End-of-Service Award in Saudi Arabia
Reviewed by the Commoner Law Editorial Team. Sourced from Saudi royal decrees, regulations, and ministerial decisions. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
The Saudi end-of-service award (ESA) is governed by Articles 84, 85, 87 of the Labour Law (Royal Decree No. M/51). The August 2024 amendments (effective February 2025) reshaped several surrounding rules, but the core ESA formula itself was not changed. The award applies to every private-sector employee — Saudi and expatriate alike — and is separate from GOSI pension entitlements, though expats are also covered for workplace injuries through GOSI.
The calculation base — where most disputes arise:
- ESA is calculated on the worker's last actual wage, which is the basic wage PLUS all fixed, regular allowances — housing allowance, transport allowance, and any other allowance paid in a stable monthly amount.
- Excluded: variable allowances, discretionary bonuses, commissions, overtime, and one-off payments.
- The most common employer error — and the most common Labour Court claim — is calculating ESA on the basic salary alone and omitting the housing or transport allowances.
Formula (Article 84):
- Years 1 through 5: half a month's wage per year of service.
- Year 6 onward: one full month's wage per year of service.
- Partial years are prorated.
Resignation reductions — Article 85 (UNLIMITED / open-ended contracts only):
- Under 2 years: no ESA.
- 2 to 5 years: one-third of the full ESA.
- 5 to 10 years: two-thirds of the full ESA.
- 10 years or more: full ESA.
Fixed-term contracts work differently: early resignation by the employee is treated as a breach, and the employee may owe the employer compensation for the remaining contract period. Only completion of the term (or employer-initiated termination without Article 80 cause) preserves full ESA.
Termination by the employer (without Article 80 cause) pays the full ESA from Year 1 — no resignation reduction applies. The minimum service for employer-initiated ESA is 1 year.
Forfeiture — Article 80 cause: assault on the employer or supervisor; serious breach of duty; fraud or dishonesty; unexcused absence of 20 days in one year or 10 consecutive days; deliberate safety violations causing serious damage. If Article 80 is validly invoked, ESA is lost entirely — but the employer bears the burden of proof.
Payment deadlines and enforcement (2025):
- Employer-initiated termination: ESA payable within 1 week of the last working day.
- Resignation: ESA payable within 2 weeks.
- Late or non-payment penalties on employers reach up to SAR 250,000 under the 2025 amendment schedule.
- From October 2025, Qiwa-authenticated contract wage clauses are directly enforceable via the Najiz portal — where the ESA calculation flows from a Qiwa wage, a court case is not always required.
Worked example — Rina, expat nurse: basic wage SAR 5,000 + fixed housing allowance SAR 1,500 = actual wage SAR 6,500. She resigns after 7 years on an open-ended contract.
- Years 1–5: 5 × (6,500 ÷ 2) = SAR 16,250.
- Years 5–7: 2 × 6,500 = SAR 13,000.
- Full entitlement: SAR 29,250.
- Resignation reduction (5–10 years): ⅔ × 29,250 = SAR 19,500 payable.
- If the employer had terminated Rina instead (no Article 80 cause): full SAR 29,250.
When does it apply?
- Your employment ends for any reason — termination, resignation, contract expiry, or retirement.
- You have at least 1 year of service (employer-initiated) or 2 years (resignation on an open-ended contract).
- Both Saudi and expatriate employees are entitled; GOSI pension recipients receive the ESA separately.
- The only full-forfeiture exception is termination for a valid Article 80 cause.
What to Do If Your Employer Refuses to Pay Your End-of-Service Award in Saudi Arabia
- Pull your Qiwa contract and confirm whether it is fixed-term or unlimited — Article 85 reductions apply only to unlimited contracts.
- Rebuild the calculation base yourself: last basic wage + every fixed, regular allowance (housing, transport). Exclude commissions, overtime, variable bonuses.
- Use the MHRSD ESA calculator on the MHRSD website / Qiwa as a cross-check.
- Request a written breakdown from your employer showing which wage components they used. Employers who inflate "basic wage" on paper while paying allowances as "basic" in practice often leak here.
- Watch the payment clock: 1 week for employer-termination, 2 weeks for resignation. Miss-by-a-day can trigger the 2025 penalty schedule.
- Enforce via Najiz first if your ESA math flows from a Qiwa-authenticated wage — post-October 2025, this can avoid a full Labour Court filing.
- File any residual Labour Court claim through Najiz within 12 months of your last working day.
- For Saudi employees, confirm how your ESA interacts with GOSI annuities — the two are separate entitlements but final-settlement forms often conflate them.
What should you NOT do?
- Do not sign the final settlement or clearance until you have independently verified the ESA base includes housing and transport.
- Do not accept a calculation based on "basic salary only" — this is the single most common underpayment pattern and is contrary to Article 84.
- Do not resign from a fixed-term contract early without legal advice — you may owe the employer for the remaining period, wiping out your ESA.
- Do not concede Article 80 grounds in writing. The employer must prove the specific clause; most categories also require three prior written warnings.
- Do not let the 12-month limitation pass — Labour Court claims filed after that are time-barred.
Common Questions
When does it apply — end-of-service award?
Your employment ends for any reason — termination, resignation, contract expiry, or retirement.You have at least 1 year of service (employer-initiated) or 2 years (resignation on an open-ended contract).Both Saudi and expatriate employees are entitled; GOSI pension recipients receive the ESA separately.The only full-forfeiture exception is termination for a valid Article 80 cause.
What should I do if my employer has not paid my end-of-service award in Saudi Arabia?
Pull your Qiwa contract and confirm whether it is fixed-term or unlimited — Article 85 reductions apply only to unlimited contracts.Rebuild the calculation base yourself: last basic wage + every fixed, regular allowance (housing, transport). Exclude commissions, overtime, variable bonuses.Use the MHRSD ESA calculator on the MHRSD website / Qiwa as a cross-check.Request a written breakdown from your employer showing which wage components they used. Employers who inflate "basic wage" on paper while paying allowances as "basic" in practice often leak here.Watch the payment clo...
What should you NOT do — end-of-service award?
Do not sign the final settlement or clearance until you have independently verified the ESA base includes housing and transport.Do not accept a calculation based on "basic salary only" — this is the single most common underpayment pattern and is contrary to Article 84.Do not resign from a fixed-term contract early without legal advice — you may owe the employer for the remaining period, wiping out your ESA.Do not concede Article 80 grounds in writing. The employer must prove the specific clause; most categories also require three prior written warnings.Do not let the 12-month limitat...