How to Calculate End Service Benefits

In Saudi Arabia, a proper document is distributed by the Ministry of Labor about Labor Law. In labor law, there are five articles  (84-88) dedicated only to end service benefits.

I have seen many articles already on the internet and to me, those are quite confusing that’s why I want to explain it and also will upload the latest available labor law documents at the end.

I request you to please read the whole article before jumping into any premature conclusions.

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As Saudi Arabian market observed some downfall due to a decrease in oil prices and it is hard for the smaller companies to sustain. That’s why most of the people are worried about their End Services Benefits in case their organization got bankrupt.

Whatever is the reason, we will see what the Saudi Labor Law says about the benefits of both parties in case of contract termination or expiration.

Articles in Labor Law

It is advisable that whenever it’s a matter of a legal contract then read the specif documents with a great deal of interest again and again before jumping into the premature conclusions.

End of Service Benefits can be calculated between the time of joining and leaving the organization. There is nothing in between. You are resigning, being terminated or end of the contract.

Article 84/85

These are considered as the major articles when calculating the End Services Benefits in Saudi Arabia.

In Case of Resignation by Employee

Years of ServiceEntitlementESB Award%age of Salary
Less than Two YearsNoNoNo
In between 2 – 5 years1/3Half Salary16.67%
In between 5 – 10 years2/3Full SalaryFirst 5 Years 33.33% & 66.67% for all next years
Above 10 YearsFullFull Salary50% of first 5 years & 100% for the rest of years

In Case of Employer Terminates the Contract

Years of ServiceEntitlementESB Award%age of Salary
Less than 5 YearsFullFull Salary50%
More than 5 YearsFullFull SalaryFirst 5 years 50% & 100% for rest of years

Article 84 as per Saudi Labor Law

Article 85 as per Saudi Labor Law

Example of ESB Calculation

Let see an easy example based on the above scenarios. I will use the same duration for Resignation & Termination so that we can compare keeping in view the article 84 & article 85 in Saudi Labor Law.

In Case of Resignation

In case if your salary is 10,000 SAR per month & you a have served the organization for 6 years and 2 months, then end of service benefit is calculated as below;

First five years = (6 x 10,000)/2 = 30,000 SR.

Next 1 years = (1 x 10,000) = 10,000 SR.

For, extra 2 months we need to calculate like below;

Calculate the benefit by day = 10,000 SAR / 365 days = 27.40 SAR

Now, calculate the days for 2 months = 2 month x 30 days per month = 60 days

Multiply the benefit by day by remaining days = 27.40 SR x 60 days = 1643.85 SAR.

Now, the is Total  30,000 + 10,000 + 1643.85 = 41643.84 SAR

Total ESB he/she will get = 41643.84 x 66.67% = 27763.95 SAR

In Case of Forced Termination

So, in your case if your salary is 10,000 SAR per month & you a have served the organization for 6 years and 2 months, then end of service benefit is calculated as below;

First five years = (6 x 10,000)/2 = 30,000 SR.

Next 1 years = (1 x 10,000) = 10,000 SR.

For, extra 2 months we need to calculate like below;

Calculate the benefit by day = 10,000 SAR / 365 days = 27.40 SAR

Now, calculate the days for 2 months = 2 month x 30 days per month = 60 days

Multiply the benefit by day by remaining days = 27.40 SR x 60 days = 1643.85 SAR.

Hence, Total you will get 30,000 + 10,000 + 1643.85 = 41643.84

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Now you see, there is a huge difference that is 33.33% in the case of Resignation & Termination. There are some rules and regulations where an employee can be terminated by the employer, of course, it is not that easy for both parties.

—————————————————–

Now let see more Cases in Regulation

Benefits Calculation | Resignation

Resignation Case 1:

If you resign within the first two years of joining then you are not entitled to any End service Benefits

Resignation Case 2:

If you resign after two years & before completing five years then you will be awarded 1/3rd of ESB.

For example, if you complete 3 years and your salary (including allowances) is 10,000 SAR. Then;

You will get (10,000 x 3)*16.67% = 5001.00 SAR

Resignation Case 3:

Case three is the same as we have seen earlier in the above main example. That is if you complete 6 years and 2 months

then you will get 27763.95 SAR

Benefits Calculation | Termination

Termination Case 1:

If you got terminated by your employer before his 5 years of service then you will get half of the salary multiplied by the years.

