How the formula works under Article 84
Article 84 sets the accrual. When the work relation ends, the employer pays an end of service award of half a month's wage for each of the first five years and a full month's wage for each of the following years. The award is calculated on the last wage, and the worker is entitled to it for portions of a year in proportion to the time spent on the job. Source: HRSD, Labor Law, Article 84, restated in plain language in HRSD knowledge centre article 317.
- Years one to five: 0.5 month of wage per year, so 2.5 months at the fifth anniversary.
- Every year after the fifth: 1 month of wage per year.
- Part years: the same rate, pro rata. Article 84 sets no minimum service for the award itself; the two year threshold belongs to Article 85 and only bites on resignation.
- Wage base: the last wage, as defined in Article 2 (see below), not basic pay alone.
As a formula: months of wage = 0.5 x min(years, 5) + 1 x max(years - 5, 0), and the full award = months of wage x last monthly wage.
Article 85: what resignation does to the award
Article 85 applies only when the work relation ends because of the worker's resignation. The worker is then entitled to one third of the award after a service of not less than two consecutive years and not more than five years, to two thirds if the service exceeds five consecutive years but is less than ten, and to the full award at ten years or more. Below two years a resigning worker receives nothing. Source: HRSD, Labor Law, Article 85.
- Under 2 years: nothing.
- 2 years up to and including 5 years: one third of the Article 84 award.
- More than 5 years and under 10 years: two thirds.
- 10 years or more: the full award.
Two details matter at the edges. Exactly five years sits inside the one third band, because the article says "not more than five years". And the article counts consecutive years, so a break in service can change which band applies; take advice on broken service.
Article 87: resignations that still get the full award
Article 87 is an exception to Article 85. A worker who leaves because of force majeure beyond their control is entitled to the full award. A female worker is likewise entitled to the full award if she ends her contract within six months of the date of her marriage or three months of the date of giving birth. Select the Article 87 case in the reason menu and the calculator drops the resignation reduction. Source: HRSD, Labor Law, Article 87.
Which wage the award is calculated on
The Labor Law defines its terms in Article 2. The basic wage is everything the contract pays the worker for the work, whatever its kind or method of payment, plus periodic increments. The actual wage is the basic wage plus all other due increments the worker receives for the effort of the work, for risks or for the job itself, including commissions or sales percentages, allowances for effort or risk, cost of living increments, contractual or customary grants, and in-kind benefits, which the article values at a maximum of two months' basic wage per year unless the contract or the firm's work regulation sets a higher figure. The article then says that wherever the Law says "wage", it means the actual wage. Article 86 adds one option: the parties may agree that all or some of the commissions, sales percentages and similar variable components are not counted in the award base. Source: HRSD, Labor Law, Articles 2 and 86.
That is why the calculator asks for basic wage, allowances and regular commissions separately, with a tick box for the Article 86 choice. It is also the main difference from the UAE, where the gratuity is calculated on basic wage only; the UAE gratuity calculator follows that rule.
Termination versus resignation, side by side
The table applies Articles 84 and 85 to a last wage of SAR 8,000 at several lengths of service. The months column is the Article 84 accrual; the resignation column multiplies it by the Article 85 fraction.
| Service | Months of wage | Termination (Article 84) | Resignation factor | Resignation (Article 85) |
|---|---|---|---|---|
| 1 year | 0.5 | SAR 4,000.00 | nothing | SAR 0.00 |
| 2 years | 1 | SAR 8,000.00 | one third | SAR 2,666.67 |
| 5 years | 2.5 | SAR 20,000.00 | one third | SAR 6,666.67 |
| 7 years | 4.5 | SAR 36,000.00 | two thirds | SAR 24,000.00 |
| 10 years | 7.5 | SAR 60,000.00 | full award | SAR 60,000.00 |
| 15 years | 12.5 | SAR 100,000.00 | full award | SAR 100,000.00 |
Did the 2025 labour law amendments change the formula
Royal Decree M/44 amended the Labor Law. It was published in the Official Gazette on 23 August 2024 and took effect on 19 February 2025. The Clyde and Co summary of the resignation changes describes a new formal definition of resignation for fixed term contracts and a 30 day window for the employer to respond, and it does not report any change to the Article 84 bands or the Article 85 fractions. We phrase that carefully: the formula is not reported as changed. The HRSD English PDF linked on this page predates the amendments, so for anything contested, read the current Arabic text, which prevails.
Worked example
A worker's last monthly wage is SAR 8,000 (say SAR 6,000 basic plus SAR 2,000 in allowances) and the service is exactly seven years, from 1 March 2019 to 28 February 2026. The arithmetic follows Articles 84 and 85.
- First five years: 5 x 0.5 x 8,000 = SAR 20,000.
- Years six and seven: 2 x 1 x 8,000 = SAR 16,000.
- Full award on termination by the employer: SAR 36,000 (4.5 months of wage).
- On resignation at seven years: two thirds of 36,000 = SAR 24,000.
