Saudi labor law end of service benefits are among the fundamental rights guaranteed by legislation for employees in both the public and private sectors. They aren’t merely a financial compensation at the end of employment but a recognition of the employee’s effort and contribution throughout their service period.
With the continuous development of the Saudi labor market and its legal framework, understanding the details of end of service benefits has become essential for both employers and employees.
In this article, we provide a detailed explanation of the five key points that will help you clearly and practically understand Saudi labor law end of service benefits.
The Concept of End of Service Benefits and Its Legal Foundation
The Saudi Labor Law, issued under Royal Decree No. M/51 and its amendments, regulates the employee’s rights upon termination of employment, including the right to end of service benefits.
End of service benefits are considered a legal obligation on the employer, regardless of whether the contract ends by expiration, resignation, legitimate dismissal, or wrongful termination.
Objectives of Organizing End of Service Benefits
- Protect workers’ rights and ensure their financial security.
- Achieve justice and compensate employees for their service.
- Promote stability in the labor market and strengthen employer-employee relationships.
Recent Legislative Developments
In recent years, there have been significant updates aimed at simplifying the calculation of Saudi labor law end of service benefits, supported by automation tools like the Nawras platform, which provides accurate and transparent end-of-service management solutions.
Conditions for Eligibility for End of Service Benefits
Length of Service
The calculation of end of service benefits depends on the actual years of service, according to the following rules:
- Less than two years: No end of service benefits if the employee resigns voluntarily.
- Two to five years: Entitled to one-third of the benefits upon resignation.
- Five to ten years: Entitled to two-thirds of the benefits upon resignation.
- More than ten years: Entitled to full benefits.
Reasons for Termination of Employment
- End of contract term: Full end of service benefits are granted.
- Resignation: Entitlement depends on the length of service.
- Wrongful dismissal: Full benefits are owed, plus additional compensation.
- Legitimate dismissal (Article 80): No benefits if the dismissal meets the legal conditions outlined.
Calculation of the Benefit Amount
The end of service benefit is calculated as follows:
- Half a month’s salary for each of the first five years.
- One full month’s salary for each year beyond the first five years.
The Nawras platform provides an automated and precise calculation system for Saudi labor law end of service benefits, minimizing errors and saving time for companies.
The Difference Between Resignation and Dismissal in Calculating End of Service Benefits
Resignation and Its Impact on End of Service Benefits
In the case of voluntary resignation:
- Less than two years: No entitlement.
- Two to five years: One-third of the benefit.
- Five to ten years: Two-thirds of the benefit.
- More than ten years: Full benefit entitlement.
Dismissal and Its Role in Benefit Calculation
- Legitimate dismissal: No entitlement if valid reasons under the law (e.g., gross negligence, violation of safety instructions) are proven.
- Wrongful dismissal: Full end of service benefits are granted, plus potential compensation for damages.
How to Handle Disputes Related to Saudi Labor Law End of Service Benefits
Despite the clarity of regulations regarding Saudi labor law end of service benefits, disputes may arise between employers and employees regarding entitlement or calculation amounts.
Thus, it is necessary to follow these steps to protect one’s rights:
1- Internal Negotiation
It is always preferable to attempt resolving disputes internally through direct negotiation or through internal dispute resolution committees.
2- Approaching Labor Offices
If internal resolution fails, the employee may file a formal complaint with the competent Labor Office.
Saudi Labor Offices are committed to a streamlined process to resolve labor disputes within a defined timeframe.
3- Required Evidence to Support Claims
- A copy of the employment contract.
- Salary slips and attendance records.
- Any correspondence or notifications that document the termination of the relationship.
4- Using Digital Systems
Digital systems facilitate the management of end-of-service records by providing detailed reports documenting:
- Accurate length of service.
- Final salary settlements.
- Reason for termination.
This strengthens the position of any party before labor committees or courts.
Key Legal Tips for Understanding Saudi Labor Law End of Service Benefits
To fully protect your rights under the Saudi labor law end of service benefits, follow these important guidelines:
1. Carefully Review Your Employment Contract
Ensure that the contract clearly specifies your entitlement to end of service benefits and don’t rely solely on verbal agreements.
2. Monitor Labor Law Updates
Stay updated on legislative changes, particularly those affecting end of service benefit calculations.
3. Maintain All Employment Records
Keep copies of attendance sheets, salary slips, and formal notices to safeguard your rights in case of disputes.
4. Consult Legal Advisors When Necessary
If there is ambiguity or dispute, seek the advice of a specialized labor lawyer to guide you properly.
5. Utilize Smart HR Systems
Leverage HR management platforms like Nawras, which enable employees to accurately track and verify their end of service entitlements transparently.
How Nawras Simplifies End of Service Benefits in Saudi Arabia
Nawras is one of the modern tools that greatly facilitate the understanding and management of Saudi labor law end of service benefits. With continuous changes in labor regulations, Nawras offers innovative digital solutions that assist both employees and employers in accurately calculating and managing end of service entitlements.
Here’s how Nawras contributes:
Speeding Up Accurate Calculations
Nawras offers an advanced calculator tool that allows employees and employers to precisely determine entitlements based on service duration and type of termination (resignation or dismissal), streamlining the process and eliminating manual calculation errors.
Electronic Data Documentation
Through Nawras, users can securely store all records related to end of service benefits, including employment start and end dates, monthly salaries, and details of termination.
This digital documentation helps prevent disputes and ensures secure record-keeping.
Facilitating Dispute Resolution Quickly and Transparently
In case of disputes over benefit amounts or eligibility, Nawras provides detailed digital reports that serve as strong evidence, allowing for faster and fairer resolutions.
Keeping Track of Legislative Updates
Nawras continuously updates users with any changes in labor laws related to end of service benefits, ensuring that both workers and employers stay compliant.
Providing Legal Guidance
Nawras also offers guidance on handling specific scenarios such as resignation or wrongful termination, helping employees better understand and defend their rights.
By using Nawras, both employees and employers can efficiently manage end of service benefits, enhancing corporate compliance and fostering a stable work environment.