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End of Service Gratuity in Saudi Arabia — How to Calculate & Claim It

End of service gratuity (مكافأة نهاية الخدمة) is a mandatory lump-sum payment that Saudi labour law requires employers to pay expat employees when their employment ends. It is calculated based on your basic salary and years of service. Many expats leave Saudi Arabia without claiming their full entitlement — or claim less than they are owed — because they do not know the exact calculation rules. This guide explains how to calculate your gratuity, when you are entitled to it, and what to do if your employer refuses to pay.

Highlights

  • ★End of service gratuity is a legal right under Saudi Labour Law Article 84 — it is not a bonus and cannot be withheld by the employer without legal cause.
  • ★The standard rate is half a month's basic salary per year for the first 5 years, then one full month's salary per year beyond 5 years.
  • ★You are entitled to gratuity after completing 2 years of service — under 2 years, no gratuity is payable.
  • ★If you resign (rather than being terminated), a reduced gratuity applies: one-third of the amount for 2–5 years, two-thirds for 5–10 years, and full amount for 10+ years.
  • ★Gratuity is calculated on basic salary only — housing allowances, transport allowances, and bonuses are excluded.
  • ★GOSI (General Organization for Social Insurance) contributions are separate from gratuity — both are your entitlement.

Who Is This For?

Expat employees working in Saudi Arabia who are approaching the end of their contract, changing jobs, or planning to leave the country and want to understand their financial entitlements.

Step-by-Step Process

  1. 1Confirm your basic salary (not total salary) — gratuity is calculated on basic salary only, which is typically 60–70% of total package for most professional roles.
  2. 2Calculate your exact years and months of service from your Iqama issue date or employment contract start date to your last working day.
  3. 3Apply the gratuity formula: for the first 5 years, multiply (basic salary ÷ 2) × number of years. For each year beyond 5 years, add (basic salary × 1) per year.
  4. 4If you resigned, apply the reduction factor: one-third of calculated amount for 2–5 years of service; two-thirds for 5–10 years; full amount for 10+ years.
  5. 5Request your gratuity calculation in writing from your employer's HR department before your last day.
  6. 6Verify that the calculation matches what Saudi Labour Law requires — compare it against your own calculation.
  7. 7Collect payment before your Iqama is cancelled. Gratuity is typically paid on the last working day or within 7 days of contract end.
  8. 8If there is a dispute, file a complaint through the MHRSD portal or the Musaned platform (for domestic workers) before leaving Saudi Arabia.

Common Mistakes to Avoid

  • ✗Accepting gratuity calculated on total salary instead of basic salary — verify the base figure your employer uses.
  • ✗Not accounting for the resignation reduction rule — if you resigned, your entitlement is reduced based on years of service. Know your exact entitlement before negotiating.
  • ✗Leaving Saudi Arabia before collecting — once your Iqama is cancelled and you are abroad, recovering unpaid gratuity is significantly harder.
  • ✗Signing a final settlement that waives your rights — read every document you sign on your last day carefully. A general waiver clause can forfeit your gratuity claim.
  • ✗Assuming short-service contracts (under 2 years) carry no gratuity — this is correct in law, but in practice some employers offer contractual gratuity for shorter service, so check your contract.
  • ✗Forgetting to claim unused annual leave — if you have untaken leave days, these are also payable as part of your final settlement and are calculated on total daily salary, not basic.

Timing & Fees

There is no fee for claiming end of service gratuity — it is a statutory payment. Filing a complaint with MHRSD for non-payment is also free. Labour courts in Saudi Arabia do not charge case fees for labour disputes below SAR 100,000. Gratuity must be paid within 7 days of termination under Saudi Labour Law; for resignation, payment on the last working day is standard practice.

Practical Tips

  • 💡Keep all your payslips for the duration of your employment — you will need them to verify basic salary and calculate the correct gratuity amount.
  • 💡Your employment contract should state your basic salary separately from total salary — if it does not, the total salary may be treated as basic salary in your favour under some interpretations.
  • 💡If your employer is delaying payment, send a formal written request via email or registered mail — this creates a documented record before escalating to MHRSD.
  • 💡MHRSD's online complaint portal (musaned.com.sa or mhrsd.gov.sa) is quick and effective — many employers settle within days of a complaint being filed.
  • 💡For large employers (multinationals, government-linked companies), HR departments typically calculate gratuity accurately. For smaller employers, self-calculation is important.
  • 💡Saudi nationals employed locally are covered by GOSI pension schemes rather than end of service gratuity — the gratuity rules apply specifically to expat (non-Saudi) employees.
  • 💡If your employment was terminated for gross misconduct as defined under Saudi Labour Law, the employer may legally withhold gratuity — this is rare but possible. Seek legal advice if you believe this applies to your situation.

Frequently Asked Questions

How is end of service gratuity calculated with an example?

Example: Basic salary SAR 10,000/month, 7 years of service, terminated by employer. First 5 years: (10,000 ÷ 2) × 5 = SAR 25,000. Years 6 and 7: 10,000 × 2 = SAR 20,000. Total gratuity = SAR 45,000. If the same person had resigned: the first 5 years entitlement is two-thirds of SAR 25,000 = SAR 16,667. Years 6 and 7 remain full at SAR 20,000. Total = SAR 36,667.

Am I entitled to gratuity if I resign?

Yes, but the amount is reduced based on years of service: less than 2 years — no gratuity. 2–5 years — one-third of the calculated amount. 5–10 years — two-thirds of the calculated amount. 10+ years — full amount. These reductions only apply if you resign; if the employer terminates you without cause, you receive the full amount regardless of tenure.

Is gratuity paid in addition to GOSI?

GOSI (General Organization for Social Insurance) contributions are separate from gratuity. GOSI covers work-related injuries and, for some categories, an annuity. End of service gratuity is a separate, additional statutory payment. Both are your legal entitlement.

What if my employer refuses to pay?

File a complaint with the Ministry of Human Resources and Social Development (MHRSD) through their online portal or by visiting a labour office. Saudi labour courts typically rule in favour of employees in clear gratuity disputes. File before leaving Saudi Arabia, as international enforcement of judgements is difficult.

Does gratuity apply to domestic workers?

Domestic workers (housemaids, drivers, nannies) in Saudi Arabia are covered by a separate regulatory framework under the Ministry of Human Resources. They are entitled to one month's salary per year of service after completing two years. Disputes are handled through the Musaned platform.