The End of Service Benefit (EOSB) calculation in the Kingdom of Saudi Arabia (KSA) is progressive, meaning the payout rate increases based on the employee’s length of continuous service. The most significant financial milestone in this structure is the five-year threshold, which triggers the shift from a half-month wage accrual rate to a full-month wage accrual rate for all subsequent years.
This system, mandated by Article 84 of the Saudi Labor Law, ensures that loyalty and extended continuous service are increasingly rewarded. This guide details the mandatory split calculation and illustrates its application with numerical examples.
The Mandate of Article 84: Progressive Calculation
The calculation of the End-of-Service Award must always be performed in two distinct tiers when service exceeds five years:
| Service Tier | Accrual Rate (Per Year) | Legal Basis |
|---|---|---|
| Tier 1: First Five Years | Equivalent to a half-month wage (0.5x) | Article 84 |
| Tier 2: Years Following the First Five | Equivalent to a full month’s wage (1.0x) | Article 84 |
The significance of the five-year mark: The accrual rate for the benefit jumps from 50% of the monthly wage per year to 100% of the monthly wage per year once the sixth year begins. The calculation is not retroactive; the first five years are perpetually set at the half-month rate.
Detailed Numerical Examples of the Split Calculation
The calculation uses the worker’s Last Wage (LW), which includes the Basic Wage plus all fixed allowances, as the uniform basis across both periods.
Example 1: Calculating EOSB for 6 Years and 4 Months of Service
Scenario: Normal termination after 6 years and 4 months of continuous service. Last Monthly Wage (LW): 10,000 SAR.
| Calculation Segment | Formula | Value (SAR) |
|---|---|---|
| Part A: First 5 Years (0.5x Rate) | 5 years × 0.5 × 10,000 | 25,000.00 |
| Part B: Remaining 1 Year & 4 Months (1.0x Rate) | (1 × 10,000) + (4/12 × 10,000) | 13,333.33 |
| Total EOSB (Full Entitlement) | Part A + Part B | 38,333.33 SAR |
Example 2: Calculating EOSB for 15 Years and 9 Months of Service
Scenario: Normal termination after 15 years and 9 months of continuous service. Last Monthly Wage (LW): 12,000 SAR.
| Calculation Segment | Formula | Value (SAR) |
|---|---|---|
| Part A: First 5 Years (0.5x Rate) | 5 × 0.5 × 12,000 | 30,000.00 |
| Part B: Remaining 10 Years & 9 Months (1.0x Rate) | 10.75 years × 1.0 × 12,000 | 129,000.00 |
| Total EOSB (Full Entitlement) | Part A + Part B | 159,000.00 SAR |
The Rule for Resignation After 5 Years
The calculation becomes more complex when the worker resigns instead of being terminated by the employer. The full, progressive calculation (Article 84) must still be performed first, and only then is the reduction for resignation applied (Article 85).
- Resignation Entitlement (Article 85) for 5 to 10 Years: If service is in excess of five successive years but less than ten years, the worker is entitled to two-thirds (⅔) of the total award.
- Resignation Entitlement (Article 85) for 10+ Years: If service amounts to ten or more years, the worker receives the full award.
Applying the Resignation Reduction (Example 1)
Using Example 1 (6 years, 4 months of service), the worker served longer than five years but less than ten years, thus entitling them to two-thirds () of the total Article 84 award upon resignation.
| Calculation Step | Value |
|---|---|
| Total EOSB (Full Article 84 Calculation) | 38,333.33 SAR |
| Resignation Entitlement (⅔ of Total) | ⅔ × 38,333.33 SAR |
| EOSB on Resignation: | ≈ 25,555.55 SAR |
This process demonstrates how the progressive accrual rates established by the five-year threshold underpin all final settlement calculations, even when reduced due to voluntary resignation.
Summary & Other Important Guides links
The transition from the half-month rate to the full-month rate after five years ensures that employees who commit to long-term service are compensated at a significantly accelerated rate for their continued tenure.
For the technical detail of time: Review the Service Period Fractions Explained for Saudi Gratuity.
For the technical detail of money: Understand what Actual Wage components are included in the final salary basis.
For the full legal entitlement: See the Guide to Saudi EOSB Resignation & Termination Entitlement.
Any unresolved disputes or questions must be formally directed to the relevant Saudi authorities for official clarification and binding decisions.
Need Your Final Entitlement Calculated Now?
Stop guessing. Our expert-verified tool applies the precise Saudi Labor Law framework, calculating the progressive accrual rates (Article 84) and applying the correct proportional reductions for resignation (Article 85/87) to your Actual Wage. Get immediate clarity on your final dues.
Use the Saudi EOSB Calculator Now