For a private-sector employee in Saudi Arabia, the end-of-service award is often the largest single cash sum of a working life. It arrives once, usually at a moment of change: a new job, a career break, a business of your own, or retirement. The formula behind it is short and fixed in law. What tends to go wrong is not the calculation but what happens next, because a lump sum with no job assigned to it is usually spent by default.
This guide covers both halves: how the award is calculated, and how to plan for it. An Arabic version is also available.
How the award is calculated
Article 84 of the Labour Law sets the formula. When the contract ends, the employer pays:
- half a month’s wage for each of the first five years of service, and
- a full month’s wage for each year after the fifth.
The award is calculated on the last wage, and part-years count in proportion to the time worked. The Ministry of Human Resources and Social Development defines wage here as the basic wage plus all other due increases, so fixed allowances such as housing and transport are part of it. The contract may exclude commissions and percentage-based pay by agreement.
A worked example: eight years of service on a monthly wage of SAR 20,000.
- First five years: 5 × SAR 10,000 = SAR 50,000
- Next three years: 3 × SAR 20,000 = SAR 60,000
- Full award: SAR 110,000, or five and a half months of wage.
What resignation does to it
If the worker resigns, Article 85 pays a fraction of the Article 84 award depending on length of service:
| Service at resignation | Share of the award |
|---|---|
| Under 2 years | None |
| 2 to under 5 years | One third |
| 5 to under 10 years | Two thirds |
| 10 years or more | Full award |
In the example above, resigning after eight years pays two thirds of SAR 110,000, about SAR 73,300. Staying past the ten-year mark, or leaving because the employer ends the contract, pays the full amount.
Article 87 restores the full award despite resignation in specific circumstances, including leaving because of force majeure beyond the worker’s control, and a female worker who ends her contract within six months of marriage or within three months of giving birth.
Try your own figures below.
End-of-service award calculator
Estimated award
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An estimate under Articles 84, 85 and 87 on the wage you enter. Your contract, unpaid leave, and any more generous company policy can change the figure.
Why the award belongs in a plan
The calculation tells you how much. A plan tells you what it is for. Three habits make the difference.
Know the number years in advance
The award is predictable. Your current wage, your start date and your likely leaving date are enough to estimate it, and to see how much it changes if you stay past a threshold such as the fifth or tenth year. For anyone weighing a move, the gap between one third and two thirds, or two thirds and the full award, can be worth months of salary.
Give every riyal a job before it lands
Split the award in advance into three parts:
- Liquidity. Enough cash to cover two to three years of known spending, especially if the award arrives between jobs or at retirement.
- Commitments. Amounts earmarked for things with dates attached: clearing a loan, a child’s university fees or wedding, a home purchase.
- Long-term capital. What remains is invested for the long run, in an allocation set by your time horizon rather than by the headlines in the month the money arrives.
Fit it to GOSI
For Saudi nationals, the award sits alongside the GOSI pension rather than replacing it. GOSI provides a monthly income calculated on basic wage plus housing allowance, capped at SAR 45,000 a month; the award provides capital. A retirement plan needs both numbers. Our GOSI pension calculator and our guide to retirement planning beyond GOSI show how they fit together. If the award is invested, remember it becomes part of the wealth on which zakat is due each year.
How Vault Saudi helps
Vault Saudi Limited Company is licensed by the Capital Market Authority for advisory activity (licence 25313-20). We build a written plan that includes your expected end-of-service award, your GOSI entitlement and your other assets, and we set the strategy for the award before it arrives. Your money stays in your name with the institutions you choose; we do not hold client assets or execute trades. Your first plan is complimentary.
See how financial planning works, or talk to an advisor.
This article is for information only and is not legal or investment advice. It summarises Articles 84, 85 and 87 of the Saudi Labour Law as published by the Ministry of Human Resources and Social Development. Amendments to the Labour Law under Royal Decree M/44 took effect on 19 February 2025; check the current wording of these articles with the Ministry. Your contract, any more generous company policy, and the facts of your case can change the outcome; confirm your entitlement with your employer or the Ministry before acting.
Frequently asked questions
How is end-of-service benefit calculated in Saudi Arabia?
Under Article 84 of the Labour Law, the employer pays half a month's wage for each of the first five years of service and a full month's wage for each year after that. The award is calculated on the worker's last wage, and the worker is entitled to a proportional amount for any part of a year. Eight years on a SAR 20,000 wage is therefore (5 × 10,000) + (3 × 20,000) = SAR 110,000.Do I get end-of-service benefits if I resign?
Partly, depending on length of service. Article 85 pays nothing for resignation before two years, one third of the award between two and five years, two thirds between five and ten years, and the full award after ten years. Article 87 restores the full award in specific cases, including leaving because of force majeure and a female worker resigning within six months of marriage or three months of childbirth.Which wage is used for the end-of-service calculation?
The last wage. For this purpose the Ministry of Human Resources and Social Development defines wage as the basic wage plus all other due increases, so fixed allowances such as housing and transport count. Employer and worker may agree in the contract to exclude commissions, sales percentages and similar variable pay. Check your contract and latest payslip, and confirm with HR or the Ministry if anything is unclear.Does end-of-service apply to Saudi nationals as well as expatriates?
Yes. The award is an obligation of the Labour Law and applies to workers covered by it regardless of nationality. It is separate from, and paid in addition to, any pension entitlement under GOSI.What should I do with my end-of-service award?
Decide before it arrives. Separate what you need as cash for the next two to three years, what is earmarked for known commitments, and what is long-term capital to be invested for retirement. An award spent by default rarely gets rebuilt. If you are approaching retirement, read it alongside our guide to retirement planning beyond GOSI.
From Vault
Turning this into an actual plan is what the planning process is for.
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