Employment in Saudi Arabia’s private sector is governed by the Labor Law issued by Royal Decree M/51 (1426H / 2005). A package of amendments approved in August 2024 took effect on 19 February 2025, changing or adding dozens of articles. Based on available summaries, the end-of-service articles (84 to 88) were not changed; the official amendments document is a scanned PDF, so check it if you need certainty. This guide gives estimates for information, not legal advice.
Who the law covers
The Labor Law covers private-sector employees, Saudi and expatriate alike. Saudi employees also contribute to GOSI for their pension, but GOSI does not replace the end-of-service award; Saudis receive both. The new Social Insurance Law in force since 3 July 2024 did not change this.
End-of-service award
- Wage used: your last actual wage, meaning basic wage plus allowances, commissions and benefits, as the law defines “wage” (Article 2). Under Article 86 your contract may exclude commissions and similar variable pay. Many online calculators wrongly use basic wage only.
- Formula (Article 84): half a month’s wage for each of the first five years, then one month’s wage for each year after that. Part years are paid pro rata.
- Minimum service: none when the employer ends the contract or a fixed-term contract expires.
- Cap: none.
- Day’s wage: the formula is in months, so no divisor is needed. Our calculator uses wage ÷ 30 only to show a daily figure.
If you resign (Article 85)
Resigning reduces the award according to your length of service:
| Service when you resign | Share of the award |
|---|---|
| Less than 2 years | Nothing |
| 2 to under 5 years | One third |
| 5 to under 10 years | Two thirds |
| 10 years or more | Full award |
Some sources word the five-year boundary differently; our calculator applies two thirds from exactly five years.
You still receive the full award despite resigning if you leave because of force majeure, or if you are a woman ending your contract within six months of marriage or three months of giving birth (Article 87). Leaving under Article 81, where the employer has breached its obligations, also keeps your full rights.
Since 2025, new Article 79-bis sets the resignation process: a resignation is treated as accepted after 30 days, the employer may postpone it by up to 60 days, and you may withdraw it within 7 days.
Dismissal
The award is lost only if you are dismissed on one of the grounds in Article 80 (serious misconduct, after you have had a chance to object). An ordinary termination does not affect it. The award is due within one week of the contract ending, or two weeks if you resigned (Article 88).
Annual leave
Under Article 109, you receive 21 days of paid annual leave a year, rising to 30 days after five consecutive years with the same employer. Leave pay is paid in advance. Use the Saudi leave salary calculator to value unused days.
Overtime
Article 107 pays overtime as your full hourly wage plus 50% of your basic hourly wage. This is a different method from most Gulf countries: the premium is calculated on basic, then added to the full hourly rate. The same premium applies to night, rest-day and holiday hours. Since February 2025, paid days off may be given instead of overtime pay if you agree. Try the Saudi overtime calculator, which asks for both your total and basic wage.
Notice period
Under amended Article 75, for an open-ended contract with a monthly wage, the employer must give 60 days’ notice and the employee 30 days’. For other workers it is 30 days either way. A party that does not give notice owes compensation (Article 76).
Worked example
An employee earns a wage of SAR 10,000 a month (basic plus allowances) and leaves after exactly 7 years.
- Years 1–5: 5 × ½ month = 2.5 months = SAR 25,000
- Years 6–7: 2 × 1 month = 2 months = SAR 20,000
- Full award: SAR 45,000
If the employer ended the contract, the employee receives SAR 45,000. If the employee resigned, seven years falls in the two-thirds band: 45,000 × ⅔ = SAR 30,000. Check your own case with the Saudi end-of-service calculator.
Common mistakes
- Using basic wage only. The Saudi award uses actual wage including allowances, unless your contract excludes commissions.
- Applying resignation cuts to termination. The Article 85 shares apply only when you resign.
- Missing the Article 87 exceptions. Force majeure and the marriage and childbirth cases keep the full award.
- Assuming GOSI replaces the award. It does not.
- Mixing up overtime methods. The 50% premium is calculated on basic wage, not total wage.