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How End-of-Service Pay Is Calculated in KSA?

Learn how end-of-service benefits are calculated for direct employees in KSA - final salary, gratuity and leave

Sameer B. avatar
Written by Sameer B.
Updated over a week ago

Components of End-of-Service Calculation

1. Final Salary

Calculated as:
Daily wage × Days worked in the final month


2. Gratuity Compensation

Gratuity applies only to all employees, regardless of the nationality.

Tenure

Gratuity Entitlement

Less than 1 year

Not eligible

1 to 5 years

15 days' actual salary per year of service

More than 5 years

30 days' actual salary per year of service

(for each year beyond 5 years)

  • Actual salary = basic salary + all allowances.

Additionally, the gratuity amount depends on the contract term and termination reason.

For Limited-Term (definite) contracts:

Termination reason

Gratuity calculation

Contract ends as agreed (i.e., it reaches the end date without renewal)

The employee is entitled to full gratuity

Employer termination, before its end without cause

The employee is entitled to full gratuity

Employee resignation, before its end

• Less than 2 years of service → Not eligible
• 2 to 5 years of service → 1/3 of the full gratuity
• 5 to 10 years of service → 2/3 of the full gratuity
• More than 10 years of service → Full gratuity

Employee misconduct

Not eligible

For Unlimited-Term (indefinite) contracts:

Termination reason

Gratuity calculation

Employer termination, without cause

The employee is entitled to full gratuity

Employee resignation

• Less than 2 years of service→ Not eligible
• 2 to 5 years of service → 1/3 of the full gratuity
• 5 to 10 years of service → 2/3 of the full gratuity
• More than 10 years of service → Full gratuity

Employee misconduct

Not eligible

Example

Scenario
An employee resigns after 7 years of service with a monthly salary of SAR 10,000.

Step 1: Calculate Full Gratuity

According to Saudi labor law, gratuity is calculated as:

  • First 5 years: Half a month’s salary per year
    → 5 × (10,000 ÷ 2) = SAR 25,000

  • Next 2 years: One month’s salary per year
    → 2 × 10,000 = SAR 20,000

Total gratuity (before applying resignation rule): SAR 45,000

Step 2: Apply Resignation Rule

Since the employee resigned after more than 5 but less than 10 years of service, they are entitled to two-thirds of the full gratuity.

Final EOSB payable: 45,000 × 2/3 = SAR 30,000


3. Unused Vacation Leave

Calculated as:
Daily wage × Unused vacation days

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