Start with how employment ended, not the formula
Article 84 of the Saudi Labor Law provides a basic award of half a month's wage for each of the first five years and one month's wage for each subsequent year, based on the last wage, with proportional entitlement for parts of a year. The final outcome can still depend on the reason for termination, resignation rules, exceptions, the contract, and other legal facts.
Basic award before any termination-reason adjustment
Last wage is the basis stated in Article 84. Do not assume it always means basic salary alone or every gross-pay component; verify wage components, the contract, and the law. Article 86 permits an agreement excluding all or some commissions, sales percentages, and similar variable elements from the wage used for this calculation.
Use documented start and end dates. Decimal months are useful for illustration, while an official settlement may use actual days of service.
Example: 8.5 years and a last wage of 12,000
- First five years: 5 × 0.5 × 12,000 = 30,000.
- Subsequent service: 3.5 × 1 × 12,000 = 42,000.
- Basic award = 30,000 + 42,000 = 72,000.
This is the basic calculation for the assumed wage and service before considering resignation, an exception, or a lawful deduction.
Resignation tiers under Article 85
The official ministry publication sets out these resignation tiers:
| Continuous service at resignation | Award proportion |
|---|---|
| Less than two years | No award under this article |
| Two through five years | One third |
| More than five and less than ten years | Two thirds |
| Ten years or more | Full award |
If the 8.5-year example is a resignation governed by Article 85 without an exception, the estimate is 72,000 × 2 ÷ 3 = 48,000. Do not apply two thirds automatically to other forms of termination.
Exceptions matter
Article 87 includes full-award exceptions, including leaving due to force majeure and specified cases where a female worker ends the contract within six months of marriage or three months of childbirth under the published text. Other provisions may also affect entitlement. Do not reduce a case to “resignation” when its facts or records point to another provision.
Common mistakes
- Using an old salary instead of the last wage.
- Using half a month for every year or one month for every year.
- Ignoring partial years.
- Applying resignation proportions to every termination.
- Treating the calculator as a final legal settlement including all dues and deductions.
Frequently asked questions
Do I always multiply years by half a month's wage?
No. Use half a month for the first five years and one month for each subsequent year, including proportional partial service.
Does seven years mean two thirds after resignation?
More than five and less than ten years falls in the two-thirds tier under Article 85, subject to exceptions and the facts of the case.
Does the result include leave or notice pay?
No. Those can be separate entitlements with their own rules. The example and calculator concern the basic end-of-service award.
Sources and references
- Saudi Ministry of Human Resources and Social Development — published Labor Law (PDF): Articles 84–87. Accessed 2026-11-06.
- Saudi Bureau of Experts — Labor Law: official reference for checking the current text and amendments.
- Ministry of Human Resources — Friendly Settlement service: an official channel for employment disputes.