5 years: 0.5 x 12,000 x 5 = SAR 30,000
• Next 3 years: 1 x 12,000 x 3 = SAR 36,000
• Total: SAR 66,000 (full amount, no reduction)

Scenario 2: Employee resigns after 8 years, last wage SAR 12,000/month

• Full calculated amount: SAR 66,000 (as above)
• Resignation reduction (5-10 years): two-thirds
• Total payable: SAR 66,000 x 2/3 = SAR 44,000

Scenario 3: Employee resigns after 3 years, last wage SAR 12,000/month

• Full calculated amount: 0.5 x 12,000 x 3 = SAR 18,000
• Resignation reduction (2-5 years): one-third
• Total payable: SAR 18,000 x 1/3 = SAR 6,000

Understanding "Last Actual Wage"

The Saudi Labour Law defines "actual wage" in Article 2 as: "the basic wage plus all other entitlements stipulated for the worker in the employment contract, or work rules, or by reason of the employer's practice, regardless of the type or description of such entitlements."

This definition is notably broader than the UAE's "basic salary" standard. In practice, the "last actual wage" for gratuity purposes may include:

• Basic salary
• Housing allowance (if regularly paid and contractually stipulated)
• Transport allowance (if regularly paid)
• Commission (if regular and predictable)
• Other regular contractual allowances

Irregular or discretionary payments such as occasional bonuses, overtime, or one-time awards are generally excluded. The specific components included depend on the employment contract terms and how allowances are structured. Employees should review their contract carefully and, if uncertain, consult a labour lawyer or the Ministry of Human Resources.

Special Provisions for Women (Article 87)

Article 87 of the Saudi Labour Law provides special gratuity provisions for female employees:

• A female employee who terminates her employment contract within six months of her marriage is entitled to the full end-of-service award, without any resignation reductions.
• A female employee who terminates her contract within three months of giving birth is similarly entitled to the full award.

These provisions recognise that some women may need to leave employment due to major life events and ensure they are not penalised financially for doing so. The full gratuity is paid regardless of the length of service (provided the minimum one-year requirement is met).

Gross Misconduct Exceptions (Article 80)

Under Article 80, an employer may terminate an employee without notice, compensation, or end-of-service award if the employee:

• Assaults the employer, manager, or a colleague during work
• Fails to perform essential duties or disobeys legitimate orders despite written warning
• Is proven to have engaged in misconduct or dishonest conduct
• Deliberately causes material loss to the employer
• Commits forgery to obtain employment
• Is absent without valid reason for more than 20 non-consecutive days or more than 10 consecutive days in one year (after written warning)
• Exploits their position for personal gain
• Discloses industrial or commercial secrets

Interaction with GOSI

For Saudi nationals, the GOSI pension system and end-of-service benefits operate in parallel. Saudi employees receive both GOSI pension benefits (based on their contribution history) and end-of-service gratuity. However, in certain cases, employers may argue that GOSI contributions should be considered as partial satisfaction of the gratuity obligation. Employees should be aware of this potential issue and seek advice if their employer attempts to offset GOSI contributions against gratuity.

For expatriate employees, GOSI covers only occupational hazard insurance (2% from employer), and the end-of-service gratuity is the primary financial benefit upon leaving employment. There is no pension component for expatriates under GOSI.

Frequently Asked Questions

Sources

• Saudi Labour Law -Royal Decree No. M/51 (Articles 80, 84-88)
• Ministry of Human Resources and Social Development (HRSD) -hrsd.gov.sa
• General Organization for Social Insurance (GOSI) -gosi.gov.sa