Calculating Saudi Arabia's End of Service Gratuity 2025: Your comprehensive guide to rights and how to calculate

Planning to quit your job? Make sure you receive all your rights first

The end of an employment relationship is one of the most sensitive moments in the career of any employee in Saudi Arabia, whether national or expatriate. During this time, you are often left with a lot of anxiety and financial questions: "How is the end-of-service bonus calculated accurately?", "Is it calculated on base salary or gross salary?", and "Will my resignation deprive me of a significant portion of my entitlements?" Unfortunately, many workers fall victim to misunderstandings or miscalculations, which can cost them thousands of riyals that are rightfully theirs.

In this article, we will give you a detailed and simplified explanation of the provisions of the Saudi Labor Law of 2025 regarding end-of-service pay. You will discover the difference between "resignation" and "termination of contract" and learn how to use the official calculator on the Qawwa platform, so you can know the value of your dues in Riyals before you sign any clearance paper with your employer.

What is end-of-service severance pay in the Saudi labor law and why is it a binding right?

Legal concept: Is it part of salary or post-employment compensation?

Severance pay is a key pillar of the Saudi labor system. It is not a "grant" or "gratuity" from the employer, but an inherent and obligatory financial right guaranteed by the Saudi legislator to the worker under Article (84) of the Labor Law. The main objective of this bonus is to provide financial security for the worker after the end of his employment relationship, to help him with life expenses until he finds another job, or to serve as a "savings balance" for his years of service. For expats (non-Saudis), it is an alternative to the government pension system, making the accuracy of its calculation crucial. Every employee should be aware that any agreement that provides for the waiver of this bonus is legally void, even if the worker signs it, because labor rights in the Kingdom are considered public law and cannot be diminished.

The categories eligible for the bonus: Who is included and who is excluded?

In general, all private sector workers with formal employment contracts are entitled to end-of-service benefits, whether they are Saudi or expatriate, and whether the contract is fixed-term or indefinite. This includes full-time workers, as well as part-time workers (whose percentage is calculated and decreased based on hours worked). However, there are exceptional cases that do not qualify for the bonus, the most important of which is if the employment relationship ends during Probation Period of no more than 180 daysEither party has the right to terminate the contract without compensation. Casual or seasonal workers working for very short periods of time may have different provisions. The prerequisite for eligibility is the successful completion of the trial period and the continuation of the contract thereafter.

Eligibility Checklist

How to calculate severance pay in detail (rules and basics)

The wage used in the calculation: Is it based on base or gross salary?

This is where the biggest misunderstandings occur. According to the Saudi Labor Law, specifically the interpretation of "remuneration," end-of-service pay is calculated based on Last Actual Wage Not just base salary. The actual wage includes: Basic salary + housing allowance + transportation allowance + any other fixed allowances that the employee receives on a regular basis. Commissions and sales percentages may also be included in the calculation if they represent a major part of the employee's income and are stipulated. Therefore, when doing the calculation, make sure to add up all the allowances that appear on the pay slip before applying the calculation formula, because neglecting the allowances could lose you up to 30% to 40% of your benefits.

Calculation formula by years of service: First five years and beyond

Article 84 clearly states the method of calculation as follows: The worker is entitled Half a month's pay for each of the first five yearsandOne month's wages for each subsequent year. To illustrate this, fractions of a year (fractions) are calculated in proportion to how long the worker has been working.

For example, if an employee works for 7 years and has a total salary of SAR 10,000:

1. The first five years: (10,000 ÷ 2) x 5 years = SAR 25,000.
2. The next two years: (10,000 x 1) x 2 years = 20,000 riyals.
3. Grand total: 45,000 riyals. This rule applies if the contract is terminated by the duration of the contract or by the employer's decision. In the case of resignation, the percentages differ, as we will explain later.

Resignation vs. termination: How does the reason for leaving affect the value of the bonus?

Entitlement to full remuneration: If the contract is terminated or canceled by the employer

If the contractual relationship ends due to the expiration of the contract and the employer's unwillingness to renew, or if the employer terminates the contract for an unlawful (arbitrary) reason, or even for the company's own economic reasons, the worker is entitled to Full severance pay (100%) According to the previously mentioned calculation, regardless of the number of years of service (provided the trial period is exceeded). Working women are also entitled to receive the full bonus if they terminate their contract within 6 months from the date of their marriage contract or 3 months from the date of their childbirth, with an exception to the resignation rules.

