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 |
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 |
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 25,000Next 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