- At four years instead: termination pays 4 x 0.5 x 8,000 = SAR 16,000, and resignation pays one third = SAR 5,333.33.
The calculator opens with this example loaded. Change the reason to resignation to see the Article 85 cut, or move the end date to see the pro rata effect of extra days.
Assumptions and exclusions
- Service runs from the start date to the last day of service inclusive. Completed years are counted from the start date; leftover days are pro rated against the anniversary year they fall in (365 or 366 days).
- The wage base is exactly what you enter. The tool does not value in-kind benefits or apply the Article 2 ceiling on them; add their agreed monthly value to allowances if you want them counted.
- Continuity is assumed. Unpaid leave, suspension and breaks in service are not modelled, and Article 85 counts consecutive years only.
- The reason you select is taken at face value. Whether a separation is a termination, a resignation or an Article 87 case is a question of fact and, sometimes, of dispute.
- Only the award is calculated. Notice pay, unused leave, outstanding wages, deductions and any contractual scheme more generous than the Law are outside the tool.
- GOSI contributions are a separate scheme and do not offset the award. See the GOSI calculator.
- The rules come from the English text published by HRSD and mirrored by WIPO Lex. The Arabic text prevails.
Check against the official HRSD calculator
HRSD publishes its own end of service benefit calculator among its ministry services. Use it as a second check before paying or claiming an award. For the wider picture across the six GCC states, including the UAE cap and the countries with no statutory award, read the GCC end of service gratuity guide.
How Axion People books the Saudi award
The People box carries the Saudi award rules inside payroll. It accrues the Article 84 award each pay run on the wage as defined in Article 2, applies the Article 85 fraction at exit from the recorded reason for leaving, and posts the provision to the ledger so the liability is visible before anyone resigns. GOSI contributions and the Wage Protection file come out of the same run, in Arabic and English, with unlimited users and pricing per box. For the payroll calendar around it, see the GCC payroll, WPS and GOSI compliance guide.
Frequently asked questions
Do I get an end of service award if I resign before two years in Saudi Arabia?
Not under Article 85. A resigning worker is entitled to one third of the award only after at least two consecutive years of service, so a resignation before that pays nothing. The exceptions are in Article 87: leaving because of force majeure, or a female worker ending her contract within six months of marriage or three months of giving birth, keeps the full award. If the employer ends the contract instead, Article 84 pays pro rata for any length of service.
Is the Saudi end of service award calculated on basic salary or the full salary?
On the wage as the Labor Law defines it. Article 2 says the word wage means the actual wage: the basic wage plus all other due increments, including commissions, effort or risk allowances, cost of living increments, contractual or customary grants and in-kind benefits. Article 86 allows the parties to agree that commissions and sales percentages are left out of the award base. This is different from the UAE, where the gratuity is on basic wage only.
Does the end of a fixed term contract count as a resignation?
No. Article 85 only reduces the award when the work relation ends because of the worker's resignation. When a fixed term contract simply reaches its end date, or the employer terminates, Article 84 applies in full: half a month of wage per year for the first five years and a full month per year after that, on the last wage.
Do Saudi nationals receive the end of service award?
Article 84 speaks of the worker without distinguishing by nationality, so the award rules read the same for Saudi and non-Saudi employees. GOSI contributions belong to a separate scheme under the Social Insurance Law, and nothing in Articles 84 to 88 of the Labor Law offsets the award against them. Use the GOSI calculator for the contribution side.
How are part years and days counted?
Article 84 says the worker is entitled to the award for portions of the year in proportion to the time spent on the job. This tool counts completed years from the start date and pro rates the leftover days against the anniversary year they fall in, 365 or 366 days, then applies the half month or full month rate to the resulting decimal years.
Did the 2025 labour law amendments change the award formula?
Not as reported. Royal Decree M/44 was published in the Official Gazette on 23 August 2024 and took effect on 19 February 2025. Law firm summaries of the package, including the Clyde and Co note on resignations, describe a new formal definition of resignation and a 30 day employer response window, and do not report any change to the Article 84 bands or the Article 85 fractions. The HRSD English PDF used here predates the amendments, so check the current Arabic text for anything contested.
Sources
- Ministry of Human Resources and Social Development (HRSD), Labor Law, English text (PDF)
- HRSD knowledge centre, article 317: end of service award
- WIPO Lex, Saudi Arabia Labor Law (Royal Decree M/51), English text
- HRSD, end of service benefit calculator (ministry services)
- Clyde and Co, KSA Labour Law amendments series, part 1: resignations (March 2025)
- u.ae, end of service benefits for workers in the private sector (UAE comparison only)
All sources checked on 4 September 2026.
Disclaimer
This calculator gives an estimate for planning purposes. It is not legal advice, and the final award depends on the contract, the reason for separation as recorded, and the facts of each case. Check the result against the official HRSD calculator or take advice before paying or claiming an award.
Related tools: UAE gratuity calculator, GOSI calculator, all calculators.