A detailed, educational legal guide explaining the preventive calculation of labor benefits in accordance with Articles 84 and 85 of the KSA Labor Law.
End-of-service benefit is a basic statutory right mandated by the Saudi Labor Law. The employer must pay this award to the employee upon termination of the employment contract. The calculation is based on the employee's "last actual comprehensive wage" (which includes the basic salary plus continuous allowances like housing, transportation, and fixed monthly commissions):
Illustrative Example: An employee whose last comprehensive wage is 10,000 SAR, and has completed exactly 7 years of service:
Entitlement for the first five years = 5 × 5,000 SAR = 25,000 SAR.
Entitlement for the 6th and 7th years = 2 × 10,000 SAR = 20,000 SAR.
Total statutorily accrued award prior to resignation scaling = 45,000 SAR.
The scale of an employee's end-of-service entitlement changes completely if the employment contract ends via formal **resignation** submitted by the worker, as opposed to termination by the employer or regular expiry of a fixed-term contract. Article 85 outlines precise deduction scales based on total service duration:
| Total Service Period | Entitlement Scale upon Resignation | Entitlement upon Termination / Contract Expiry |
|---|---|---|
| Less than 2 years | No Entitlement (0%) | Full Entitlement (100%) |
| Between 2 and 5 years | One-Third Entitlement (33.3%) | Full Entitlement (100%) |
| Between 5 and 10 years | Two-Thirds Entitlement (66.6%) | Full Entitlement (100%) |
| 10 years or more | Full Entitlement (100%) | Full Entitlement (100%) |
A female worker is entitled to the full award if she resigns within 6 months of marriage, or within 3 months of giving birth. Similarly, any employee is entitled to 100% of the award if they leave work due to force majeure beyond their control or due to employer breaches falling under Article 81.
We frequently litigate labor cases before Riyadh Labor Courts resulting from startups or employees falling into standard traps during end-of-service settlements. Pay close attention to these parameters:
Labor Courts mandate the calculation of the award based on the employee's "last comprehensive wage" rather than basic only. Comprehensive wage incorporates basic salary plus permanent allowances (housing, transport, fixed B2B commissions).
Your signature on a release/clearance document serves as definitive legal proof before Labor Courts. Never sign a final release or discharge form until the actual settlement funds are fully credited to your bank account.
Some employers believe not renewing a fixed-term contract forfeits the employee's award. In reality, regular expiry of a fixed-term contract is considered a natural end of service, entitling the employee to 100% of the award under Article 84.
Your right to sue for outstanding labor benefits and end-of-service settlements expires exactly **one year** from the contract termination date. Delaying litigation beyond this window forfeits your statutory right to proceed in court.
Liquidating settlements for senior executives or directors may get extremely complex due to penalty clauses or restrictive non-compete covenants embedded in shareholder or labor agreements.