An end of service calculator for Saudi employers follows Articles 84 and 85 of the Labour Law. The award is half a month’s last wage for each of the first five years of service and one month’s wage for each year after that, with part-years counted in proportion. If the employee resigns, only part of the award is due: nothing under two years of service, one third from two years, two thirds beyond five years and the full award from ten years.
This is general information, not legal advice. Confirm any individual case with a qualified labour-law adviser or with the Ministry of Human Resources and Social Development (HRSD).
The Labour Law was amended by Royal Decree M/44 of 8/2/1446H, in force from 19 February 2025. Law-firm summaries of those amendments describe the end-of-service rules as substantially unchanged. The article wording used below comes from HRSD’s published English text and the Bureau of Experts’ Arabic text. The end of service benefits Saudi Labour Law provides are set out mainly in Articles 84 to 88, and each article is cited where it applies below. Even with the rules substantially unchanged, an end of service calculator built before 19 February 2025 is worth re-checking against the current text.
How an end of service calculator works out the award
The end of service award Saudi Arabia employers owe (مكافأة نهاية الخدمة) is the payment due to a worker when the employment relationship ends. Article 84 sets the formula, and HRSD’s guidance says the award is payable whether the contract is fixed-term or indefinite. A Saudi end of service calculator, whether a spreadsheet or a tool inside payroll, takes three inputs and applies one rule.
- Last wage. Article 84 uses the worker’s last wage as the base for every year of service. The Law’s definition of wage (Article 2) is the basic wage plus the other increments due to the worker for effort, risk or conditions set in the contract, so in practice it is basic salary plus the fixed allowances written into the contract. The parties may agree in advance to leave commissions out of the base (Article 86).
- Length of service. Count from the start date to the last day of employment, in years and parts of years. Article 84 pays part-years in proportion to the time worked but does not prescribe a counting method. The example below divides whole months by 12.
- The rates. Half a month’s wage for each of the first five years, then one month’s wage for each year after that.
- The reason the contract ended. This decides what share of the award is due, as the next section shows.
In one line: award = (0.5 × wage × years up to five) + (1 × wage × years beyond five).
How resignation, dismissal and contract type change the amount
The formula stays the same. Only the share of the award that is due changes with the reason the employment ended, so an end of service calculator must ask for that reason.
| How the employment ends | Share of the award due | Basis |
|---|---|---|
| Employer ends the contract, other than for a case listed in Article 80 | Full award | Article 84 |
| Fixed-term contract runs to its end | Full award | Article 84 |
| Worker resigns with under two years of service | None | Article 85 |
| Worker resigns with two to five years of service | One third | Article 85 |
| Worker resigns with more than five and under ten years | Two thirds | Article 85 |
| Worker resigns with ten years or more | Full award | Article 85 |
| Worker leaves because of force majeure beyond their control | Full award | Article 87 |
| Female worker ends the contract within six months of marriage or three months of childbirth | Full award | Article 87 |
| Worker leaves without notice for a reason listed in Article 81, such as the employer failing its essential obligations | Worker keeps all legal rights, which includes the award | Articles 81 and 84 |
| Employer ends the contract for a case listed in Article 80, such as assault, forgery to obtain the job or disclosure of trade secrets | None | Article 80 |
Contract type. The award is payable under both fixed-term and indefinite contracts, and a fixed-term contract that runs to its end pays the full award. Resignation from a fixed-term contract had unclear provisions before the 2024 amendments, which added a definition of resignation and a process for submitting and withdrawing it.
The five-year boundary. Read literally, Article 85 puts a worker with exactly five years in the one-third band (“not more than five years”) and starts the two-thirds band only once service is “in excess of five”. HRSD’s summaries describe the bands as two to five years and five to ten years, so an end of service calculator should state which reading it uses for exactly five years.
Probation. Probation is governed by Articles 53 and 54, and the 2024 amendments changed the probation rules, including a longer permitted maximum of 180 days.
Unjustified termination. A termination without a valid reason can also lead to compensation under Article 77. That compensation is separate from the award and is not calculated here.