For example, if your salary is 10,000 SAR and you got terminated after 3 years then you will get;

ESB = (10,000 x 3)/2 = 15,000 SAR

Termination Case 2:

If you got terminated after completing the 5 years then you will get end service benefits as we have seen in already that is if you have served the organization for 6 years & 2 months with the last drawn salary 10,000 SAR then you will get;
ESB = = [(6 x 10,000)/2  + (1 x 10,000) + (10,000 SAR / 365 days)*60] = 41643.84

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Thay all about the first two articles in Saudi Labour Law. I hope you got the calculations and now let’s see what is in the next three articles. This is the exact extract from the document available on the Ministry of Labour website to date.

Article 86 as per Saudi Labor Law

Article 87 as per Saudi Labor Law

Article 88 as per Saudi Labor Law

Points to Consider for ESB

  • You have been working for consecutive years in that organization you are claiming ESB for.
  • ESB will be based on the latest drawn salary ( Article 84) including all benefits in cash like housing, food & vehicle allowance.
  • Any partial time will be calculated & benefits will be included for example 6 years and 2 months then 2 months will be included, even the days will be there.
  • if you worked for exactly 5 years, then you will get 33.33% as of ESB in case of resignation & you will get 50% of ESB.
  • Include vocation Salary and a round ticket to the home country if applicable as per contract at the particular time (sometimes one way).
  • Normally, basic salary, housing allowance, car allowance or vehicle allowance also called FAT  (food, accommodation & transport) all are included and have equal weight in the calculation that’why always keep all the contractual documents with you.
  • As per article 87, a female worker will be entitled to the full EBS award only if she ends the contract within six months from the date of her own marriage or three months from the date of giving birth.
  • EBS should be paid in local currency until otherwise specified in the contract.
  • If a worker lost his job due to Force Majeure, a natural disease, death or any physical disability then he/she will be entitled to full ESB award.
  • The maximum number of years for ESB has no limit it can be 25 years or 50 years or even more.
  • As per article 86 in Saudi Labor Law, the ESB calculations do not include commissions, sale percentage, etc. where an increase or decrease is dependent as per worker’s productivity.
  • As per article 88, the employer should pay the settlement dues after ESB calculation within a week from the date of contract end in either case.  But if ESB calculated becomes negative like in case of debt bt the employee then he/she needs to pay within two weeks.
  • It is up to the employer that he may deduct any work-related debt or leave it in the benefit of a working relationship for the future.
  • An employer may deduct Iqama fee, insurance fees, and another related fee if those are not expired. For example, if your Iqama is still valid for 8 months & you resign then he can cut Iqama fee equivalent to these 8 months as he has already paid for you.

MS Excel Sheet for ESB

One of the workers at Daralriyadh shared one fine MS Excel sheet to help others and I think this is worth to try. You can get that file from here and can contact the other at his email there.

MS Excel to Calculate ESB

ESB for Domestic Workers

It is quite easy to calculate for Domestic workers like Home Driver, Maid, Gardener, etc. but as you know these have different legalities than the other workers as they are hired by local Studies to help them in daily chores.

A domestic worker will get a one month salary after completing 4 years like if he/she has worked for 20 years and his salary is 1000 SAR then he/she will get 5000 SAR as ESB.

Note: Rules are changing for Dometic workers and please check with MOL helpline for the latest updates.

Helpline of MOL

If you have any query or issue related to you ESB then you can contact Ministry of Labor by following below steps;

1. Dial Ministry of labor for expatriates at 19911
2. Follow the instructions and Press 2 for English or choose your preferred language
3. Make sure to have your 10-digits Iqama ID number and enter when asked like 2188346969

Speak to them and they are quite cooperative. Always make sure to settle with the employer before heading towards the MOL or authorities.

Here is the Official Documents Saudi Labor Law 

Final Words

It has been observed in recent years that workers are resigning just to avail ESB but an employer can reject your resign. In that case, make sure to access the company situation and get an amicable solution. This is not business and you have to put your foot in employer shoes as he has given you the opportunity and you must respect. Money is not everything my friends!

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