End-of-service award in Saudi Arabia: how it is calculated

The Saudi Labor Law makes one payment obligatory when an employment relationship ends, and the Ministry of Human Resources and Social Development states that the obligation holds whether the contract is of fixed or non-fixed term. Articles 84 to 88 fix what it is worth, how resigning changes it, and how few days the employer has to pay it. For a worker leaving the Kingdom for Australia, that is the calculation the departure turns on.

Key Takeaways

• Article 84 of the Labor Law sets the end-of-service award at half a month's wage for each of the first five years and a full month's wage for each year after that, calculated on the last wage.
• Part years count in proportion to the time spent on the job, so the award does not step up only on anniversaries.
• Article 85 cuts the award to one third for a resignation after two to five years and two thirds from five to under ten, with the full award at ten years or more.
• Article 88 requires settlement within one week of the employment ending, or two weeks where the worker ended it.
• The Ministry of Human Resources and Social Development defines the wage the calculation runs on as the basic wage plus all other due increases, and article 86 lets commissions be excluded by agreement.

The arithmetic in article 84

The Labor Law, issued by Royal Decree No. M/51, states the rule in one sentence. Upon the end of the employment relation, the employer shall pay the worker an end-of-service award equivalent to the amount of a half-month wage for each of the first five years and a one-month wage for each of the following years. The award is calculated on the basis of the last wage, and the worker is entitled to an award for the portions of the year in proportion to the time spent on the job.

Three features of that are worth separating out, because each of them changes the size of the payment.

The rate rises after five years. The first five years accrue at half the pace of every year after them, so a long stay is worth disproportionately more than two short ones adding up to the same length.

The calculation runs on the last wage, not on the wage that applied while each year was worked. A promotion late in a long posting lifts the value of every earlier year, and a demotion or a change to a lower-paid role has the reverse effect on the whole accrual.

Part years count. The article says portions of the year are paid in proportion to the time spent on the job, so leaving four months into a year is not the same as leaving on the anniversary.

What resignation does to it

The award is not conditional on the employer ending the relationship, but resigning reduces it on a scale set out in article 85. A worker who resigns is entitled to one third of the award after service of not less than two consecutive years and not more than five, to two thirds where service exceeds five consecutive years but is less than ten, and to the full award where service amounts to ten years or more.

Below two years there is nothing. The Ministry of Human Resources and Social Development states it plainly in its own restatement of the rules: if the work-bound relation ends due to the worker's resignation, and his service is less than two years, he shall not be entitled to end-of-service award.

Article 87 carves out two situations where a worker who ends the contract still receives the full award. The first is force majeure beyond the worker's control. The second is specific: a female worker is entitled to the full award if she ends her contract within six months from the date of her marriage or three months from the date of giving birth.

The practical effect is that the same departure date can be worth three very different amounts, depending on which side ended the contract, how long the service ran, and which of the article 87 exceptions applies. A worker planning a move to Australia around a two-year, five-year or ten-year mark is planning around a step, not a slope.

Which parts of pay the award is worked out on

The phrase last wage does a lot of work, and it is defined elsewhere. The Ministry's knowledge-centre restatement defines the term as the basic wage in addition to all other due increases that are determined for the worker in return for the effort made in the work, or risks he is exposed to in performing his work, or that are determined for the worker in exchange for work according to the work contract or labor regulations.

That is broader than base pay. Regular allowances tied to the work sit inside it. What can be taken out is dealt with by article 86, which allows the parties to agree, as an exception to article 8 of the law, that the wage used as a basis for calculating the award does not include all or some of the commissions, sales percentages and similar wage components paid to the worker which are by their nature subject to increase or decrease.

So a contract may lawfully carve variable earnings out of the calculation base, and for a salesperson or a commission-earning role that clause is the difference between two quite different awards. The exclusion has to be agreed; it is not the default.

The Ministry also records that the award is obligatory on the employer at the end of the work contract, whether the work contract is of a fixed or non-fixed term. A fixed-term contract running to its natural end is not a way around it.

The week that decides when the money can move

For anyone timing a transfer, article 88 is the operative provision. Upon the end of the worker's service, the employer shall pay his wages and settle his entitlements within a maximum period of one week from the date of the end of the contractual relation. Where the worker ends the contract, the employer shall settle all entitlements within a period not exceeding two weeks. The employer may deduct any work-related debt due to it from the worker's entitlements.

One or two weeks is a short window, and the article measures it from the date the contractual relation ends rather than from any earlier point. It sets a deadline, not a prohibition on settling sooner. Nothing in articles 84 to 88 addresses the transfer of the money afterwards; what article 88 fixes is only how quickly the employer must settle.

The deduction clause is the other thing to read carefully. Work-related debt due to the employer may come out before settlement, so the amount that arrives is the award net of anything of that kind rather than the article 84 figure on its own.

What the award is, and what it is not

Every property that articles 84 to 88 give the award points the same way: it is an obligation of one employer, arising at the end of one employment. Article 84 sizes it by the length of that service and the last wage paid under it. Article 88 makes it due within days of that relationship ending. The Ministry describes it as obligatory on the employer at the end of the work contract, whether the contract is of fixed or non-fixed term.

Nothing in either source describes it accruing in a fund the worker can inspect, carrying across to a new employer, or being adjusted for inflation. That is why a departure produces one payment rather than a stream, and why the article 84 and 85 arithmetic turns on the date of leaving and on which side ended the contract.

Where to look next

• Receiving money from Saudi Arabia - the live reference rate for the riyal against the Australian dollar, struck and dated on the page.
• Sending money to Saudi Arabia from Australia - the opposite direction, and why the stated purpose of a transfer is a recorded field in Saudi rules.
• How international transfers work - the sequence a payment moves through before any national rule reaches it.
• Understanding transfer fees - the separate question of what moving a large one-off sum costs.
• AUD to SAR - the convert page for the pair, with the story of the riyal's fixed relationship to the US dollar.

Sources

• Labor Law, Royal Decree No. M/51, Ministry of Human Resources and Social Development - article 84 on the half-month and one-month accrual, the last-wage basis and pro rata part years; article 85 on the one third, two thirds and full award steps for resignation; article 86 on excluding commissions and similar variable components by agreement; article 87 on force majeure and on a female worker ending her contract within six months of marriage or three months of giving birth; and article 88 on settlement within one week, or two weeks where the worker ended the contract, with work-related debt deductible.
• End-of-Service Award Regulations, Ministry of Human Resources and Social Development knowledge centre, article 317 - the definition of wage as the basic wage plus all other due increases determined in return for effort, risk or under the contract or labor regulations; the statement that a worker resigning with less than two years of service is not entitled to an award; and the award being obligatory whether the contract is of fixed or non-fixed term.

General information about the Saudi end-of-service award and how it is calculated and settled. Not employment advice, not financial advice, not tax advice, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.