End of service calculator worked example, with illustrative figures
The figures below are invented for illustration and do not describe a real employee. Assume a last wage of SAR 12,000 a month (basic salary plus fixed allowances) and 8 years 3 months of service, which is 99 months or 8.25 years.
- First five years: 5 × (12,000 ÷ 2) = SAR 30,000.
- Remaining 3.25 years: 3.25 × 12,000 = SAR 39,000.
- Full award: 30,000 + 39,000 = SAR 69,000. This is due if the employer ends the contract outside Article 80, or a fixed-term contract expires.
- If the employee resigns instead, service falls between five and ten years, so two thirds applies: 69,000 × 2 ÷ 3 = SAR 46,000.
Any Saudi end of service calculator should reproduce these figures. The same wage across other lengths of service shows how sharply the resignation scale moves the result.
| Service | Full award | If the employee resigns |
|---|---|---|
| 1 year 11 months | SAR 11,500 | Nil (under two years) |
| 4 years 6 months | SAR 27,000 | SAR 9,000 (one third) |
| 8 years 3 months | SAR 69,000 | SAR 46,000 (two thirds) |
| 12 years | SAR 114,000 | SAR 114,000 (full award) |
Where calculators and spreadsheets go wrong
Check any Saudi end of service calculator, including your own spreadsheet, against these four points.
- The wage base. An end of service calculator that uses basic salary alone understates the award where the contract includes fixed allowances, because the base is the wage as the Law defines it. The opposite error is including commissions that the contract excludes under Article 86.
- One wage for every year. Article 84 takes the last wage as the base for the whole service period, so an end of service calculator should not apply each year’s own wage.
- Dates. The scale has steps. A resignation effective at 1 year 11 months pays nothing, and the same resignation at two years pays one third. Check start and end dates against the signed contract before trusting the end of service calculator’s output.
- Leave pay. It is a separate entitlement. A worker who leaves without using accrued annual leave is paid for the accrued days (Article 111), on top of the award.
When the award has to be paid
The employer must settle the worker’s wages and entitlements within one week of the end of the contract, or within two weeks if the worker ended it (Article 88). The employer may deduct any work-related debt the worker owes it from the amounts due. How final settlement sits alongside the monthly wage file and social insurance is covered in how payroll works in Saudi Arabia.
Because the amount grows with every month of service, many employers accrue it monthly so the cost is visible before anyone leaves. Where that accrual lives in spreadsheets, errors multiply with headcount. HCM software for Saudi employers should hold the accrual and the final calculation in the same system as payroll, so that the end of service calculator reads the same wage, dates and contract terms as everything else. Whichever route you take, test it with your own resignation, dismissal and fixed-term cases, and compare the results with the Ministry’s own end-of-service calculator listed under Sources.
Test your end of service calculator on real cases before you automate
Send a few anonymised resignation and termination cases and we will talk through how an end of service calculator in payroll software should treat them.
Sources
- Labor Law (Royal Decree No. M/51 of 23/8/1426H), English text, Ministry of Human Resources and Social Development. hrsd.gov.sa. Accessed 2 October 2026.
- نظام العمل (Labour Law), Bureau of Experts at the Council of Ministers. laws.boe.gov.sa. Accessed 2 October 2026.
- End-of-Service Award Regulations, Ministry of Human Resources and Social Development. hrsd.gov.sa. Accessed 2 October 2026.
- Calculating End-of-Service Award, Ministry of Human Resources and Social Development. hrsd.gov.sa. Accessed 2 October 2026.
- End of Service Reward Calculator, Ministry of Human Resources and Social Development (labour education portal). laboreducation.hrsd.gov.sa. Accessed 2 October 2026.
- Labour Law, Arabic edition listing Royal Decree M/44 of 8/2/1446H as the latest amendment, Ministry of Human Resources and Social Development. hrsd.gov.sa. Accessed 2 October 2026.
- KSA Labour Law amendments series, Part 1: resignations, Clyde & Co (law-firm commentary on the amendments in force from 19 February 2025). clydeco.com. Accessed 2 October 2026.
- Amendments to the Saudi Labor Law, King & Spalding (law-firm commentary). kslaw.com. Accessed 2 October 2026.
