Employees in the Kingdom of Saudi Arabia are entitled to End of Service Benefits (ESB). These are benefits given to employees at the time they leave the company. Entitlement to End of Service Benefits, however, varies depending on the status of the worker, such as if he resigned or he was terminated. The benefits also depend on the length of the year the worker stays in the company.
In Case of Resignation of Employee
When an employee resigns, four possible cases serve as a basis of the End of Service Benefit an employee may receive.
Case 1: Employed for less than 2 years
An employee who joins the company or organization for less than two years is not entitled to an End of Service Benefit.
Case 2: Employed between 2-5 years
An employee who works for the company for more than 2 years but less than 5 years is entitled to 1/3 of his or her ESB award, which is half salary.
For instance, an employee resigns after working for 3 years in a company, the last total paycheck received was SAR15,000. Therefore, the worker receives 7,501.50 as the end of service benefit. That is, the employee’s paycheck multiplied by half the salary of the entitlement (1/3 divided by 2 is 16.67%) multiplied by the number of years in the company. In figures, it is SAR15,000 x 16.67% x 3 = SAR7501.50
Case 3: Employed between 5-10 years
An employee who stays in the company for more than 5 years but less than 10 years receives 2/3 entitlement and an ESB award or half salary for the first five years and full salary for the next five years.
For instance, an employee resigns after working for 7 years in a company receiving a total of SAR20,000 as his or her last salary, takes home an end of service benefit amounting to SAR60,003. That is, salary multiplied by five divided by 2 plus salary multiplied by 2, the sum of this is multiplied by 66.67% since 7 years fall under the bracket of the next five years. In figures, {(SAR20,000 * 5/2)+(20,000 * 2)} * 66.67% = 60,003. Meanwhile, if the employee worked for exactly 5 years, he or she only gets 33.33% as of the end of service benefit.
Case 4: Employed for 10 years or more
An employee who stays with the company for 10 years or more receives a full entitlement and a half salary for the first five years and a full salary for the succeeding years as an End of Service Benefits award.
For instance, an employee who resigns after working for 15 years in a company receives SAR10,000 as his or her last salary and brings home an end-of-service benefit amounting to 125,000. That is, salary multiplied by 5 years divided by 2 plus salary multiplied by 10 years. In figures, (SAR10,000 * 5/2) + (SAR10,000 * 10) = SAR125,000.
Notes:
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As an exception, the employee may be entitled to the full award if he or she leaves the work due to a force majeure outside of his or her control.
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If a female worker ends her contract within six months from the date of her marriage or three months from the date of giving birth, she may be entitled to the full award.
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The employer may deduct any work-related debt due to him or her from the worker’s entitlements. Other deductions are done according to the law.
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If the employee has not worked for a full year, a prorated amount is paid.
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There is no maximum number of years for the EOS payment award.
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EOS does not include all or some of the commission, sales percentage, and similar wage components that are subject to increase and decrease.
In Cases of Forced Termination of Employee
When an employee is terminated, two possible cases serve as a basis of the End of Service Benefit an employee may receive.
- Case 1: An employee who is terminated from an organization before completing a 5-year stay in the company receives a full end of service benefit entitlement and half salary as an ESB award. For instance, an employee who finished his or her job after 3 years in service and receives 5,000 as his or her last paycheck, gets SAR7,500. That is, salary multiplied by the number of years divided by 2. In figures, (SAR5,000 * 3) / 2 = SAR7,500.
- Case 2: An employee who is terminated from an organization after completing a 5-year stay in the company receives a full entitlement and half salary for the first 5 years and full salary for the succeeding years as ESB award. For instance, an employee is terminated after 9 years in service, and receives SAR20,000 as his or her last paycheck, gets SAR130,000. That is, salary multiplied by 5 and divided by 2 plus salary multiplied to 4. In figures, (SAR20,000 * 5/2)+(SAR20,000×4)= SAR130,000.For more details, please refer to the End of Service Benefits Calculator tool.
The Exception to the Rule
A female worker who decides to resign 6 months before her date of marriage or 3 months before giving birth will be given full award end of service benefits. Although she has resigned, the computation of her End of Service Benefit will be that of a Termination by an Employer.
Another exception to the rule is when an employee resigns due to inability to work such instances as death, permanent mental or physical disability, a full award end of service benefits shall also be granted.
What is Included in End of Service Benefits Payment
Only the basic salary, housing allowance, and transportation allowance are included at the end of service benefits. Phone and food stipends are excluded.
End of Service Benefit When Given in Kind
There are instances when benefits are paid in kinds, such as a car given to an employee in place of transportation and food allowance. However, the employee who is granted a car would receive lesser cash than those who get all benefits in cash.
Important Points for ESB Calculation
1. It is assumed that employees have completed consecutive years in the organization.
2. End of Service Benefit is based on the latest salary received by the employee.
3. The ESB of an employee who does not complete an entire year is computed proportionally.
Domestic Workers End of Service Benefits
Following the new law passed by the Ministry of Labor, a domestic worker receives the end of service benefits as well. However, the calculation of the ESB differs from that of other workers. For every four consecutive years, a domestic helper is entitled to a one-month salary.
An End of Contract: Is it Resignation or Termination?
The boundaries and limits of an end of the contract can vary depending on who denies the renewal of the contract. It is ‘resignation’ if the employee does not want his or her contract to be renewed. On the other hand, it is classified as ‘termination’ if the employer is the one who denies contract extension.
