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Labor Laws
Step-by-step EOSB calculation under Saudi Labor Law Articles 84, 85 — actual wage basis, resignation tiers, and the Article 80 misconduct exception.
Step-by-Step EOSB Calculation Under Saudi Labor Law
Article 84 of the Saudi Labor Law sets out the formula: half a month's wage for each of the first five years of service, plus one full month's wage for each year after that.
The real calculation base: "Actual Wage"
The calculation uses the employee's Actual Wage, not just basic salary. This includes basic pay plus housing allowance, transport allowance, and any other fixed, regular allowance — unless a written agreement under Article 86 explicitly excludes variable components like commissions or production bonuses.
Resignation reduction tiers (Article 85)
Under 2 years of service: no entitlement
2 to 5 years: one-third of the full gratuity (33.3%)
5 to 10 years: two-thirds of the full gratuity (66.7%)
10+ years: full gratuity (100%)
Full entitlement without reduction
The resignation reduction does not apply to fair dismissal cases (contract expiry, employer-initiated termination) — those receive full gratuity regardless of service length. A female employee who ends her contract within six months of marriage or three months of childbirth is also entitled to the full award under Article 87.
When gratuity is forfeited entirely
Under Article 80, if employment ends due to serious misconduct (fraud, assault, or a serious breach of company policy), the employer may terminate without notice and the employee forfeits the gratuity entirely.
Payment deadline
The employer is legally required to settle the gratuity and final dues within 7 days of the end of the employment relationship.
Frequently Asked Questions
Does the housing allowance count toward EOSB?
Yes. Housing and transport allowances and other fixed, regular allowances are part of the Actual Wage used for the calculation, unless a written contract clause explicitly excludes variable pay under Article 86.
Do expatriates get EOSB?
Yes. EOSB is a right for all private-sector employees — Saudi nationals and expatriates alike.
Is EOSB forfeited for gross misconduct dismissal?
Under Article 80, yes — gratuity is fully forfeited in cases of dismissal for serious, documented misconduct.
How Inclusive Solutions helps
We calculate gratuity and final settlements accurately under the current rules. Try our EOSB calculator or talk to our payroll team.
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