How to Calculate End of Service Benefits in Saudi Arabia - Complete Guide

End of Service Benefits (EOS), also called gratuity, is a lump-sum payment that every employee in Saudi Arabia is entitled to at the end of employment under the Saudi Labor Law. Understanding how to calculate it correctly is critical for both employers and employees.

The Legal Basis

Articles 84 and 85 of the Saudi Labor Law define the mandatory formula for calculating gratuity:

• First 5 years: Half a month's wage for each year of service.
• After 5 years: One full month's wage for each year of service.

What Counts as "Wage"?

The calculation base is the last basic salary + all fixed allowances including:

• Basic salary
• Housing allowance
• Transport allowance (if regular and fixed)
• Nature-of-work allowances

Commissions and variable bonuses are generally not included unless they form a regular part of the wage over the last 12 months.

Resignation vs Termination

The amount you actually receive depends on why you left:

Reason	Under 2 years	2-5 years	5-10 years	10+ years
Resignation	0%	33%	66%	100%
Termination by employer	100%	100%	100%	100%

Worked Example

An employee with:

• Basic salary: 8,000 SAR
• Housing: 2,000 SAR
• Total wage: 10,000 SAR
• Years of service: 7 years
• Reason: terminated by employer

Calculation:

• First 5 years: 5 × (10,000 / 2) = 25,000 SAR
• Remaining 2 years: 2 × 10,000 = 20,000 SAR
• Total gratuity: 45,000 SAR

Common Mistakes to Avoid

1. Using only basic salary and ignoring housing allowance.
2. Forgetting the resignation multiplier (1/3, 2/3).
3. Not counting partial years — fractional years must be counted proportionally.
4. Miscalculating due to unpaid vacation or overtime.

Use the Free Calculator

To skip the math, use our Free End of Service Calculator. It applies the Saudi Labor Law formula automatically and gives you an itemized breakdown.

Frequently Asked Questions

Is EOS taxable in Saudi Arabia?

No. End of service gratuity is not subject to income tax for individuals.

What if the employer refuses to pay?

File a complaint with the Labor Office or the online Musaned platform. Employees are entitled to gratuity by law.

Can I get gratuity if fired for cause?

Article 80 lists specific cases where the employer may terminate without EOS. In all other terminations, full EOS is due.

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