The standard formula gives half a month's wage for each of the first five years of service, then a full month's wage for every year after that. A partial final year is generally pro-rated rather than rounded away, so someone who worked six years and eight months gets more than someone who worked exactly six years.
The 'wage' used in the calculation is typically the employee's final basic salary plus any regular allowances that were consistently paid — housing, transportation, and similar recurring amounts — not a one-off bonus or commission that varied month to month. Getting this base figure right matters, since it's the number everything else is calculated from, and employers sometimes calculate from basic salary alone when regular allowances should genuinely be included.
If the employer ends the contract, or the contract simply expires at the end of its term, the employee is generally entitled to the full calculated amount. If the employee resigns voluntarily, the amount is reduced on a sliding scale based on tenure: nothing for under two years of service, a third of the full amount for two to five years, two-thirds for five to ten years, and the full amount for ten years or more.
There are specific circumstances under the Labor Law where a resignation is still treated as entitling the employee to the full amount — for example, where the resignation follows a serious breach by the employer, such as non-payment of wages or a fundamental change to the job without consent. Which category a specific resignation falls into is often the actual point of dispute, more than the arithmetic itself.
| Years of service | Entitlement if resigning voluntarily |
|---|---|
| Under 2 years | 0% |
| 2 up to 5 years | 33% |
| 5 up to 10 years | 67% |
| 10+ years | 100% |
Saudi employment contracts are either fixed-term (a specific end date) or open-ended (no set end date), and this distinction affects both notice requirements and, in some circumstances, how a termination is evaluated. An open-ended contract generally requires proper notice from either side before ending it, while a fixed-term contract that simply runs its course doesn't require the same notice process.
Many contracts that start as fixed-term convert to open-ended after renewal, and confirming which category your specific contract currently falls into is worth doing before assuming how notice or termination rules apply.
Disputes often center on what the final wage figure should include, whether a resignation was genuinely voluntary or effectively forced by the employer's conduct, and whether all the years of continuous service were properly counted, particularly across contract renewals or changes in job title within the same company.
Where an employer disputes the calculation or simply hasn't paid, this is generally pursued through the labor courts via the Ministry of Human Resources and Social Development's complaint system before litigation, and having the calculation double-checked by counsel before filing avoids arguing from the wrong number from the outset.
Most labor disputes in Saudi Arabia start with a complaint filed through the Ministry's platforms, which attempts a settlement session between the parties before the matter escalates to the labor courts if no resolution is reached. This initial step is often faster and less costly than litigation, and a meaningful share of disputes resolve at this stage.
Where settlement doesn't work, the matter proceeds to the labor courts, and having your documentation — contract, salary records, any termination notice — organized before filing meaningfully speeds up the process.
Yes — the firm's free End-of-Service Calculator uses this exact formula and gives you an instant estimate before any conversation is needed.
Document your calculation and any communication with your employer, then contact the firm — this is generally pursued through a Ministry complaint first, then the labor courts if it isn't resolved directly.
Generally yes, if these were paid regularly and consistently — this is a common point where employers under-calculate, and it's worth confirming before accepting a final figure.
Not necessarily — a resignation following a serious breach by the employer, like unpaid wages, can still entitle you to the full amount rather than the reduced voluntary-resignation scale. This is worth having reviewed specifically.
There are time limits that apply to labor claims, so it's worth reaching out promptly rather than waiting, since delay can affect your position.
Expert Riyadh