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At the end of his or her job term, every employee in Saudi Arabia is entitled to End of Service Benefits.
The Saudi Arabian Ministry of Labor produced this end-of-service benefits calculator. https://laboreducation.mlsd.gov.sa/en/calc
You must type the following information here:
- The contract kind.
- The cause for your dismissal or resignation.
- Salary total.
- Service timeframe.
Who is eligible for ESB?
With the following three exclusions, any employee working in Saudi Arabia is entitled to end-of-service benefits:
- Employees who are working without having their Iqama sponsorship transferred.
- Employees who are in the country on a business trip.
- Employees hired on a consulting basis, such as IT consultants.
ESB in the event of a termination
Whether or not an employee is terminated or resigned affects the gratuity calculation.
In the event of termination, an employee is entitled to the following end-of-service benefits under Saudi Labor Law article 84:
For the first five years, a half-salary is paid for each year of service.
After the first five years, you will receive a full pay for each year you have worked.
Keep in mind that if an employee is fired under Saudi Labor Law Article 80, there is no right to ESB.
After working for a corporation for seven years, an employee was fired. His previous monthly total compensation was SR 10,000.
For the first five years, the ESB is calculated as follows: 5 Years X 10,000 / 2 = 25,000.
2 Years X 10,000 Equals 20,000 ESB for the next period.
SR 45,000 in total.
In the event of a resignation
There are seven possible scenarios that affect the computation of end-of-service compensation in the event of a resignation.
1- Resignation within 2 years = ZERO.
If an employee resigns within two years of his departure without finishing his contract, he is not entitled to any end-of-service incentives, according to Saudi Labor Law Article 85.
2- Resignation between 2 to 5 years.
If an employee resigns after two years but before completing five years of service, he or she is subject to Article 85 of Saudi Labor Law.
- He is entitled to 1/3rd of his ESB award.
- ESB Award: Half salary for each year.
After four years with a corporation, an employee resigned. His previous monthly total compensation was SR 10,000. The screenshot below was taken from the above-mentioned End of Service Benefits calculator. Read More: Ministry of Labor Launched Mobile Application to File Late Salary Cases in Saudi Arabia
For the first four years, the ESB is (10,000/2) X 4 X 1/3 = SR 6,667.
An employee who resigns after 5 years but before 10 years of service is entitled to the following benefits under Saudi Labor Law Article 85:
He received two-thirds of his ESB reward.
ESB Award: 1/2 salary for the first five years, plus full compensation for each next year.
After working for a corporation for seven years, one employee resigned. His previous monthly total total salary was SR 10,000.
- ESB for the first 5 years = (10,000/2) X 5 X (2/3) = SR 16,667
- ESB for the next period = 10,000 X 2 X (2/3) = SR 13,333
- Total = 16,667 + 13,333 = SR 30,000.
4- Resignation after 10 years.
According to Article 85 of Saudi Labor Law, a worker who resigns after completing ten years of service shall receive his entire end-of-service benefits award.
For the first five years, you will be paid half of your annual wage.
For the next period, you will be paid the full wage.
After 11 years with a corporation, an employee resigned. His previous monthly total compensation was SR 10,000. The screenshot below was taken from the ESB calculator mentioned before.
- ESB for the first 5 years: (10,000/2) X 5 X (1/2) = SR 25,000.
- ESB for the next period: 10,000 X 6 = SR 60,000.
- Total = 25,000 + 60,000 = SR 85,000.
5- Resignation at contract completion.
If an employee resigns before the contract expires, he is entitled to the entire amount of his end-of-service benefits, i.e.
For the first five years, you will be paid half of your annual wage.
After the first five years, you will be paid in full.
To put it another way, the ESB will be computed as if the person had been fired.
Before his next contract renewal, an employee resigned after finishing his two-year contract with the company. His previous monthly total compensation was SR 10,000.
End of Service Benefits: (10,000/2) X 2 = SR 10,000.
6- Resignation under Article 81.
Employees who quit under Saudi Labor Law Article 81 are still entitled to their full end-of-service benefits. This calculation is included in the above-mentioned end-of-service calculator.
7- Resignation under Article 87.
The following employees will also receive a full ESB award per Saudi Labor Law Article 87.
A female employee who leaves her job within six months of getting married.
A female employee who resigns after becoming a mother within three months.
Due to a natural impairment, an employee resigns.
In the event of an employee’s death.
What does the ESB cover?
According to Saudi Labor Law, all fixed benefits paid to an employee are included in the computation of end-of-service benefits, such as;
- The starting salary.
- Allowance for mobile phones.
- Benefits that are dependent on other circumstances, such as a sales incentive, a ticket allowance, or a bonus, are not mentioned.
Payment of End of Service Benefits
A Saudi employer is required to pay end-of-service benefits within the timeframe specified in article 88 of the Saudi Labor Law.
- In the event of termination, you will be given one week’s notice.
- In the event of a resignation, there will be a two-week grace period.
The employee has the right to start a case with the Saudi Labor Court if the ESB is not paid within two weeks. In addition, the employer faces an SR 10,000 penalties for delaying the ESB by more than two weeks.
Furthermore, the Saudi Arabian Monetary Agency (SAMA) has underlined that banks do not have the jurisdiction to withhold end-of-service rewards unless they obtain a judicial ruling enabling them to do so.
ESB for Domestic Workers
According to Article 16 of Council of Ministers Resolution 310 dated 07/09/1434;
- A domestic worker is entitled to one salary after 4 years of service.
- If a housemaid or a house driver worked for 12 years, he will get 3 monthly salaries as the ESB award.
- Source: Resolution 310
Unfortunately, the above-mentioned Saudi Arabian end-of-service calculator failed to calculate the ESB for domestic workers.
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