Termination of the contract
Article 84 of the Saudi Labour Law:how end-of-service pay is calculated
Article 84 sets the gratuity formula: half a month's wage for each of the first five years and a full month for each year after that. It uses the final wage, and part years are paid pro rata.
- Article 84
- Explanatory guidance
When employment ends, end-of-service pay is the first figure people ask about, and Article 84 is its only source. The formula is short and clear. Disputes come from the details: which wage to use, how to treat part years, and when the amount is reduced or lost.
Article 84 sets the rule, and the articles after it adjust it. Article 85 reduces the gratuity on resignation. Article 86 allows commissions to be excluded by agreement. Article 87 restores the full amount in certain cases. Article 80 removes it.
The text of the article
On the ending of the employment relationship, the employer shall pay the worker an end-of-service award calculated at half a month's wage for each of the first five years and one month's wage for each of the following years. The final wage is taken as the basis of calculation, and the worker is entitled to an award for parts of a year in proportion to the period served.
Status of the text: This article has not been amended; the text below is the original operative text.
The official reference is the Arabic text published by the Bureau of Experts at the Council of Ministers.
The English above is a working translation.
The formula worked through
Final wage 10,000 riyals, seven years of service. The first five years earn half a month each: 5,000 × 5 = 25,000. The next two years earn a full month each: 20,000. The total is 45,000 riyals.
For three years and six months, it is half a month per year, with the six months counted pro rata: 17,500 riyals.
Use the final wage, including allowances
The text uses the final wage. Article 2 defines the wage as the basic wage plus established allowances and increments, so housing and transport allowances are included. Using the basic wage alone gives too low a figure.
Article 86 allows one exception. The parties can agree to leave out commissions and sales percentages, which vary from month to month.
When the award is reduced or lost
On resignation, the sliding scale in Article 85 applies: nothing before two years, a third from two to five, two thirds from five to ten, and the full amount at ten years or more. Dismissal under Article 80 removes it entirely.
Article 87 restores the full amount even after resignation in two cases: the employee leaves because of force majeure beyond their control, or a female employee ends her contract within six months of marriage or three months of giving birth.
What belongs in the calculation
- The basic wage plus established allowances and increments, including housing and transport.
- The full period of service in years, months and days, not whole years only.
- The reason the employment ended, since it decides whether the award is paid in full, reduced by the resignation scale, or lost.
- Commissions and sales percentages left out only if a written agreement under Article 86 says so.
- Payment for untaken leave as a separate line under Article 111.
Common mistakes
Calculating on the basic wage alone
The text says final wage, and the legal definition of wage includes established allowances and increments.
Ignoring part years
The text grants a pro rata award for part years, so service is not rounded down to whole years.
Applying half a month to every year
Half a month applies to the first five years only. Each year after that earns a full month.
Merging gratuity with leave pay
They are separate entitlements under separate articles. Combining them can hide an underpayment in one of them.
How Barez applies this article
Computed from the employee file
The start date, final wage and reason for leaving are already in the file, so the figure is calculated without manual entry.
The ground changes the result
When you select the reason in Barez, it applies the resignation scale, the full amount or forfeiture. The accountant does not have to work it out by hand.
The settlement separates the lines
Gratuity, leave pay, dues and debts appear as separate lines that both sides can check.
Sources
This page is explanatory guidance, not legal advice. In a dispute, rely on the official text and consult the Ministry of Human Resources and Social Development or a licensed lawyer.
Article 84
Frequently asked questions
How is end-of-service pay calculated in Saudi Arabia?
Half a month's wage for each of the first five years and one month's wage for each following year, based on the final wage, with parts of a year paid in proportion to the period served.
Do allowances count towards the gratuity?
Yes. The calculation uses the final wage as the Law defines it: basic pay plus established allowances such as housing and transport. Commissions can be left out by agreement under Article 86.
What is the gratuity after three years of service?
Half a month per year, so one and a half months' wage in total. If the employee resigned, the Article 85 scale applies. If they were dismissed under Article 80, the gratuity is forfeited.
Labour law articles
Continue from here
End-of-service calculator
Work out the figure for your service, wage and termination ground.
Article 85: gratuity on resignation
The scale that reduces the award when the employee resigns.
Article 80: dismissal without gratuity
Where the award is forfeited entirely.
The final settlement and service certificate
How the gratuity enters the final settlement statement.
Article 74 of the Saudi Labour Law: when an employment contract ends
Article 74 lists every ground on which an employment contract ends, including resignation and bankruptcy rulings, both added in 1446H. The ground decides what the employee is owed, so settle it first.
Article 77Article 77 of the Saudi Labour Law: compensation for unlawful termination
Article 77 sets a fixed formula for compensation: fifteen days' wage per year of service on an indefinite contract, or the wage for the remaining term on a fixed one, and never less than two months' wage.
Article 80Article 80 of the Saudi Labour Law: nine cases for dismissal without gratuity
Article 80 is a narrow exception to employee protection. It lists nine cases that allow termination without gratuity, notice or compensation. In every case, the employee must first be given the chance to object.
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