Resignation status: How to calculate the bonus when leaving work voluntarily (one-third and two-thirds rules)?

When an employee decides to resign (voluntarily quit), Article 85 places restrictions on the amount of the bonus to encourage job stability. The rules are:

1. Less than two years: The worker is not entitled to any bonus.
2. From 2 years to less than 5 years: Worth One-third (1/3) Bonus.
3. From 5 years to less than 10 years: Worth Two-thirds (2/3) Bonus.
4. 10 years or more: Worthy of reward Complete. This means that timing is very important; resigning one day before the completion of two years deprives you of the bonus altogether.

Comparison table: Resignation vs. Termination of Contract

When is a worker deprived of end-of-service gratuity (Article 80 cases)?

Violations that lead to dismissal without reward or compensation

There are specific and exclusive cases stipulated by Article 80 of the Labor Law, which gives the employer the right to terminate the contract No severance pay without prior notice. These cases represent maximum penalties for serious offenses, and include:

1. The worker physically assaults the employer or manager.
2. Failure to fulfill the substantive obligations of the contract despite written warnings.
3. The worker is proven to have committed an act of dishonesty or dishonesty.
4. The worker deliberately inflicts a material loss on the business (provided that the competent authorities are informed).
5. Falsification of appointment papers.
6. Disclosing industrial or commercial business secrets.
7. Absence from work without a legitimate reason for more than 30 intermittent days or 15 consecutive days in a year (written warnings must be given before dismissal). These offenses should be taken with extreme caution as they not only forfeit the bonus, but can also affect your professional reputation.

Steps to use the official end-of-service bonus calculator via Qawwa platform

Practical explanation: How to enter data and check the value due

The Ministry of Human Resources and Social Development has provided an accurate online calculator via the Qiwa platform to ensure transparency. To use it correctly:

1. Access the "Powerful" or the Labor Culture Portal.
2. Select "Severance Pay Calculator".
3. Select Type of contract (fixed-term or indefinite).
4. Select Why the labor relationship ends (resignation, contract termination, employer termination, etc.) - this option is the most important because it determines the rate of benefit.
5. Enter Gross salary (not just basic).
6. Enter Start and end date of service accurately. The result will appear immediately. It is advisable to print this result and compare it with the "Final Clearance Sheet" provided by your employer before signing it.

Frequently Asked Questions About End-of-Service Benefit Accrual and Payment

Frequently asked questions

Q: Is my unused vacation balance included in my severance pay?

c: No, vacation credit is a separate financial right that is paid "in addition" to severance in the final settlement, calculated based on base or actual pay as per company policy (most often base), but it is not incorporated into the bonus formula.

Q: When does the company have to pay the bonus after leaving employment?

c: The system requires the employer to pay all the worker's dues within One week From the date of termination of the labor relationship. If the worker is the one who terminated the contract (resignation), payment must be made within a maximum of two weeks.

Q: My employer refuses to pay on the grounds of financial loss, what should I do?

c: Financial hardship does not exempt the employer from payment. You should not sign any clearance, and immediately file an amicable settlement claim through the Qawwa platform or the labor office.

Conclusion: Know your financial rights before signing the final discharge

To conclude this comprehensive guide, we summarize the most important points to remember to ensure your financial rights:

• Mandatory right and universal pay: Severance pay is a legally binding right and must be calculated based on Last Actual Pay (base salary + housing + transportation + fixed allowances), not just base salary.
• The effect of the reason for leaving work: The amount is drastically different between "resignation" and "termination of contract". Resignation may lose you two-thirds or all of your bonus if your service is short, while termination of the contract by the employer guarantees you the full bonus.
• Years of service is the standard: Remember the rule of "half salary" for the first five years, and "full salary" for the following years, taking into account the accrual rates upon resignation.
• The danger of a hasty signature: Never sign the "final clearance" paper until you have matched the number offered to you with the result of the official Qawwa calculator and have actually received the amount or ensured its transfer.

Thank you for reading this article. We hope we have been able to simplify complex laws and clarify the right path to calculate your benefits. Awareness of the system is your first weapon to protect your professional and financial future, so don't hesitate to refer to this guide or consult the experts when needed.

In this comprehensive guide, we summarize the most important points you need to remember to ensure your financial rights: