End of service benefits (ESB) are among the most important employee rights defined under the Saudi Labor Law. Yet, many employees—and even some employers—are unclear about how these benefits are calculated, when they are due, and what exceptions apply.
Understanding the rules governing end of service benefits is essential for maintaining compliance, avoiding disputes, and ensuring a fair working relationship across all sectors.
This comprehensive guide breaks down the Saudi end of service rules, the calculation method, eligibility conditions, and the most common scenarios employees should be aware of.
1. What Are End of Service Benefits in Saudi Arabia?
End of service benefits are a mandatory financial entitlement paid by employers to employees when their employment relationship ends, regardless of the nature of the contract (fixed or unlimited).
According to Article 84 of the Saudi Labor Law, ESB is a form of financial acknowledgment for the employee’s service and loyalty, calculated based on:
- The type of contract
- The reason for termination
- The duration of service
- The employee’s final wage
These benefits help employees transition financially after leaving a job, and help employers maintain transparency and fairness within the workplace.
2. Who Is Eligible for End of Service Benefits?
Under Saudi Labor Law, ESB applies to almost all employees working in the Kingdom, including:
- Full-time employees
- Part-time employees (pro-rated)
- Domestic workers
- Employees with fixed-term or indefinite contracts
Eligibility is determined by:
✔ Length of service
ESB applies once the employee completes two years of continuous service, except in cases where the employer terminates the contract—then the employee may still be eligible even before completing two years.
✔ Nature of termination
ESB varies depending on whether the employee resigned, was terminated, or if the contract ended naturally.
3. How End of Service Benefits Are Calculated
The calculation follows a clear formula outlined in Articles 84 and 85 of the Saudi Labor Law.
For the first five years of service
- Half a month’s wage for each year.
After completing five years
- One full month’s wage for each additional year.
Important notes
- Calculations are based on the last wage the employee received.
- Partial years are calculated proportionally.
- Certain termination reasons may reduce or deny ESB.
Below is a simplified example.
Example Calculation
If an employee worked 7 years at a final wage of 8,000 SAR:
- First 5 years: 5 × (0.5 × 8,000) = 20,000 SAR
- Last 2 years: 2 × 8,000 = 16,000 SAR
- Total ESB = 36,000 SAR
4. End of Service Rules for Resignation
When the employee resigns (Article 85), ESB is reduced:
✔ If service is between 2–5 years
Employee receives one-third of ESB.
✔ If service is between 5–10 years
Employee receives two-thirds of ESB.
✔ If service is more than 10 years
Employee receives the full ESB amount.
✔ If an employee resigns before completing 2 years
No ESB is paid (unless exceptions apply).
5. End of Service Rules for Employer Termination
When the employer terminates the employee (not due to gross misconduct), the employee receives the full ESB amount, regardless of years of service.
This includes:
- Termination due to organizational restructuring
- Redundancy
- Non-renewal of contract
- Business closure
- Any reason that is not covered under Article 80
6. Situations Where Employees Receive Full ESB Even if They Resign
Saudi Labor Law grants full ESB in special cases of resignation:
✔ When a female employee resigns:
- Within three months after childbirth
- Within six months of marriage
✔ When an employee resigns due to:
- Verified harassment
- Unsafe work environment
- Employer violation of contract terms
- Employer failure to pay wages for three months or more
7. Situations Where ESB May Be Reduced or Forfeited
ESB may be affected under specific conditions:
✔ Gross misconduct (Article 80)
If termination occurs due to:
- Assaulting the employer
- Fraud or dishonesty
- Absence without valid reason (as defined by the law)
- Breach of duties intentionally
Then the employer may withhold ESB entirely.
✔ Ending the contract during probation
Employees under probation generally do not receive ESB.
8. End of Service Benefits for Fixed-Term Contracts
If the contract ends naturally and is not renewed:
- Employee receives full ESB.
- If the employee decides not to renew, ESB rules for resignation may apply.
Employers must provide written notice if they do not intend to renew the contract.
9. End of Service Benefits for Indefinite Contracts
For indefinite contracts that end due to:
✔ Employer termination
Employee receives full ESB.
✔ Employee resignation
ESB is calculated as per resignation rules.
10. When Must ESB Be Paid?
According to Saudi Labor Law:
✔ Within 1 week
If the employer terminates the contract.
✔ Within 2 weeks
If the employee resigns.
Delays may result in penalties, depending on the circumstances.
11. Do Employers Have to Provide ESB Certificates?
Yes.
Employees are entitled to a service certificate confirming:
- Employment duration
- Job title
- Last wage
- ESB status (if requested)
This certificate must be issued free of charge.
12. FAQ: Common Questions About Saudi ESB Rules
1. Does ESB include allowances?
Only the basic wage is used, unless the contract explicitly states otherwise.
2. What if an employer refuses to pay ESB?
The employee can file a labor complaint via the Saudi Ministry of Human Resources (MHRSD).
3. Are part-time employees eligible?
Yes—calculated based on actual worked hours.
4. Is ESB affected by job transfer between companies under the same ownership?
If service is continuous, ESB continues accumulating.
Conclusion
Understanding Saudi end of service rules is essential for both employees and employers.
The law is designed to ensure fairness, reward loyalty, and support financial stability when employment ends.
Companies that comply with ESB rules not only avoid legal disputes but also build trust and strengthen their organizational reputation.
With continuous improvements to labor regulations in alignment with Saudi Vision 2030, transparency and employee protection remain core priorities across the Kingdom’s labor landscape.