Understanding End-of-Service Benefits
When an employment contract concludes in Saudi Arabia, it’s crucial to comprehend the calculation of End-of-Service Benefits (ESB), which serve as financial support for employees post-employment. This guide elucidates the process according to Saudi labor law.
How ESB is Calculated
The calculation of ESB is based on the worker’s final wage, computed as follows:
- For the initial five years of service, the worker receives half a month’s wage for each year.
- Beyond five years, the worker is entitled to one month’s wage per year.
ESB Calculation for Resignation
Eligibility Criteria
- If the worker resigns with less than two years of service, they forfeit the ESB.
- For service between two to five years, one-third of the award is provided.
- Between five to ten years, two-thirds of the award is granted.
- With over ten years of service, the worker receives full ESB.
Special Cases
- Female workers departing within six months of marriage or three months post-childbirth receive full ESB.
- Workers leaving due to force majeure events are entitled to the full award.
- Employers and workers may mutually agree to exclude certain wage components from the ESB calculation.
Wage Definition
The term “wage” encompasses the basic salary and any additional increases or allowances per the employment contract or labor regulations, reflecting the worker’s efforts and risks.
Employer Obligations
ESB is a worker’s entitlement, mandating employers to disburse it upon contract termination, irrespective of its term.
ESB for Domestic Workers
Domestic workers serving four continuous years are entitled to one month’s wage as ESB.
How to Calculate ESB Using MHRSD’s End of Service Calculator
- Visit the End of Service Calculator page.
- Select your contract type: “Fixed Time” or “Unlimited Period.”
- For fixed-time contracts, choose the applicable “End of Service Reason.”
- For unlimited period contracts, select the relevant “End of Service Reason.”
- Input your basic salary and duration of service.
- Click the “Green Button” to compute.
- The calculator displays your ESB at the top.
Additional Information
Article 80 of the Saudi Labor Law delineates cases permitting employer contract termination without award, notice, or indemnity, while Article 81 outlines worker scenarios for leaving without notice. These articles offer further insight into employment termination.
By utilizing MHRSD’s End of Service Calculator, individuals can accurately determine their ESB entitlements, ensuring they receive their due benefits.
Frequently Asked Questions (FAQs)
Can the employer deduct any debts owed from the worker’s ESB?
Yes, according to Article (87) of the Labor Law, the employer has the right to deduct any debts owed to them by the worker from the ESB.
Are commissions and sales included in the calculation of ESB?
As per Article (86) of the Labor Law, commissions and certain wage components may be excluded from the calculation of ESB if agreed upon between the employer and the worker.
What happens if a worker resigns due to force majeure circumstances?
Workers resigning due to force majeure are entitled to the full ESB as outlined in Article (87) of the Labor Law.
How soon should the employer settle the worker’s rights and wages after the end of the contractual relationship?
According to Article (87) of the Labor Law, the employer must settle the worker’s rights and wages within a week of the end of the contractual relationship.
