End of Service Calculator

Gratuity is due when the employment relationship ends, whether by expiry of the contract, termination by the employer, or resignation, under conditions that differ in each case. The common requirement is that the relationship has actually ended; gratuity is not paid during service and does not accrue as an annual payment.

An employee with less than a full year is entitled pro rata where the contract expired or the employer ended it, so partial months are not lost. Resignation follows an entirely different rule, covered in the third section below.

These provisions apply to workers covered by the Labour Law in the private sector. Some categories, such as government employees and domestic workers, fall under separate regimes, so check which one governs your contract before relying on any calculation.

Article 84 provides for half a month's wage for each of the first five years of service, and a full month's wage for each year thereafter. Fractions of a year are calculated proportionally.

In practice, every year after the fifth is worth double a year before it. An employee on SAR 15,000 with twelve years whose contract ended is owed: the first five years at 5 x 7,500 = SAR 37,500, and the following seven at 7 x 15,000 = SAR 105,000, for a total of SAR 142,500.

Note that the last seven years alone make up roughly three quarters of the whole entitlement. This is the point most often missed by anyone considering a move shortly before completing five years.

Resignation does not cancel the gratuity but reduces it according to length of service. Article 85 gives a resigning employee one third of the gratuity where service has reached two consecutive years but not five, two thirds where it has reached five years but not ten, and the full amount at ten years or more.

An employee who resigns before completing two consecutive years receives nothing. This is the harshest line in the system and the most disputed: someone who resigns at one year and eleven months walks away with nothing, while one more month would have earned a third.

Calculate your service precisely before submitting a resignation. The difference between two nearby dates can be worth thousands, and the date difference calculator gives you the exact figure in days and months.

Take an employee on SAR 10,000 with three years of service. If the contract ends or the employer terminates: 3 x 5,000 = SAR 15,000. If the employee resigns: the same amount divided by three = SAR 5,000. A threefold difference driven by one factor, who ended the relationship.

At five years on SAR 8,000, the base gratuity is 5 x 4,000 = SAR 20,000, and a resigning employee receives two thirds = SAR 13,333. At ten years and beyond the two cases converge completely, since a resigning employee then receives the full amount.

This is why anyone approaching ten years is advised not to rush a resignation. At nine years and eleven months, a third of the gratuity is lost, and it is usually the largest single payment of a working life.

This is the most common point of dispute. The rule is that gratuity is calculated on the last wage, and wage under the Labour Law is not basic salary alone but includes what is paid to the worker regularly and consistently in return for work.

A housing allowance and a transport allowance paid monthly at a fixed amount generally form part of the wage, because they are a stable component of income rather than an occasional bonus. Allowances tied to a temporary circumstance or to variable performance, such as a secondment allowance or a project bonus, generally do not.

Commission is the hardest case. Where it is a core and regular part of income, as in sales roles, the tendency is to include it and take an average. Your contract and your employer's work regulations are the first reference in any dispute.

Article 80 sets out specific cases in which the employer may terminate without gratuity and without notice, including assault on the employer or a manager during or because of work, failure to perform essential obligations under the contract, and misconduct or an act affecting honesty and integrity.

They also include disclosure of industrial or commercial secrets, absence without a legitimate reason for more than thirty days in a single year or more than fifteen consecutive days, and exploiting the position for personal gain.

The law attaches an important safeguard: termination on these grounds is not permitted until the worker has been given the opportunity to state the reasons for their objection. An arbitrary dismissal that does not meet these conditions does not forfeit the gratuity, and the labour court is open to the worker.

Gratuity is not the whole of what is due at the end of service. Payment for unused annual leave is added, calculated on the last wage, and cannot be withheld regardless of how the relationship ended.

Where the employer terminated without a legitimate reason, notice pay and additional compensation may be due depending on the type of contract and its remaining term. A service certificate stating your period of employment and occupation is also due, and it may not contain anything prejudicial to you.

Make sure you receive your dues within the statutory period after the relationship ends, and document everything you receive in writing. Where a dispute arises, the labour court is the competent forum, and filing a claim there carries no fees.