The One-Third EOSB Rule: Resignation Entitlement (2 to 5 Years)

The End-of-Service Benefit (EOSB) is a mandatory entitlement under Saudi Labor Law. However, when a worker voluntarily resigns, the full potential award is subject to a reduced proportional payout based on continuous service duration.

The One-Third (⅓) Rule, established in Article 85 of the Saudi Labor Law, applies to workers who resign after completing between two and five years of continuous service.

This guide provides a precise breakdown of the eligibility criteria, the statutory calculation formula, and a numerical example demonstrating how the ⅓ entitlement works in practice.

Statutory Basis: Articles 84 & 85 and the Reduced Entitlement

The standard EOSB calculation under Article 84 awards:

• Half a month’s wage for each of the first five years of service, and
• A full month’s wage for each subsequent year.

When a worker resigns, Article 85 modifies this award according to the length of service, as shown below:

👉 Understand the full EOSB calculation method under Article 84 →

Defining Eligibility: 2 to 5 Consecutive Years

The One-Third EOSB Rule applies only when both of the following are true:

• Minimum Threshold: The worker has completed not less than two full consecutive years of service.

  ⚠️ Resigning even one day before completing two years results in zero EOSB entitlement.

• Maximum Threshold: The worker has served no more than five years.
  Once service exceeds five years, entitlement automatically upgrades to the Two-Thirds (⅔) Rule.

Calculation Methodology: Applying the One-Third Reduction

The computation involves two mandatory steps:

Step 1: Calculate the Hypothetical Full EOSB (Article 84)

For workers resigning within five years, only the half-month rate applies:

👉 Understand the full definition of Actual Wage components for EOSB calculation →

Step 2: Apply the One-Third Reduction (Article 85)

The resignation entitlement equals one-third of the total full EOSB calculated in Step 1:

Detailed Numerical Example

Scenario:
A worker resigns after 3 years, 6 months, and 15 days of continuous service.

Contextual Considerations and Exemptions

• The EOSB entitlement is based solely on continuous service and final wage basis.
• Employers and workers may agree to exclude certain variable pay elements (e.g., commissions, sales incentives) from the EOSB base, per Article 8.

Exemptions to the One-Third Reduction (Article 87)

The reduced entitlement does not apply when:

• The worker resigns due to force majeure beyond their control.
• A female worker resigns within six months of marriage or three months after childbirth.

In these cases, the worker is entitled to the full (100%) EOSB.

Boundary Transition Point

Resigning one day after completing five years of continuous service automatically shifts the entitlement to the Two-Thirds (⅔) Rule, offering a significantly higher payout.

👉 Review the Two-Thirds EOSB Rule →

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