When a job in Saudi Arabia ends, the employer owes the worker an end-of-service benefit — a lump sum the Labour Law calls mukafaʾat nihayat al-khidma. The rules are simpler than most people fear, but three details quietly change the number. Here's the whole thing, grounded in the actual articles of the law.
The base formula (Article 84)
Article 84 of the Saudi Labour Law sets the headline calculation. It is built on your last wage and your length of service:
- Half a month's wage for each of your first five years.
- One full month's wage for each year beyond the fifth.
- Pro-rated for any partial year — you are paid for the fraction of the year you actually worked.
So a worker on SAR 10,000/month who completes exactly six years receives: five years at half a month (5 × 0.5 × 10,000 = SAR 25,000) plus one year at a full month (1 × 10,000 = SAR 10,000), for SAR 35,000.
"Wage" here means your actual wage — basic pay plus regular cash allowances — not just basic pay. That single point changes a lot of calculations.
The wage that counts (Article 2)
Article 2 defines the "wage" used in the formula as the actual wage: basic pay plus every regular increment you receive for doing the work — including cash housing and transport allowances. If your housing is provided in kind (the employer gives you a flat rather than an allowance), it's treated differently and capped. The practical takeaway: enter your full regular monthly cash pay, not just the "basic" line on your contract.
If you resigned (Article 85)
Resignation reduces the award on a tenure ladder:
- Under 2 years of service: no gratuity.
- 2 to under 5 years: one third of the Article 84 amount.
- 5 to under 10 years: two thirds.
- 10 years or more: the full amount.
This is the single biggest reason two people with identical salaries and tenure walk away with very different cheques — one was let go, the other resigned.
The exceptions that restore the full amount (Article 87)
Article 85's reduction does not apply in two situations: where the worker leaves because of a force-majeure circumstance outside their control, and where a female worker ends the contract within six months of her marriage or three months of childbirth. In those cases the full Article 84 award is due regardless of resignation.
When you get paid (Article 88)
Settlement is due quickly: within one week if the employer ended the contract, within two weeks if the worker did. The employer may set off legitimate work-related debts you owe.
The mistakes people make
- Using basic pay instead of actual wage — understates the result.
- Forgetting the 5-year break point — years six onward are worth double the early years.
- Assuming resignation means zero — only true under two years.
- Confusing this with Article 77 — wrongful-termination compensation is a separate remedy that can stack on top.
Keep reading
More plain-English guides to Saudi compliance, quality, and the standards behind good business — each grounded in the primary sources.
Browse all articles →Questions
Is the gratuity taxed?
Saudi Arabia has no personal income tax, so the end-of-service benefit is paid gross. It is a statutory entitlement, not salary.
Do commissions count toward the wage?
Under Article 86, commissions and sales percentages can be excluded from the wage base only by written agreement. Absent that, they form part of the actual wage.
Does this apply to domestic workers?
Domestic workers are governed by a separate regulation, not the main Labour Law articles described here.