Saudi End of Service Calculation Formula – Find Out How Much You Will Get!

Losing or leaving a job can be stressful, and one of the biggest concerns for employees in Saudi Arabia is understanding their end of service calculation formula. Many employees are unaware of their rights regarding the compensation they are entitled to upon resignation or termination.

Misunderstandings about end-of-service benefits (ESB) can lead to financial losses, making it crucial to understand the rules set by the Saudi Labor Law. In this detailed guide, you will learn everything about the Saudi end of service calculation formula, including how to calculate it based on your years of service, salary, and termination type.

What Is the Saudi End of Service Calculation Formula?

The Saudi end of service calculation formula is a legal compensation system for employees when their job contract ends. It is designed to ensure financial security after employment termination and is regulated under Saudi Labor Law. The compensation amount depends on several factors, including:

• Total years of service

• Type of contract (fixed or indefinite)

• Reason for termination (resignation, termination, or retirement)

• Final basic salary

Key Factors in the Calculation

1. Basic Salary – The last drawn basic salary forms the foundation of the calculation.

2. Years of Service – The longer you work, the higher your entitlement.

3. Type of Termination – Whether you resign or get terminated affects the benefits you receive.

How to Calculate End of Service Benefits in Saudi Arabia?

The Saudi end of service calculation formula is structured as follows:

1. If You Are Terminated by the Employer:

• For the first five years: Half a month's salary for each year.

• Beyond five years: One full month's salary for each additional year.

Example Calculation:

If your basic salary is SAR 10,000 and you worked for 7 years, your ESB calculation would be:

• First 5 years: (10,000 ÷ 2) × 5 = SAR 25,000

• Additional 2 years: 10,000 × 2 = SAR 20,000

• Total ESB = SAR 45,000

2. If You Resign from the Job:

• Less than 2 years: No ESB is granted.

• Between 2 to 5 years: One-third of the ESB.

• Between 5 to 10 years: Two-thirds of the ESB.

• More than 10 years: Full ESB entitlement.

Example Calculation for Resignation:

If your basic salary is SAR 10,000 and you worked 6 years, your ESB calculation would be:

• Standard ESB: (10,000 ÷ 2) × 6 = SAR 30,000

• Eligible amount: Two-thirds of SAR 30,000 = SAR 20,000

Different Scenarios for End of Service Calculation

1. ESB Calculation for Fixed-Term Contracts

Employees with fixed-term contracts receive full ESB benefits upon completion of the contract. If the employer terminates the contract before its expiration, the employee is still entitled to compensation.

2. ESB for Retirement Cases

If an employee retires after at least 10 years of service, they receive full ESB benefits regardless of whether they resigned or were terminated.

3. ESB Calculation for Female Employees

Female employees who resign within six months of marriage or within three months of childbirth are entitled to full ESB benefits, regardless of the duration of their service.

How to Use the Saudi End of Service Benefits Calculator?

To simplify the process, the Ministry of Human Resources and Social Development (MHRSD) offers an online ESB calculator where employees can enter their details to get an estimate of their benefits.

Steps to Use the Calculator:

1. Visit the MHRSD website.

2. Enter your basic salary.

3. Input your total years of service.

4. Select your termination type (resignation or termination).

5. Get an instant estimate of your ESB amount.

Common Mistakes to Avoid in End of Service Calculation

1. Ignoring the Basic Salary Factor – Some employees assume their ESB is based on their full salary instead of the basic salary.

2. Misunderstanding Resignation Rules – Not knowing that resigning before completing two years results in no ESB.

3. Not Knowing the Impact of Employment Type – Fixed-term contracts and indefinite contracts have different ESB calculations.

4. Overlooking Extra Benefits – Only the basic salary is considered, and allowances like housing or transport are excluded.

Frequently Asked Questions (FAQs)

1. Is the end of service benefit mandatory in Saudi Arabia?

Yes, Saudi Labor Law mandates that all employers must pay end-of-service benefits as per the legal calculation method.

2. Can an employer refuse to pay ESB?

No, employers are legally obligated to pay end-of-service benefits. Employees can file a complaint with the Saudi Ministry of Labor if their rights are violated.

3. How long does it take to receive end-of-service benefits?

Typically, ESB should be paid within two weeks of contract termination.

4. Are bonuses included in the ESB calculation?

No, only the basic salary is used for ESB calculation.

5. What happens if I switch jobs within Saudi Arabia?

If you switch jobs without a gap in service, your ESB calculation resets with your new employer.

Conclusion

Understanding the Saudi end of service calculation formula is crucial for employees to ensure they receive their rightful benefits. Whether you resign, get terminated, or retire, knowing how ESB is calculated can help you plan your financial future effectively.

To avoid any miscalculations, always use the official ESB calculator and ensure your employer follows the Saudi Labor Law guidelines. If you have any disputes, you can always seek assistance from the Ministry of Human Resources and Social Development.