Precise Calculation of Service Period Fractions for Saudi End of Service Benefits (EOSB)

The End of Service Benefit (EOSB), a mandatory financial entitlement in the Kingdom of Saudi Arabia (KSA), is accrued based on the worker’s continuous service duration and their last determined wage.

While the core calculation for completed years of service follows a defined progressive rate, determining the final value with accuracy - especially for fractions of a year, requires a precise legal approach.

This authoritative guide explains how fractional service periods are computed under the Saudi Labor Law (SLL), ensuring that every day of service contributes proportionally to the final gratuity entitlement.
This rule, rooted in Article 84 of the SLL, guarantees full compliance with the proportional reward principle under Saudi employment law.

The Statutory Basis for Proportional Gratuity Calculation (Article 84)

The foundation for calculating the Saudi End of Service Benefit (EOSB), or gratuity, is established in Article 84 of the Saudi Labor Law.
This article sets both the progressive accrual rates and the method for computing incomplete years of service.

The Core Proportional Rule

Article 84 explicitly provides that:

The worker shall be entitled to an end-of-service award for the portions of the year in proportion to the time spent on the job.

This ensures that every single day of service contributes proportionally to the final EOSB calculation.

For example, if a worker completes 5 years, 6 months, and 10 days, those additional months and days are calculated precisely as a fraction of a full year.

It is critical to note that the rate applied to the fractional year depends on which segment of service it falls into.
If the fraction occurs after the fifth year, it is calculated using the full-month (1.0×) rate.

For detailed examples of this mixed-rate method, refer to:
👉 EOSB Calculation for Service Over 5 Years (Full Month Rule)

Defining the Continuous Service Period

Before calculating the proportional gratuity entitlement, both the employer and employee must determine the total Continuous Service period.

Under the Saudi Labor Law, Continuous Service is defined as uninterrupted work for the same employer or their legal successor, starting from the original employment commencement date.

Factors Legally Included in Continuous Service

To ensure accurate calculation of EOSB, the following periods are included as part of Continuous Service:

• Official Holidays and Vacations - Fully counted as service time.
• Examination Interruptions - Counted when aligned with Labor Law provisions.

The Crucial Rule on Unpaid Absences

A key statutory rule addresses how unpaid absences affect continuity:

Worker’s unpaid absences from work for intermittent periods not exceeding twenty days per work year shall not interrupt the continuity of service.

To calculate the fractional value, the entire service period (in years, months, and days) is converted into total days, and the remainder is divided by 360 (or 12 months) to determine the fractional year.

Numerical Examples of Proportional Calculation

Below are three examples illustrating how Article 84’s proportional rule is applied, using the Last Monthly Wage (W) as the legal wage base.

Example 1: Service Less Than Five Years (Half-Month Rate)

Service Details: 3 Years, 7 Months, 18 Days
Entitlement Rate: Half-month rate (0.5×)

Result: If W = 12,000 SAR, Total EOSB = 21,800.40 SAR

Example 2: Service Crossing the Five-Year Threshold (Mixed Rates)

Service Details: 8 Years, 5 Months
Entitlement Rates: 0.5× (first 5 years); 1.0× (remaining 3 years 5 months)

Result: If W = 15,000 SAR, Total EOSB = 88,750.50 SAR

For more details on wage components, see:
👉 Understand the Definition of Actual Wage Components

Example 3: Long Service, Fraction at Full Rate (1.0×)

Service Details: 14 Years, 11 Months, 5 Days
Entitlement Rates: 0.5× (first 5 years); 1.0× (after 5 years)

Result: If W = 8,000 SAR, Total EOSB = 99,444.80 SAR

Summary of Fractional Calculation Methodology

The calculation of End of Service Gratuity for fractional service periods requires the following sequence:

1. Determine Total Continuous Service
   Include official holidays, vacations, and unpaid absences not exceeding 20 intermittent days per work year.

2. Identify Rate Segments

   • Segment A: First 5 years → 0.5× rate
   • Segment B: After 5 years → 1.0× rate
     See: Review the Full Guide on the Full Month Rule for Service Over 5 Years

3. Calculate Proportional Value
   Convert the partial year into a fraction (days ÷ 360 or months ÷ 12), then multiply by the applicable rate and Last Wage (W).

Conclusion

By following these proportional rules and applying the Actual Wage as the calculation base, both employers and employees in the Saudi Arabia (KSA) can ensure a precise and lawful EOSB computation, fulfilling the requirements of Article 84 of the Saudi Labor Law.

Any unresolved disputes or questions must be formally directed to the relevant Saudi authorities for official clarification and binding decisions.