Saudi end of service award (ESB) calculation: Labour Law rules, resignation and examples

If you work in the Saudi private sector, the end of service award (often called ESB, or مكافأة نهاية الخدمة) is usually the largest payment you receive when a job ends. The rules are short, but small details change the number a lot: whether you resigned or the contract ended, how many full years you served, and which wage figure is used.

This guide explains the rules in the Saudi Labour Law as published by the Ministry of Human Resources and Social Development (HRSD), then walks through five examples in Saudi riyals so you can check your own figure.

This is general information, not legal advice. If your case involves a dispute, contact HRSD or a qualified lawyer.

Who the rules cover

The end of service rules in Articles 84 to 88 apply to workers covered by the Saudi Labour Law. Some groups are excluded from the law or have their own rules. Domestic workers, for example, are covered by a separate regulation, so their entitlements are not calculated this way.

The core formula (Article 84)

When the employment relationship ends, the employer must pay an award based on your years of service:

• Half a month’s wage for each of the first five years
• One month’s wage for each year after the fifth

Two more points from the same article matter:

1. The last wage is the basis. The calculation uses the wage you were receiving at the end, not your starting salary or an average.
2. Parts of a year count. You receive a share of the award for any extra months and days, in proportion to the time you worked.

Article 84 does not set a ceiling on the total, unlike the two year cap in the UAE.

The law defines a month as 30 days unless your contract or the work regulations say otherwise. So half a month’s wage is simply your monthly wage divided by two.

Which wage counts

This is where many people go wrong. In the Saudi Labour Law, “wage” means the actual wage. HRSD describes it as the basic wage plus the other increments set for you in return for your work, effort or risk, or under your contract or the work regulations. The legal definition also lists items such as cost of living increases, regular bonuses and benefits in kind.

In other words, the Saudi rule is not limited to basic salary in the way the UAE rule is. Article 86 allows one exception: you and your employer may agree that commissions, sales percentages and similar parts that go up and down are left out of the wage used for the award.

Before you calculate anything, open your contract and your last payslip and write down every fixed monthly component. If your employer uses a different figure, ask which parts they included and why.

Resignation: the one third and two thirds rule (Article 85)

If the job ends because you resigned, the award is reduced unless you served long enough:

Continuous service when you resign	Share of the award
Less than 2 years	Nothing
2 years up to 5 years	One third
More than 5 years, less than 10	Two thirds
10 years or more	Full award

The share applies to the whole award calculated under Article 84. You first work out the full figure, then take one third or two thirds of it.

These cuts apply only to resignation. If your fixed term contract simply expires, or your employer ends the contract outside the cases in Article 80, Article 85 does not reduce the award.

Cases where you still get the full award

Article 87 makes two exceptions to the resignation cuts:

• Force majeure. If you leave because of a force majeure beyond your control, you receive the full award.
• Marriage or childbirth. A female worker who ends her contract within six months of her marriage contract or within three months of giving birth receives the full award.

Article 81 also lists situations where you may leave without notice while keeping all your statutory rights. Examples include an employer who fails to meet essential contractual or legal obligations, assigns you fundamentally different work without your consent, or treats you with cruelty or insult. If you rely on one of these, keep written evidence.

How resignation works now

Recent amendments to the Labour Law, published by HRSD, set out a clearer resignation process:

• Resignation must be a written request.
• It is treated as accepted if your employer does not reply within 30 days.
• The employer may postpone acceptance for up to 60 days if work requires it, with a written explanation given before the 30 days end.
• You may withdraw the request within 7 days, unless the employer has already accepted it.
• The contract stays in force during this period, and both sides keep their obligations.

This matters for timing. Your service counts until the contract actually ends. If you are close to a threshold such as two, five or ten years, check the date your contract will end before you submit anything.

When no award is due

• Article 80 dismissals. The employer may end the contract without an award in specific cases listed in the law, such as assault at work, proven misconduct or breach of trust, forgery to obtain the job, or long unexcused absence after written warnings. You must be given a chance to state your objections.
• Probation. Under Article 54, if the contract ends during the probation period, there is no award for that period.

Compensation for termination without a legitimate reason is a separate entitlement under Article 77. It is not part of the end of service award.

Five worked examples

All examples use a 30 day month, so half a month’s wage is the monthly wage ÷ 2.

Example 1: 4 years, contract expires, wage SAR 8,000

Your wage is SAR 6,000 basic plus SAR 1,500 housing and SAR 500 transport, all fixed in the contract.

• Half month: 8,000 ÷ 2 = SAR 4,000
• Award: 4 × 4,000 = SAR 16,000
• If you had resigned instead: 16,000 ÷ 3 = SAR 5,333.33

Example 2: 7 years, wage SAR 10,000

• First five years: 5 × 5,000 = SAR 25,000
• Years six and seven: 2 × 10,000 = SAR 20,000
• Full award: SAR 45,000
• If you resign: two thirds of 45,000 = SAR 30,000

Example 3: 12 years, you resign, wage SAR 12,000

• First five years: 5 × 6,000 = SAR 30,000
• Next seven years: 7 × 12,000 = SAR 84,000
• Award: SAR 114,000, paid in full because you served 10 years or more

Example 4: 1 year and 8 months, wage SAR 6,000

• If you resign: less than two years, so no award
• If the employer ends the contract after probation, outside Article 80: about 1.67 × 3,000 = SAR 5,000

Example 5: 3 years and 6 months, wage SAR 9,000, resigning after childbirth

She ends her contract two months after giving birth, so Article 87 applies.

• Full award: 3.5 × 4,500 = SAR 15,750
• As an ordinary resignation it would have been one third: SAR 5,250

Payment and deductions (Article 88)

When the employer ends the contract, wages and entitlements must be settled within one week of the end of the contract. When you end it, the employer has up to two weeks. The employer may deduct any work related debt you owe. Keep copies of your contract, payslips and your resignation or termination letter in case you need to raise a complaint with HRSD.

Check your number in under a minute

Open the gratuity calculator and choose Saudi Arabia. In the salary field, enter the monthly wage your award is based on (your actual wage under the contract), then your start date, last working day and the reason the job ended. The calculator applies the half month and full month rates and the resignation bands, counts service in days, and shows your service in years. It runs in your browser, so your salary details are not sent anywhere.

Treat the result as an estimate. Special cases such as Article 87 or Article 81, agreed exclusions of commission, and work related deductions are not part of the calculation, and they can change the final amount.