Saudi End of Service Calculator: Official Labour Law Articles 84 & 85
Direct Legal Rule: Under Saudi Labour Law (Royal Decree M/51), End of Service Award is calculated on Actual Wage (Basic + Housing + Transport). It accrues at half-month salary per year for the first 5 years, and one full month per year thereafter, with Article 85 resignation tiers applied.
Saudi Wage & Contract Parameters
Compliant with Saudi Ministry of Human Resources and Social Development (MHRSD).
Base pay
SAR
2,000 SAR20,000 SAR40,000+ SAR
Usually 25% of basic
SAR
Cash allowance
SAR
Years
0 to 11 months
Determines Article 85 reduction
Net Payable Award
SAR0.00
Calculated via Saudi Labour Law Art. 84/85
Total Actual Wage (Basis):0.00 SAR
First 5 Years Accrual (0.5 mo/yr):0.00 SAR
Subsequent Service (1.0 mo/yr):0.00 SAR
Gross Uncut Benefit:0.00 SAR
Resignation Entitlement Ratio:100%
Saudi Labour Law Articles 84, 85, and 87: The Definitive Guide
In the Kingdom of Saudi Arabia, terminal severance pay is codified under the Saudi Labour Law (Royal Decree No. M/51) as the End of Service Award (Mukafoat Nihayat Al-Khidma). Governed by the Ministry of Human Resources and Social Development (MHRSD), the award represents a statutory obligation upon the employer at the conclusion of the contractual relationship.
The Mandatory 'Actual Wage' Calculation Basis
A widespread compliance error among private companies is computing the award exclusively on basic salary. Article 2 of the Saudi Labour Law defines the wage for terminal benefits as the Actual Wage (Al-Ajr Al-Fi'li), which includes:
Monthly Basic Salary;
Fixed Housing Allowance (or fair cash value of company-provided housing);
Fixed Transportation Allowance;
Any recurring, fixed allowances contractually paid without condition.
Saudi End of Service Accrual Formula (Article 84)
Actual Wage = Basic Salary + Housing Allowance + Transport Allowance
Years 1 to 5: Accrual = (Actual Wage / 2) × Years
Year 6 Onwards: Accrual = Actual Wage × (Years - 5)
Gross Award = Accrual (1-5 yrs) + Accrual (6+ yrs)
When an employee resigns under an indefinite term employment contract, Article 85 imposes a structured deduction scale based on completed service:
Continuous Service Period
Entitlement Percentage
Statutory Reduction
Less than 2 Completed Years
0%
100% Forfeited
2 Years to less than 5 Years
33.33% (One-Third)
66.67% Deducted
5 Years to less than 10 Years
66.67% (Two-Thirds)
33.33% Deducted
10 or more Completed Years
100% (Full Award)
Zero Deduction
Article 87 Full Award Exceptions
Notwithstanding Article 85, Article 87 dictates that an employee is entitled to 100% full award upon resignation if:
The female employee leaves work within six (6) months of marriage;
The female employee leaves work within three (3) months of giving birth;
Separation is due to force majeure beyond the worker's control;
The worker terminates the contract under Article 81 due to employer breach of contractual obligations or assault.
Two Practical Scenarios
Scenario 1: Resignation at 4 Years
Sales Lead Resigning After 4 Years
Basic: 8,000 SAR | Housing: 2,000 SAR | Transport: 1,000 SAR Actual Wage: 11,000 SAR Gross Accrual: 4 yrs × (11,000 / 2) = 22,000 SAR Article 85 Ratio: 1/3 (33.33%) for 2–5 yrs tenure Net Payable:7,333.33 SAR.
Scenario 2: Termination at 7 Years
Plant Engineer Terminated After 7 Years
Actual Wage: 16,000 SAR Tier 1 (5 yrs): 5 × (16,000 / 2) = 40,000 SAR Tier 2 (2 yrs): 2 × 16,000 = 32,000 SAR Gross Award: 72,000 SAR Separation: Termination triggers 100% full entitlement. Net Payable:72,000.00 SAR.
Frequently Asked Questions
Can an employment contract waive or reduce Article 84 award?
No. Article 8 of the Saudi Labour Law explicitly nullifies any condition or contractual agreement that derogates from or waives the statutory rights granted to workers under the law, unless it provides terms that are more beneficial to the worker.
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